How I Sold My Amazon FBA Business for $425,000
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Back in the old days of 2015, I discovered Amazon FBA as an ecommerce market to sell private label products on Amazon. Now I've been able to sell an Amazon FBA business.
Until that point, I never really understood how easy it was to get private label products manufactured in China, shipped to Amazon, and then sold and shipped via Amazon Prime. All of this happened while I didn't have to pack and ship a single item thanks to the Amazon fulfillment centers and their processes (FBA).
I've written about how I started my Amazon FBA business extensively in the past.
So, the primary focus of my article today is why and how I was able to sell an Amazon FBA business that was about 2 and a half years old.
The sale of my business closed just last month with a price tag of $425,000.
I want to share exactly how I did it.
Amazon FBA Business For Sale!
If you want to sell an Amazon FBA business, the first step is obviously building up an Amazon FBA store that is doing a serious amount of sales.
The more fba products you're moving through the Fullfilled by Amazon FBA warehouse, the more net profit you make, and the better the business sits, the more attractive your online business is going to be.
To make your Amazon FBA business even more attractive, and offer the new owner more value, focus on growth trends. This could involve expanding your product offerings through your Amazon store, increasing your average order value, or growing your customer base.
By demonstrating that your business is growing rapidly, and has good net profits and historic sales, along with low operating expenses, you'll be able to sell it for a higher price, even in a buyer's market.
We've gone over how to build an Amazon FBA business in other posts, so we'll skim over most of that here, but suffice to say the Amazon FBA is a great way to sell products online.
Just keep in mind it takes a lot of work selling products and optimizing net profits before getting to the point you can sell the business. But it's definitely worth it!
The Idea and the Numbers
Out of respect to the new owner, I won't be sharing what the products were or the URL of my website. However, my products were in the “Home Goods” niche. If you have a house, then the vast majority of you will probably have one of these types of products in your home.
So, it's a consumer good.
The idea came to me a few years ago as I was looking to replace something in my house and I could not find a variation that I was 100% satisfied with on the Amazon store with positive reviews.
So, after hearing about the success that several people I knew (including Chris Guthrie, Scott Voelker, Greg Mercer, and other sophisticated fba competitors) were having as Amazon business owners, I decided this would be my chance to try out the Amazon FBA business model.
You can read about how to pick the right products to sell on Amazon here.
What I found during my product research was a niche that had high demand (almost everyone has one of these in their home), and then a variation that helped me to stand out from the crowd (low competition for this particular variation).
As a result, my first actual product in the fba space started selling well almost from day one.
You can see that in my first 30 days, I had over $4,000 worth of goods sold.
After a couple of months, I decided to add more variations to expand my Amazon business.
By the time I sold the Amazon FBA business last month, I had built up to 8 total SKUs in my niche of product listings. Not too many products to manage, but enough for decent profitability.
The more SKUs you have, the more potential there is for profitability. But you need to make sure you can handle the extra work that comes with managing multiple products, multiple suppliers and fostering supplier relationships.
Here's a Look at Some of the Numbers
As I ran sponsored ads, grew my related niche site (more on that later), did promotional giveaways, and focused on selling on Amazon, the revenue quickly grew from $4,000 a month to over $60,000 a month in peak months.
Of course, when you are selling physical products, the net profit margins are not as high as a digital product or an affiliate website. But you can still make a good profit after accounting for all of your business expenses, so it's definitely worth it!
However, the trailing 12 months prior to the sell my Amazon FBA business was netting just over $14,000 a month on average. And a pretty good profit margin on the goods sold to boot.
It was a great and profitable business!
However, when I started to focus on the potential price tag for what I could sell the entire business for, I decided to pull the trigger.
The result was a nice $425,000 pay day.
What About the Niche Site?
Shortly after creating my first product on Amazon, I launched a niche site in the same space. So, imagine I was selling a kitchen tool on Amazon.
I hypothetically would have launched a niche site reviewing kitchen tools and “how to” tips for cooks (or something similar) to drive potential sales.
My niche site started to grow, and after 1 year it was making about $3,000 a month in affiliate commissions on its own. As an Amazon business owner, there are many ways you can use a niche site to promote your own brand and drive more sales, but this is just one example Amazon sellers can utilize.
