How to Sell Your Amazon Business in 2022: Tips, Process, and More

In 2021 alone, over 1 million independent sellers joined Amazon globally. Profitable FBA businesses are highly likely to sell as they provide a lucrative exit strategy for sellers and, on the other hand, offer buyers a great start to their eCommerce journey.

So, if you’re considering selling your FBA business to get the capital you need to invest in your next project, now could be the right time to make the leap. However, selling an Amazon FBA business is often a complicated transaction. Right from valuation to taking care of the legal nitty gritty, there are many moving parts involved, and you should tackle them right to maximize your profits to the fullest potential.

In this comprehensive guide, we take you through everything you need to know about selling your FBA business, including:

• When to sell your Amazon business
• How to value your FBA business
• Costs associated with selling an Amazon FBA business
• Preparing your FBA business for sale
• Steps involved in selling your Amazon business
• Tips for selling your Amazon business for maximum profit

Let’s dive in!

Can You Sell Your Amazon Seller Account?

According to the program policies of Amazon FBA, a seller account cannot be sold or transferred. However, Amazon’s rationale behind prohibiting sellers from selling their Seller Central Accounts is to minimize the risk of fraudulent activity. 

Amazon wants to prevent transferring FBA seller accounts to banned users or users who already own a Seller Central account. However, when you sell an Amazon FBA business, you’re selling the entire business; the seller account is only one part of it. 

Image Caption: Amazon’s policy about transferring seller accounts.

Several publicly-listed companies use Amazon as a channel to sell their products. Many of these have gone through a change in ownership and transferred their Amazon seller accounts to new buyers. This points to the fact that selling an Amazon FBA business is permitted and legal, provided you sell the entire business, not just your Seller Central account. 

Also, when an FBA seller decides to sell their business and hand over their account to a new buyer, they must inform Amazon Seller Support beforehand. 

Why Sell Your Amazon Business?

Selling your business may not be top of mind when you first start selling on Amazon, but it can be a wise decision to make as your FBA store grows in value. 

Here are some reasons for selling an FBA business:

You Want to Move Onto Other Things

Managing an Amazon FBA business is a chore in itself. You’ve to optimize your listings, prepare and package your products, manage product ratings and reviews, and stay up to date with the latest changes in seller policies. 

Some owners may get bored with time and want a change after years of running a profitable FBA business. Others might want to try another venture and cash out their investments. Selling an FBA business presents a great avenue to relieve the stress of running an online Amazon business and get a return on your years of hard work.

You May Want to Go Liquid

The need to raise capital for another project is a common reason for Amazon sellers to cash out of their businesses. For example, you might be running a 7-figure FBA store, but all your capital remains locked. As a result, the door to invest in opportunities with potentially higher returns remains closed with no cash in hand. 

Selling your FBA store can be a way to overcome this issue.

You Want to Mitigate Risk

Your business might be stable or profitable today, but you never know when things may change. For instance, your buyer might find a cheaper, more functional alternative, or a new trend can change your product into a forgotten fad. And with cold, hard cash and hundreds of hours invested, you wouldn’t want to put anything at risk. 

What is the Best Time to Sell an Amazon Business?

The best time to sell an Amazon business is during the growth or expansion phase. Typically, most Amazon FBA businesses enter this stage after two to three years of operation. These businesses boast a successful track record, allowing them to fetch higher valuation multiples and making them lucrative to buyers.

Sometimes, however, the decision to sell an Amazon business isn’t out of choice but necessity, and you’re forced to exit. Possible scenarios may include:

• Change in personal circumstances – Someone in your family got ill, and you need the money for the treatment; you got married and need money to relocate, etc.
• You no longer find fulfillment in running an Amazon business and want to embark on a new entrepreneurial adventure.
• The business has outgrown your resources, and you want to hand it over to someone else with more time, resources, and capabilities.

Once you understand why you want to sell your Amazon FBA business, you’re one step closer to determining the right time to sell your FBA store. 

How Much Do FBA Businesses Sell For?

Most FBA businesses sell at around 1.5x to 5x of their net annual profit. Smaller, newly set up enterprises get 1.5x to 3x of the annual EBITDA. In contrast, mature and top-tier businesses that are functional for more than three years are valued at 3x to 5x or more of their yearly profit.

How Long Does it Take to Sell an Amazon Business?

On average, it takes 2 to 4 months to sell an Amazon business via an auction, a broker, or a marketplace. However, if you decide to take the DIY route and sell your business privately, it can take between 3 months to 2 years to close the transaction. 

