The world of Amazon FBA businesses is a fascinating one constantly evolving and presenting unique opportunities for both buyers and sellers.
Back in 2017 when we were still figuring out the nuances of this marketplace we embarked on a into our own data analyzing the sales of 19 Amazon FBA businesses from January to September of that year.
It was a wild ride and the insights we gleaned were truly eye-opening.
This experience along with the wisdom gleaned from our many years in the online business world has given us a unique perspective on this vibrant industry.
The Amazon FBA Landscape in 2017: A Time of Change and Opportunity
It’s easy to get caught up in the numbers but remember that every data point represents a real person a real story a real business.
As we delved into our 2017 data we saw a clear shift in the Amazon FBA landscape.
The average multiple for a sold Amazon FBA business had climbed considerably from the days when investors were just starting to learn about this business model.
Back then multiples were more in the 20x range but by 2017 we were seeing multiples often exceeding 50x.
It was like watching a child grow up.
In the early days the market was full of exciting potential but buyers were cautious the multiples reflected a level of uncertainty.
As the market matured so did the understanding of the business model driving up valuations.
It was exciting to witness this growth firsthand.
Understanding the “List Price” vs. “Sales Price” Conundrum
One of the most important takeaways from our case study was the difference between what we call “list prices” and “sales prices.” List prices are what brokers often put out there as a representation of the business’s worth while the sales price is the actual amount the business ultimately sells for.
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Most studies rely on list prices which while helpful don’t tell the whole story.
It’s like looking at a menu and assuming everyone orders the most expensive dish.
You might be surprised to find out that the most popular dishes are often the more affordable ones.
By sharing both list prices and sales prices we aimed to provide a more realistic picture of the market.
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It was important for buyers to understand that the quoted value might not be the final price tag and for sellers it was crucial to grasp that achieving the list price wasn’t always guaranteed.
Diving into the Details: Niche Trends Sales Times and Average Deal Sizes
Our analysis revealed some fascinating trends.
The “Home & Kitchen” niche emerged as a surprise leader which makes sense considering the vast array of products it encompasses.
It’s a niche where potential is practically endless as vast as a well-stocked kitchen itself.
The “Health” niche continued to be strong with several businesses in the health fitness and personal care spaces finding new homes through our marketplace.
It’s important to note that these numbers were just a snapshot in time a reflection of the market at that particular point.
Trends evolve and so does the Amazon FBA landscape.
We also looked at the average time it took to sell an Amazon FBA business which in our case study hovered around 74 days.
While this seemed longer than our overall marketplace average we learned that the additional complexity of FBA businesses with their multiple suppliers logistics and customer service systems played a significant role.
When you compare that to a typical affiliate content site where the only real ongoing cost is ordering new content you begin to see why FBA businesses might take a bit longer to sell.
It’s like comparing a simple bicycle to a sophisticated sports car both capable of getting you where you need to go but with very different levels of complexity.
The Buyer’s Market: Opportunities and Challenges
Our case study revealed that even as the average multiple for FBA businesses had increased it was still a buyer’s market.
The average FBA business was being listed at a 26x multiple but selling at a 23x multiple.
This indicated that buyers still held a strong advantage with the opportunity to acquire businesses at a potentially lower valuation.
This is a great time for buyers with a good war chest to scout our marketplace for attractive deals.
The value of these businesses is likely to only continue to increase as more buyers enter the market eventually shifting the balance towards a seller’s market.
It was exciting to see how buyers were using FBA businesses as a springboard to launch their own brands.
They recognized the value of an established product a proven logistics system and a loyal customer base.
The ability to quickly expand into new markets like Shopify Walmart or even international Amazon marketplaces was a major draw.
The Seller’s Perspective: When to Sell and How to Maximize Value
Now from the seller’s perspective this buyer’s market might be a bit disheartening.
Why sell now when you can potentially see a 15 percent increase in valuation in just a few months?
Our advice to sellers was straightforward: wait unless you have a compelling reason to sell.
If you’re looking for a lump sum of capital to invest in real estate to fund a personal project or to simply free up time for a new venture then selling now might make sense.
But if you’re simply seeking to maximize your valuation then waiting could be a better strategy.
We also highlighted the growing competition in the Amazon FBA space.
While this could present a challenge for new players entering the market it could be an opportunity for existing sellers to leverage their existing infrastructure brand recognition and customer base to acquire an edge.
A Seller’s Mindset: Optimizing Your Exit Strategy
Our business advisors seasoned veterans in the FBA business provided invaluable insights.
They emphasized the importance of planning your exit strategy well in advance.
Don’t wait until your business starts to decline to think about selling.
A thriving growing business commands a higher valuation than a declining one.
Just like you wouldn’t wait until your car is on its last legs to start saving for a new one don’t wait until your business is struggling to think about your exit.
Plan ahead anticipate your needs and seize the right moment to sell.
Remember the opportunity cost of waiting is not just about the money you might miss out on but also the time and effort you could be dedicating to your next big project.
Navigating the Account Transfer Process: A Guide for Buyers and Sellers
We also addressed a common concern: how to transfer ownership of an Amazon FBA business when Amazon’s policies state that accounts are not transferable.
The key is to understand that Amazon is not against selling an FBA business itself but they do have strict rules regarding account transfers.
The process involves two main approaches: account takeover and listing migration.
Account takeover is simpler but requires the seller to surrender their account.
Listing migration takes longer but allows the seller to retain their account while transferring the specific listings and reviews of the business to the buyer.
In either case communication with Amazon is key.
We emphasized the importance of reaching out to Amazon support clearly explaining the situation and obtaining their written confirmation.
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This transparency helps avoid potential issues and ensures that Amazon understands the transfer is legitimate.
It’s like making sure everyone is on the same page before embarking on a big trip.
Investing in Yourself: Connecting with the FBA Community
Finally we touched upon the challenges of being an entrepreneur especially in a field as dynamic and competitive as Amazon FBA.
We encouraged aspiring entrepreneurs to connect with other FBA professionals join groups like the Amazon FBA High Rollers group on Facebook or Dynamite Circle and engage in communities that offer support mentorship and shared insights.
It’s important to build your own network of peers to learn from their experiences and to find a community where you can share your successes and challenges.
Remember even the most experienced entrepreneurs learn from others and a strong network can make all the difference in navigating the world of Amazon FBA.