If you’re reading this, you have successfully launched an Amazon business, and are now wondering how much it’s worth. Whether you want to sell, or you simply want to understand the value of what you’ve built, this article is for you.
In it, we go in-depth into how you can value your Fulfillment By Amazon (FBA) business. We’ll also share what makes an Amazon business more valuable to a buyer, as well as some steps you can take to increase the value of your business before selling.
So read on to discover everything you need to know to help you make an informed decision on what your business is worth.
Why Would Someone Sell an Amazon Business?
This question is one that comes up often when people are wondering why anyone would sell a digital asset – particularly one that is driving a healthy monthly profit.
Amazon’s eCommerce market share is speculated to reach 50% by 2021, so why would anyone want to miss out on carving out their own little slice of that pie?
There are many reasons why someone might want to sell their business.
Here are a few of them:
Reason #1: To Create Time Freedom
If you’re someone who is looking for a way to free up more of your time, now is a great time to sell your online business. There is a huge demand for digital assets right now, which means there has never been a better time to sell your Amazon business.
In fact, a bit of research will show you that web-based valuations are increasing each day as an increasing number of economies and businesses become more reliant on the internet.
Reason #2: To Take a Break From Running a Business
Maybe you just want to take a break from working so hard managing your FBA business. It could be that you’re at an age where you’d rather spend your time enjoying the fruits of your labor.
That’s a great reason to sell your business so you can do more of what you want to do, such as travel, spend more time with family, take up new hobbies and pastimes, create an online course, and so on.
Reason #3: To Change Direction
You may be considering selling your Amazon business simply because you want to go in a different direction.
Maybe you’ve discovered another interest, and you want to sell in order to come up with the capital needed to start, or you’ve already started another venture that is taking up all of your time, and you no longer have the time to invest in managing your FBA business. Your decision could be inspired by a myriad of things, and all of them are valid reasons to sell.
As an example, I used to focus myself on Amazon businesses and then in the beginning of the year switched to being much more heavily invested in YouTube. I had challenges finding the right YouTube editing software, but after I figured that out and found my “voice”, off I went and now I’ve got a pretty decent following.
Reason #4: To Raise Capital
Things come up in life. Maybe everything’s going well in your business, but you need money to purchase a house, a car, or to pay for your kid’s educational tuition, or whatever else may be the case. There could be endless reasons why you need to raise capital quickly, and selling your FBA business is one way to do it.
The bottom line is that your business has massive value. You’ve worked hard on it and you know that it has a huge potential to be worth even more in the right hands. That’s why we’re here to help you figure out how to get the best price when selling your Amazon business.
But first, let’s take a look at whether an Amazon business is even worth it?
Is an Amazon FBA Business Worth it?
The FBA business model is quickly becoming one of the most profitable business models in the internet business space. Because of this, purchasing a well-developed FBA business is an alluring prospect for many current and aspiring business owners.
An online business presents a great investment opportunity, and an Amazon business, in particular, is an attractive option for buyers with the skill set necessary to manage, grow, and scale such a business – but don’t want to start one from scratch.
It’s also perfect for buyers who may not have the knowledge or skills to start an Amazon business, but simply want to purchase one that’s already running and easy for them to manage.
Although Amazon has maintained secrecy pertaining to the adoption of FBA up to now, third-party sellers in the marketplace now account for over 50% of all the items sold on Amazon.
This means that this huge business model, which is at the core of the world’s biggest marketplace, continues to grow.
If you’re still wondering if Amazon FBA business is worth it, there are also a lot of success stories from some of the early movers in FBA who made large amounts of money in a relatively short amount of time.
Marketers like Chris Guthrie from UpFuel, and Spencer Haws, from Niche Pursuits.
These are well-known bloggers who share stories of their journey selling on Amazon, and how they built successful FBA businesses.
Of course, that’s not to say that everyone will replicate their success, but if these bloggers can do it, then it’s clear that anybody can.
So, now that you understand that an Amazon FBA business is absolutely worth buying, let’s move on to the next step in our process of helping you determine what your Amazon business is worth.
How to Determine What Your Amazon Business Is Worth
Understanding EBITDA
As a business owner looking to sell, you may be asked to calculate your EBITDA accounting report.
EBITDA stands for Earnings before Interest, Taxes, Depreciation, and Amortization. It is a means of measuring the value of your business.
While this measurement is widely used by lending institutions and investment professionals, it is also a powerful tool to help business owners track and monitor the profitability of their business, as well as its operating health.