The timeline to sell an Amazon business varies depending on the value of your FBA store. Generally speaking, large Amazon FBA businesses valued at $1 million or above take longer to sell than small businesses worth $500,000 or less. Various reasons may affect it – the complexity of the transfer, the due diligence required, and the risks involved for the buyer.  

Are There Any Closing Costs for Selling an Amazon Business?

Like any other business transaction, some substantial closing costs are associated with selling an Amazon FBA business. These include:

• Legal Fees – The transfer of business ownership entails a fair amount of documentation, ranging from a Letter of Intent to the Purchase Agreement. Depending on the business size, you might be required to set aside $5000 to $15000 in legal fees. While this appears to be significant, having an attorney involved to get the documents reviewed offers peace of mind and mitigates risks. 
• Taxes – A business sale is subject to taxes such as income tax and capital gains tax. These state and federal taxes can range anywhere between 5 to 25% of the total sale value. 
• Platform/Broker Fee (Optional) – If you’re prepared to do all the heavy lifting associated with selling an Amazon FBA business, you can sell it to a prospective buyer privately. However, if you decide to get a broker involved or use a marketplace platform, you must account for the broker or platform fee in the total closing costs.

Do You Pay Tax When Selling an Amazon Business?

Yes, you pay income and capital gains tax when selling an Amazon FBA business. How much you pay depends on the business’s ownership structure and the agreed-upon terms of sale. However, capital gains tax can range between 0 to 20%, while income tax starts from 13% and can go up to 37%.

Capital gain refers to sellers’ profit when selling their Amazon FBA business. Get an estimate of your capital gains using this formula:

Capital Gains = Final Sale Price – Investments 

After calculating the capital gains value, refer to the following table to determine the tax you will have to pay.

The rates for personal income tax start from 10% for single filers with an income of $10,275 or lower and go up to 37% for single filers with an annual income of $539,901 and higher. 

Some states also charge state-specific capital gain tax and federal taxes. For example, sellers who are residents of Iowa are subject to a state-level capital gains tax of 8.5%. 

What Are the Options to Sell Your Amazon Business?

Once you have decided to cash out your Amazon FBA investment and put a price tag on your brand, the next step is to find the right buyer. Given the complexity of the task, you might need help navigating the entire selling process.

How to sell your business and where to find the right buyers depends on your knowledge of the acquisition market and how much help you will need to navigate the entire selling process. 

Here are a few options:

List it on a Marketplace

Business listing marketplaces such as Empire Flippers and Flippa allow sellers to connect with plenty of Amazon FBA aggregators and buyers. These marketplaces charge a listing fee and a commission on the sale of Amazon businesses conducted via the platform.

It can be challenging to stand out in some of these marketplaces, given the number of stores that go on sale daily. However, they offer sellers a safe and relatively cheaper way to sell their Amazon FBA businesses to informed buyers.

Post on Facebook Groups and Seller Forums

Selling privately on Facebook groups, LinkedIn communities, and other seller forums is a great way to avoid service charges and gain maximum profit from selling your Amazon business. 

As a private seller, you control the transaction and don’t have to pay brokerage commissions, listing charges, or after-sale percentages to a third party. That said, this direct method has its fair share of drawbacks.

For instance, you must stay involved from the start till the transaction closes and sort out all the legal documentation. It also entails greater risk as there’s no vetting process for buyers. Also, if you’re new to selling FBA stores and aren’t sure how to evaluate your business, you may fall prey to lowball offers.

Keeping these risks in mind, going DIY isn’t recommended, especially if you’re trying to sell a high-value FBA business. 

Work with a Broker

This is the most optimal choice for sellers who lack the experience, time, or patience to land the best deal for their years of hard work on an Amazon FBA store. 

Working with a broker specializing in Amazon acquisitions ensures a quick, smooth, and stress-free transaction. These experts handle the entire process on your behalf, from business valuation to finding the right buyers, negotiating a deal, and managing all the documentation. 

The only downside is that brokers charge a certain percentage of the sales revenue as a commission. But, given the fact that sellers want to cash in for maximum profits, it’s a small price to pay.

What is the Easiest Way to Sell Your Amazon Business?

Working with a broker is the easiest and fastest way to sell your Amazon business. With a team of experts working on sorting everything from finding buyers to taking care of all the paperwork, expect to get top dollar for your FBA investment minus the stress and heavy legwork.

