How Much Is My Amazon Business Worth?
Updated: Dec 2, 2020
Are you wondering how much is my Amazon business worth? Are you looking to sell your Amazon business and finally see all the profits of your hard work?
Many Amazon sellers start with the goal of eventually selling their business to receive a large payout. AccrueMe wants to help you determine how much your Amazon business is worth if you are interested in selling it.
This is a big decision and there are many things to consider before making that decision.
After all the time spent funding your Amazon business, researching products, and managing inventory it is important to calculate how much your Amazon business is worth.
Calculating how much your Amazon business is worth will help you determine whether or not your Amazon business will sell on the market.
You are probably asking yourself these questions:
Is the right time to sell my business?
Should I grow your Amazon business more before I sell it?
How much is my Amazon business worth?
There are two main variables when negotiating the sale of your Amazon business.
Net Profit - or the past 12 months of cash flow
A multiplier applied to the net profit/ cashflow — this multiple is discretionary and negotiated between the parties. It is based on the risk associated with taking on the business.
Potential buyers mostly care about the risk they are taking on with the Amazon business. Unfortunately, Amazon FBA businesses are considered a risky asset because of the control Amazon has over them. For example, Amazon can suspend certain product listings or even your entire seller account with no warning or legitimate reasoning.
The multiple applied to the net profit is based on several factors, but because it is a discretionary number each buyer will evaluate the factors differently. Buyers will consider their size, resources, and experience with Amazon FBA businesses when calculating multiplied applied to the net profit. You can speak to prospective buyers and other Amazon professionals to get a better sense of what this number is.
When preparing to negotiate the sale, make sure you know your business inside and out. Be ready to present documentation of market analyses, profit and loss statements, cash flows, and total profit breakdowns. This will help facilitate constructive discussion and speed up the negotiation process.
Another exercise to perform while preparing for negotiation is the SWOT analysis. SWOT stands for strengths, weaknesses, opportunities, and threats. The primary goal of the SWOT analysis is to develop a full awareness of all the factors involved at the negotiation table. You can use the strengths and opportunities to develop propositions for prospective buyers. This way you can exhibit how your Amazon FBA Business is enticing to buy, rather than a risky acquisition.
There is no way to calculate a specific worth of your Amazon business, so you just have to present it to the market and evaluate throughout the process. It is good to have a price in mind, but ultimately the market will determine how much your Amazon business is worth.
Who wants to buy my Amazon business?
Prospective buyers consider and value different characteristics of e-commerce businesses. You may have tailor your negotiation approach to the type of buyer. Acquisition firms have different strategies when purchasing e-commerce stores, some prefer direct to consumer stores powered by websites like Shopify. Others prefer Amazon FBA businesses because it involves less operational management than a Shopify store.
Buyers who have experience managing Amazon FBA stores are better prospects. They will be more comfortable purchasing your store, which lowers their risk. By lowering the risk of a potential buyer, you will be able to negotiate a higher multiplier to apply to your net profits, inevitably increase the worth of your Amazon business.
Another aspect to consider is what type of Amazon businesses have they are interested in purchasing, wholesale based, or private label. If the prospective buyer has extensive experience with Amazon businesses then they have probably worked with both.
What are the benefits of selling my Amazon business?
As mentioned earlier, the payout associated with the sale is the main goal, but there are also tax benefits.
You are probably paying yourself very little while running the business so you can reinvest most of the profits into the business. The profits you are paying yourself are subject to ordinary income tax, which is about 37% plus state taxes for the highest bracket. Amazon FBA business sales are considered an asset purchase, which means the seller pays capital gains taxes. The highest bracket of capital gains tax is 20%.
Essentially, the sale of your Amazon business gets you to pay a lower percentage of taxes on a larger sum of money, rather than paying a higher percentage on a smaller amount of money.
Not only does the sale grant you more financial freedom, but also time freedom! You no longer have to deal with contacting suppliers, wait on Amazon Seller support, or allocate any time to managing your Amazon business.
If you are interested in growing your business before you sell it, apply for Amazon funding here.
Ready to take things to the next level? Apply now and get pre-approved for Amazon Seller Funding from AccrueMe and double your capital.