To calculate your EBITDA, you must subtract your business expenses from the revenue without amortization and depreciation. Do not include interests and taxes when subtracting the expenses. The remaining amount is a good idea of your business’s profitability, debt, and cash flow.
Fortunately, this isn’t something you have to worry about doing yourself as the majority of online small business accounting software will perform EBITDA calculations for you.
By determining your business’s earnings before taxes, interests, amortization, and depreciation, you will be able to measure and analyze your business’s profitability without the effect of financing and accounting activities.
Of course, there are other measurements and variables that factor into your business’s worth that you could also include in your calculations, but EBITDA is a simple way of helping you quickly gauge the approximate value of your business.
There are also different ways of pumping up your EBITDA multiple, such as redesigning certain aspects of your business according to what potential buyers within your niche are interested in.
These are all things that we, at flippa.com, can help you with, in order to get to a figure that is a more accurate representation of what your Amazon business is really worth.
Focus on Profit (Not Potential)
Net profit is simply the amount of money left in your business after you’ve deducted all your expenses from the sales you made.
When selling your Amazon business, it’s important to calculate your website’s net profit, as opposed to its potential. Buyers don’t care much for a business’s potential profit, but they would rather know what the net profit is as this is a key indicator of whether or not a business is doing well.
Computing your average net profit is not a complicated process, but it allows you, as the business owner, to see the ROI (return on investment). It also lets buyers see that your business has sufficient return on investment to allow it to continue operating profitably.
In short, net profit informs the buyer how much money the business earns for each dollar made in sales revenue. If the business has a high net profit, then it’s an indication that the company is in good condition.
Understanding Multiples
Yet another factor when determining the value of your Amazon FBA website is multiples. The multiple can be anything from 20x the value of your business to 40x, and even more.
Larger multiples are typically used for businesses that are larger, have been around more, or those with less risk for the buyer. So, if yours has more longevity and proof, you may be able to raise your multiple.
Whether you’re selling an Amazon FBA website or an Amazon Associates website, the multiples are calculated in more or less the same way. In order to get to the multiple, full 12-month averages are typically required.
Smaller businesses that have less longevity and an average monthly net profit shorter than six months usually have smaller multiples. This means that if your Amazon Associates or FBA business is under a year old, you may be able to sell it, but you’ll likely get a smaller multiple.
If your business is new and only started making good earnings just in the last few months, then you may not be able to sell it as it doesn’t meet the criteria.
For instance, if you create sports blog and fill it with great content and make around $200/month by the end of the first year, the multiple will likely be a lot less when compared to another sports blog that’s been around for 3 years and generates $1000/month. Longevity is key when trying to sell an online business for the highest possible multiple.
In such a case, if your end objective is to sell, then you need to continue working on your business with a purpose to maximize its value.
Check Current Flippa Listings
One of the best things you can do to help you determine what your business might be worth is to look on Flippa to see what other Amazon businesses like yours recently sold for.
After all, clarity is king with regard to selling any online business asset. So make sure you leave no stone unturned in order to arm yourself with as much information as you possibly can before making your final decisions.
How to Have Success When You List on Flippa
If you want to successfully sell your Amazon business on Flippa, it’s important to ensure that you fill out the information properly and provide income proof and all the other required information. This will help increase the credibility of your listing and make it stand out so that you get tons of views from serious buyers.
Follow the tips below to optimize your listing it so you get the best selling experience possible:
1. Enter all the Basic Information
The first thing you’ll have to enter on the listing form is the sort of business you’re selling. You’ll also be asked for the business name, web domain, and the date you started your business. After that, you’ll enter the name of the country where your business is registered, as well as where you conduct business from.
2. Provide Google Analytics Details
The next step is an extremely important one. You must provide verified information about the traffic that comes to your website. This means that you’ll need to link Google Analytics if you haven’t already. Your analytics, together with the revenue figures, are the most important factors that affect sales for most business owners.
3. Provide Financial Information
When selling your Amazon business, it’s important to be able to provide as much information as possible pertaining to your financials. Buyers want to be able to see your financial history before making decisions. So you’ll need to upload your revenue and expenses either manually, or using a platform like Quickbooks Online.
4. Describe Your Amazon Business
Now is your chance to wow potential buyers and entice them to find out more about your business. Consider this from the buyer’s perspective, and include all the information that you’d like to know if you were in their shoes. What would you want to know if you were the one considering making such a huge investment in a business built by someone else?
This post goes into more detail on how you should structure your Amazon business description.
Summary
The bottom line is that selling your business on Flippa is the best thing you can do if you want to earn more from the sale. We are here to provide you with all the information you need to make your experience as smooth as possible.