The following are key benefits of hiring a broker to sell your Amazon FBA business:

• Negotiation is a skill that is perfected with practice. Having spent years in the industry, brokers know how to fetch the best price for your online business. 
• Professional brokers have access to networks with Amazon aggregators, making it easy for them to locate serious buyers. Going solo often results in a massive waste of time as you have to deal with people who aren’t interested in buying your business or want to obtain sensitive information regarding your FBA store.
• Selling an Amazon FBA business is a complex process that involves buyer vetting, negotiation, and paperwork. Brokers assist sellers at every, mitigating risks and removing any hassles.
• Working alongside brokers generally leads to faster transactions, whereas selling your business in private groups or on a 1-on-1 basis can extend timelines up to 2 years. Sometimes, Amazon business brokers can sell your Amazon FBA business and close the transaction between 4 to 8 weeks. 

Regardless of your option, getting your business ready is essential for sale and ensuring everything is in order.

Preparing Your Amazon Business for Sale

Two questions you should ask yourself before listing your Amazon FBA business for sale are: 

How can I make my business more attractive to buyers? What should I do in the weeks and days leading up to the sale?

Implement the following housekeeping tips to make your FBA business appear as a great investment opportunity to prospective buyers:

Sort Out Brand Registry, Trademark Registration, Patent Approval, and Other Business Documents

Prospective buyers exercise due diligence by requesting various documents at different stages of the acquisition, such as brand assets documentation (product rights, trademarks, and brand registry), merchant statements, and data representing brand goodwill, e.g., the number of repeat purchases.

Having these documents at the ready will make you come across as a bona fide seller, which also reflects positively on your Amazon FBA business:

• Business registration, patent approvals, product rights documentation
• Bank statements for the number of months requested by the buyer
• Amazon merchant statements
• Tax returns
• Key performance reports from Amazon and third-party tools
• Vendor invoices, suppliers’ information, agreements, and contracts

In addition to the above, you should also prepare a buyer prospectus. A buyer prospectus gives buyers an overview of crucial business details and outlines why they should purchase and take over your business.

Organize Your Financials

Amazon merchants know too well how challenging sorting out financials can be, especially after a long work day. Unfortunately, it’s a common practice among sellers who sell on Amazon as a hobby or side hustle. But if you’re looking to flip your Amazon business eventually, it’s essential first to tidy up your finances. 

Set up a financial and accounting system at least 18 months before the sale. Doing so makes it easier for the buyer to do due diligence and ensures your business functions as smoothly as possible post-purchase.

The advantages of having such systems in place also include the following:

• Improved inventory management – Overstocking and frequent stockouts indicate poor inventory management practices and messy financials. Prevent such situations by studying past sales trends to order the right amount of inventory and avoid extra fees and lost revenue.
• Fulfilling your tax obligations – Having a complete and accurate overview of your business financials is very helpful in staying up-to-date with tax obligations. After all, you don’t want to scare away buyers with a hefty pending tax bill.
• Accurately tracking your income and expenses – A clear and accurate balance sheet provides more than just a breakdown of revenues and expenditures. It lets sellers determine how much disposable income they have, which can be reinvested into the business. You can also track unnecessary expenses and cut them out before putting your business up for sale to increase its value.

Establish SOPs

Fully automated businesses or those with established SOPs appear more attractive to FBA business buyers. Therefore, if you’re heavily involved in the day-to-day operations of your business, it’s time to get off the driver’s seat and start outsourcing routine tasks. 

There are two ways to do this:

Outsource or automate repetitive tasks

Automating repetitive tasks not only boosts the efficiency and scalability of your operations but also frees up your schedule so you can focus more on tasks of strategic importance.

For example, you could invest in reliable eCommerce automation tools or hire virtual assistants and agencies to create a sustainable system that’s not overly dependent on your involvement.

If automation is not possible, consider outsourcing. For instance, packaging and quality control tasks can be easily outsourced to save time without compromising the customer experience or product quality.

Optimize inventory management

Optimize your supply chain to shorten the time it takes to restock your SKUs without ordering excess inventory. A decent optimization level can easily be achieved with an inventory management solution that allows you to set threshold quantities for individual products and issue reorders when stock gets low. 

Automated inventory management translates to fewer stockouts, less long-term storage costs, improved delivery times, and enhanced customer satisfaction.

Check Inventory and Restock on Popular SKUs if Needed

Your business’s valuation depends significantly on how efficiently and productively you manage your FBA inventory. In the future, thoroughly audit your SKUs to ensure you have balanced inventory levels. 

Excess on-hand inventory can lead to long-term storage fees and lower your business valuation. Similarly, you must keep your most popular products in stock at the proper levels to meet customer demand and avoid lost sales. 