The best factor was that a good part of those affiliate commissions were coming from referring visitors to my own products on Amazon through my own Associates link.
Yes, Amazon is fine with this.
Because I had the experience of knowing how to build niche sites in multiple niches and rank quickly in Google, I was able to leverage this skill to grow my Amazon FBA business even faster by referring a bunch of outside traffic. That helped make sure my online business using the FBA program grew even faster.
Now, I should be clear that MOST of the sales of my products came directly from the traffic on Amazon. However, my niche site definitely sent traffic and was helpful in growing the Amazon business as part of the overall marketing strategy.
Having this niche site along with the Amazon FBA piece was a nice selling point for most buyers. It made the business worth slightly more and an attractive investment. From a buyer's perspective, it was slightly less risky, since the niche site was referring traffic as well outside of the Amazon ecosystem.
Why I Decided to Sell
I wrote a blog post previously outlining the pros and cons of selling a business.
When I analyzed all factors, I decided that the cash up front would be nice to have to re-invest in other business ventures that I'm more excited about.
After running the business for almost 2 years, I had lost my interest level in those particular products a bit.
Losing your passion in your own brand should always be a beginning red flag for a business owner. If you're no longer passionate about your brand or product, it's going to be difficult to maintain your level of owner involvement.
I've always found that if I invest where I'm most passionate at the time, things tend to work out. This isn't some golden rule of thumb that everyone should follow; it just happens to work for me.
I had been able to pocket $14,000 a month over the past couple of years, and so losing that revenue stream was the biggest con.
However, I always have 3 or 4 business ventures or projects going on at once, so I truly felt like having the capital to invest in these other ventures was a good reason to sell.
Selling An Amazon FBA Business
Once selling the FBA business was a legitimate option, it was time to figure out how to get the selling process under way.
Here's how I did it:
Where I Listed My Business for Sale
I sold my Amazon FBA business on EmpireFlippers.com. Honestly, I was surprised how fast it sold.
I had the expectation that it would take at least 3 to 4 months to find an interested buyer. However, after about 40 days, I already had a verbal agreement with a buyer after negotiating the best deal.
I was also very impressed with how professional the Empire Flippers process was. I know lots of people that have had positive experiences with their sale process when selling Adsense sites and other businesses through them.
They were very helpful in getting my P&L cleaned up and gathering the other documentation necessary for potential buyers to look at.
Within a couple of weeks, I had received several inquiries from potential buyers and did a call with a few of them.
In a nutshell, I would definitely recommend Empire Flippers if you are looking to sell your Amazon FBA business. I've personally known Justin and Joe (the founders) over there since, well, before they started Empire Flippers.
Negotiating the Deal
The business was listed at a sale price of $456,256. I knew going in that this list price was on the high end at a 32x monthly valuation multiple.
After a few calls with potential buyers, the king of deal makers gave me a call. His name is Ace Chapman.
I had met Ace briefly once before at a conference, but we had never done any business together.
Ace is one of those savvy buyers who closes A LOT of deals on Empire Flippers, so I knew that if he was interested in my business, the chances were good that the deal would close.
As a side note, I think Ace has a REALLY interesting business model. He buys tons of online businesses on his own or by bringing in partners.
Then he basically allows the partners to run the business, or Ace has a team if he does a deal on his own.
You can read a bit more about Ace Chapman's story here.
From Valuation to Selling Price
Ace and I did a couple of calls and just chatted a bit. Honestly, they were pretty casual calls with a little business mixed in. He asked a few questions about numbers, the website, and the Amazon side of the business.
Then, a couple of days later, he made me an offer. Just like that, I had my dream buyer.
The offer was not as much money as I was asking. I think his first offer was $400,000… or $56,000 less than the listed selling price. If your buyer values your business lower with their first offer, don't worry.
This is perfectly normal. In almost every business sale, expect lowball offers to begin with. If you want to sell your Amazon business, you need to be prepared for this. The most important thing is to not get offended or emotional about it.
Remember, the first offer is just the starting point for negotiations and not necessarily the price at which the company sells for. The true value was somewhere in the middle.