Get the IPI Score in Order

Your Inventory Performance Index (IPI) score shows how well you manage your inventory. Since the IPI score considers both long-term and recent inventory performance, improve it before your business’s valuation by adhering to these best practices:

• Relist or remove any stranded inventory stored at an Amazon fulfillment center.
• Remove excess inventory belonging to slow-moving products.
• Increase your sell-through rate by storing just the right amount of inventory to drive sales through paid ads.
• Avoid stockouts. Consider keeping a buffer stock at a third-party warehouse. 

Spring Clean Your Seller Account

Spring clean your seller account by fixing inventory issues, conducting a listings audit, and shutting down underperforming ASINs. 

• Clean up your inventory – If you have a bunch of inactive listings that have yet to make a sale, or perform very poorly, consider removing them. 
• Optimize your listings – Thoroughly review your product detail pages. Make sure the copy is clear, concise, and compelling to engage desktop and mobile users – pay special attention to SEO. 
• Resolve and close opened cases – If you have opened cases about customer disputes, fulfillment issues, or compliance violations, go through them and either close them or get in touch with the Amazon seller support team to seek a resolution. 

Decide on a Valuation

Now that we’ve discussed a few reasons for selling an Amazon FBA business and how to prepare ahead of the sale let’s talk about valuing an Amazon business to know its true worth. 

Assigning value to an Amazon FBA business depends on many factors. Getting it wrong can cause you to overprice your business or undervalue it. In the former, buyers won’t come near your listing, and you’ll waste a lot of time. In the latter scenario, you’ll regret knowing you could have sold your FBA store at a much higher price.

Using an Amazon business valuation tool can be a good first step to getting an idea of how much your FBA business is worth. All you have to do is provide your EBIT, salary expense, profit margin, revenue, and information about whether you sell patented or branded products. Once you input all the details, you arrive at an estimated value. 

The following values calculation methods help determine your Amazon FBA business’s actual value:

Seller Discretionary Earnings (SDE)

Seller discretionary earnings or SDE is helpful because it accounts for the following expenses and gives you a more accurate picture of your business earnings:

• Owner’s compensation
• Add-backs, such as personal meals, travel, mobile phones
• Patent/trademark applications
• Depreciation of assets
• Interest on loans
• One-time and repeat expenses
• Charity
• Cost of services and subscriptions that are no longer used

To calculate SDE from the annual revenue of your business, you can use the following formula:

SDE = Total revenue – Cost of goods – Operating expenses + CEO compensation + Discretionary operating expenses

Valuation Multiple/Net Income Multiple

Once you have computed your SDE, the next step is to figure out the valuation multiple or net income multiple. Again, there’s no rule of thumb here – it’s mostly an educated guess based on your business’s strengths and weaknesses, coupled with market research. 

Generally, valuation multiples for most Amazon businesses range between 2 to 5x. However, larger businesses with a wide range of high-performance branded ASINs can sell for as high as 7x of their SDE. On the other hand, companies with weak operations and irregular financial records are valued at a 2x multiple or less. 

Here is a list of financial and non-financial valuation drivers that can increase or decrease the worth of your business: 

• Financial Drivers – Profit margin, complexity, and replicability of the cost structure, earnings stability, and recent profit and loss data.
• Non-Financial Drivers – Business age, number of SKUs, traffic and conversion rate, brand assets, business goodwill, and operations (owner’s involvement, number of employees, automated and outsourced processes)

P.S: Want to know how much your business valuation is worth in just a few minutes? Check out this nifty Amazon business valuation calculator.

How Does the Sale of an Amazon Business Work?

After setting the groundwork, you can finally start the Amazon FBA business selling process. But with finding buyers and negotiating a deal, don’t forget that you still need to continue running your business operations as usual. This is important because a sudden dip in performance can make your business appear less attractive. 

Here’s a quick overview of how the sale of Amazon business works.

Create a Business Prospectus

A business prospectus is a legal document that provides critical information buyers need to make an informed decision. It includes:

• The nature of the FBA business
• Financial information
• Information regarding business operations
• Products sold and their historical performance
• Information about the owner as well as the team

Having a business prospectus ready helps save valuable time for both buyers and sellers. It allows buyers to quickly review the business details and decide whether they want to purchase your Amazon business. You, as a seller, also save time by engaging with only serious buyers.

Search for Potential Buyers

Depending on your preferences, you can list your Amazon FBA business for sale on a marketplace, hire a broker, or try to find a buyer yourself. Regardless of your option, it would be best if you had some idea about how to research prospective buyers and shortlist those most likely to go through with the acquisition. 

Knowing the buyer’s profile, acquisition history, corporate structure, available funding, and investment objectives gives you an edge during the negotiation process. 

If you’ve hired a broker to help you with the sale, they can set up a conference call where you and the buyer can interview each other and gather the information required to make the right decision. 