We settled on $425,000 as the purchase price and called it a day. The negotiation was more of a formality, honestly. I knew I had listed the business a little high, and Ace knew his $400k offer was a little low. The true value was somewhere in the middle.
So, we settled in the middle where we were both happy. The final sale price was about a 30x monthly multiple of net business earnings.
We also negotiated payment terms and inventory payment separately (I got an additional payment for the inventory I had on hand on top of the $425k).
The deal terms are roughly as follows:
- $175k up front upon close (already happened)
- $150k after 6 months
- Then monthly payments based on % of profits until the rest is paid off.
- If the total isn't paid off after 2 years, there's a balloon payment to finish the deal.
So, I may have been a bit lenient in the payout terms of the purchase agreements, but I'm okay with it because of a couple of things:
- I don't need the full sale value right now
- I know Ace is good for the money
- I'm confident the Amazon FBA business will continue performing well.
Overall, both the buyer and I were happy with the negotiated price and terms of the deal.
Transferring the Business and Challenges
If you are wondering how to transfer an Amazon FBA business… well, it's not easy. The whole process involved several hoops to jump through, but everything was done in compliance with Amazon. So what did the sales process look like?
Before I listed the business for sale on Empire Flippers, I had done a bunch of prep work on my own. In addition to the 8 products for this brand, I also had another dozen or so products on the SAME Amazon account.
I knew a potential buyer wouldn't want these other dozen unrelated products, so I had to figure out how to get the “Home goods” products on one account, and my other unrelated products on another account.
In a nutshell, here is what I did:
- Opened a new Amazon seller central account under a DIFFERENT legal business entity. Amazon only allows one amazon seller account per person or legal business. Since I had a separate legal business entity that didn't have a seller central account, I was just fine opening a brand new one.
- I then linked the email addresses in both the old and new seller central accounts; essentially notifying Amazon that there is some kind of relationship between these seller accounts.
- Sold out the inventory on the old account and then shipped new stock to the new seller central account. If anything wasn't selling fast enough, I just did a removal order, then shipped those removed products into the new account.
- I did NOT have to create new listings or anything. You can just ship the goods into the new seller central account and use the exact same listing as before. This means all the reviews, star ratings, and everything are saved and the same.
- When the new buyer had purchased, I just gave him the login to the new seller central account.
Additional Challenges Overcome
Changing ownership of an e commerce business is never simple. And there were definitely plenty of challenges that came up during the process of transferring the business.
One of them was that Ace's new venture partner on this deal was a Canadian citizen and didn't have his business entity set up yet.
So, as part of the sale process, we had to wait a few weeks for the new owner to get a US business entity set up and bank accounts opened.
Once that was completed, we sent a message to Amazon seller support letting them know that I had sold the business and that we needed to change the Tax ID, bank account information, and more on the backend of seller central.
I felt like it was important to get this “approval” from Amazon first, before just changing bank account and other information.
Amazon gave us the green light and then we just made all the changes to the new owner's information.
We've had no issues whatsoever since changing the information and it's been months (update: now years) since that change took place.
The other challenges were going through the process of transferring the website in addition to the eBay account and the Walmart.com account (the other places I also sell products).
Empire Flippers Support Was Solid
The Empire Flippers support has gone out of their way to handle most of the transfer themselves during the sales process.
The final step that they are still working on is getting the Amazon affiliate codes all changed from my affiliate id to the new buyers.
So, I made the verbal deal with Ace sometime in mid-October. Then working with Ace's partner and Empire Flippers to get all the due diligence and then transfer process complete has taken from then until now (Jan 9th).
So, it's been a 2 and a half month process to get things finalized.
However, despite some of the challenges that are likely to occur with just about any business sale, I'm happy with the end result.
Where To Sell Your FBA Business
There are several places to sell your business, but some are much better than others. I used EmpireFlippers, and I was super happy with them, so I'd definitely recommend them to sell you Amazon business.
But here are some of the other players in town if you're considering selling your fba business:
They've been trying to rebrand over the past fear years and it's not as bad as it used to be, although its more for small business sales.
But Flippa is still the bottom rung on the ladder, the lowest on the website-selling totem pole to sell your Amazon business.
My employee Brady has bought and sold on Flippa before. All was well, but he's not interested in doing it again.
Flippa's biggest benefit is that they have the lowest seller fees out of any broker I've seen. It costs very, very little to get rid of a business on Flippa and there are no fees for buying. Flippa's relative take is pretty small. So if you want to sell your Amazon fba business you can save big!
I'd recommend Flippa if your FBA business is on the smaller side.
They do have some FBA listings going up well into the 6 figures and almost into the 7 figures. But you'll be left doing a lot of the work of the sale and it won't be as smooth or hassle-free when you sell your business.
This is who I used for my successful sale and I liked using them a lot.
Up until the past year, they've been a middle-of-the-line broker for websites.
Their clientele was out of Flippa's league but not quite at the level of guys and gals at FE International.
That changed not too long ago. Empire Flippers listed their first 8 figure business in July 2019.
And not only was it just 8 figures. It listed for a whopping $27,672,627. Before this listing, I would have told you that FE International is a better place to go if you're looking in the 8 figure range.
Now, I'm not so sure.
I was blown away by the customer service of this team. There's obviously still an element of owner involvement but they helped me clean up my P&L, connect with many buyers wanting to pull the trigger on my business, and they were great through the due diligence process.
They do smaller offerings on their list of classified sites as well; if your business is making in the $1,000 a month range, it could be valued at around $30,000 on the low end.
Empire Flippers has a market for this type of site, too.
FE International has a reputation for being the chief of all super high end transactions. They have a track record for doing a lot of 7 and 8 figure higher price type of large business deals.
At the time I'm writing this, their lowest business is listed at $45,500. Their next lowest jumps to a fat $71,000.
This isn't the best bet for you as an fba broker if you're looking to sell your business for under 6 figures.
If you have a 7 or 8 figure business, it's worth taking a look at what they have to offer. I don't think their interface is as clean as Empire Flippers, but that doesn't matter.
They have a reputation for selling big companies, so they have a repertoire of repeat customers, private investors and cash buyers at the ready to help get maximum value for larger businesses.
I don't know what their fees or sales process are like.
The best I can suggest is that if you qualify in their range, as part of your due diligence, reach out to them and Empire Flippers to determine the right business for your circumstances and who you're a better fit with.
Now that my first Amazon FBA has sold, what's next?
Well, as mentioned, I've already got several other products selling on Amazon. In addition, with the new cash infusion, I plan to invest heavily in new Amazon products.
In fact, we already have several in the works: either in production, design, or research phase.
I'm hoping to build a revenue stream just as strong as the FBA business I just sold in the next 12 months. Even though some may think that it's too late and that the competition is too high on Amazon already, I see things a bit differently.
With their massive market share, I don't see Amazon getting any smaller as a platform anytime soon, as they're such a strong brand. Add in my experience in online business and good tools like Jungle Scout (check out Jungle Scout vs Helium 10), and I'm convinced the ecommerce business model on Amazon is going to be doing just fine.
The truth is more and more people are going to be buying more and more products on Amazon. I plan to be there ready to get on with selling them those products using fulfillment services.
Since selling my Amazon FBA business, I have dabbled in other Amazon products a bit until I sold everything. As of today, I am 100% out of the physical products business.
It's not that I don't think there's a ton of opportunity there. Taking all factors into account, Amazon FBA businesses are still one of the best business models as an investment for entrepreneurs for making money online, and I don't regret it for a second (and you can learn how to start an Amazon FBA business with very little money here).
I'm just more passionate about other projects and revenue streams right now.
At some point, I hope to return to selling proprietary products through a fulfillment by Amazon FBA business. I've always run several online businesses at once and I'm glad that I give in to “shiny object syndrome”.
But for right now, I'm running Niche Site Project 4, Link Whisper, and trying to focus on growing Niche Pursuits.
That's enough for a while.
Have questions about being an Amazon FBA seller? Or selling your e commerce businesses for the best price once they're big enough? Or have you recently sold your own Amazon FBA business?
Leave a comment below and I'll do my best to answer.
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