Letter of Intent

After a successful call between you and the buyer, the next step is to get your Letter of Intent (LOI) ready. A letter of intent is a non-binding agreement that documents the buyer’s intention to purchase your business, the offer, and the terms at which they plan to acquire your FBA store. 

In addition, the LOI also outlines the payment schedule and terms related to the business structure. For example, if the buyer intends to maintain the original structure of the business and wants you to stay involved, they might choose a part-ownership offer. 

Similarly, the buyer might transfer the ownership fully to their name but want you to stay on board for a specified time at a salary stated in the LOI. 

One key thing to understand about the LOI is that even though it is a non-binding agreement, it serves as a prelude to the purchase agreement. 

Negotiation

The next step is to negotiate the offer. If you’re selling privately, the negotiation occurs personally between you and the buyer. On the contrary, if a broker is involved, they serve as an intermediary and try to negotiate the best terms and price on your behalf. 

Negotiations continue until an accord is reached between both parties or until one of the two decides to back out of the deal. 

Due Diligence

Due diligence is the step where the buyer verifies the information you provided regarding your FBA business. It includes inspecting business operations, vetting the seller, conducting market analysis, etc. 

For an average Amazon FBA business with complete and accurate financial documentation, due diligence only takes a few days. However, the due diligence process can extend for months for high-value businesses with complex operational models. 

The process can take longer in case of discrepancies or warning signs, such as pending legal actions or trademark violations. Depending on the severity of the issue, the buyer may either walk out of the deal or adjust their offer. 

Preparing the Purchase Agreement

This legally-binding agreement documents the offer, offer terms, payment schedule, and the list of assets that will be handed over to the buyer. 

Some of the business assets listed in the purchase agreement include:

• Websites, domains, and admin accounts
• Customers’/email lists
• Ecommerce accounts
• All marketing materials and content
• Supplier contracts and agreements
• Social media accounts
• Business email and phone
• Trademarks and intellectual property
• Policy documents

Transferring the Business and Closing the Deal

Once you and the buyer have agreed upon the offer terms, the next step is to contact Amazon to inform them about the change in ownership. To do this, open a case using your Amazon Seller Central account and apply for the transfer of account details to hand your business over to the buyer. 

On top of your Amazon Seller Central account, other digital assets, such as websites and social media accounts, may also require transfer. 

Once you have transferred all the assets, you notify the escrow service, which then confirms everything with the buyer and releases the funds. 

5 Tips to Sell Your Amazon Business for Max Profits

Selling your Amazon FBA business for maximum profits is a long-term game. Therefore, if you intend to cash out your FBA store later in the future, it’s important not to tunnel vision sales and profits and use other strategies to improve the worth of your business. 

Here are five tips to make your business more attractive to buyers and earn a high ROI.

1. Amazon aggregators are fascinated by businesses with fewer SKUs and a decent income stream over FBA stores with hundreds of SKUs, generating the same income. Therefore, don’t go overboard with the idea of selling everything that looks interesting to you. Maintain a portfolio of 3 and 8 products to keep things easy to manage.
2. Try to secure exclusive agreements with your vendors. This allows you to source quality products in a cheaper, more reliable manner and helps build a unique and high-value brand.
3. Strive to achieve brand cohesiveness by selling products that belong to the same category and niche. This allows you to pair products with each other and capitalize on upsell opportunities. 
4. Building an email list is one of the best things you can do to ensure the long-term success of your Amazon FBA business. It allows you to engage with and develop a loyal customer base who can then be relied upon to leave behind positive feedback. 
5. Establish your presence in marketplaces outside your local Amazon marketplace. Selling internationally allows you to widen your customer base and drive more sales during international sales events, such as Christmas, Cyber Monday, Black Friday, etc. 

Selling an Amazon Business Made Easy

Selling an Amazon business can feel overwhelming. But the reward of getting 5x or even higher of your annual revenue is well worth the years of hard work you put into your online business. 

To make the most of your experience, you should understand what buyers are looking for, how the selling process works, and ways to get a higher valuation. More time spent researching the market or getting assistance from a professional broker increases the chances of selling your store at a higher price.

Dragonflip is a leading eCommerce M&A consultancy firm that maximizes your business value and gets you the best deal terms. From business valuation and taxes to coordinating with the buyer and negotiating the exit price, Dragonflip has helped numerous FBA merchants like yourself sell their FBA stores for high prices.

Interested in knowing how much you could earn by selling your Amazon FBA business? Set up a call with one of our consultants to work out your exit strategy and sell your business for the maximum profit.