Never Miss a Beat - Get Updates Direct to Your Inbox
How Long Does It Take to Sell Your Amazon FBA Business?
By Quiet Light
A lot of sellers ask, “how long does it take to sell your Amazon FBA business? After all, having a clear understanding of the deal timeline is important when it comes to planning an effective exit strategy. By accurately budgeting your time and knowing what steps to take, you maximize your chances of success.
In this article, we discuss several important elements related to selling your Amazon business, including:
- What’s involved in the valuation process when selling your Amazon FBA business
- How to prepare your Amazon business for sale
- Ten steps to sell your Amazon business
- How long it takes to sell your Amazon FBA business
“One of the first steps to successfully selling your Amazon FBA business is to get an accurate valuation of your company.”
How an Accurate Valuation Contributes to Selling Your Amazon FBA Business
One of the first steps to successfully selling your Amazon FBA business is to get an accurate valuation of your company. A valuation gives you an idea of how much you can expect to earn from the sale of your business. It will allow you to list it at a reasonable price, one that will help you earn top dollar while still attracting a number of interested buyers.
As an Amazon FBA seller, a thorough valuation provides many other benefits. As we will see, a valuation is a measure of the objective and subjective components of your business that go into determining its value.
The information you gain during a valuation can help you identify the strengths and weaknesses of your Amazon store. When planning ahead appropriately, you can use this information to optimize your business operations before putting it on the market. These optimizations allow you to create a more profitable exit and win more favorable deal terms.
SDE multiple method
There are many different ways to calculate the value of a business. The preferred manner, however, is the seller’s discretionary earnings (SDE) multiple method.
According to the SDE multiple method, the value of a business is equal to the seller’s discretionary earnings multiplied by a number, called the multiple. In other words:
Business value = SDE x multiple.
Below, we take a closer look at both SDE and the multiple.
The seller’s discretionary earnings is a number that captures the true money-generating capacity of the business. Said another way, the SDE represents the true benefit the business produces for the owner of the company.
SDE can be calculated by looking at your financial statements. It comprises the pre-interest and pretax profits of your Amazon store before taking into account certain discretionary expenses. These include:
- Your salary as the owner
- Noncash expenses
- One-time investments
- Unrelated expenses or income
While similar to business profit, SDE adds back the expenses listed above in order to more accurately assess the income available to you as the owner. This distinction is important, as it can lead to a dramatic difference in the assessed value of your company.
It is highly important to accurately calculate your true SDE when valuing your company. Failure to add back certain discretionary expenses would result in your business being undervalued. However, if you add back expenses that don’t count as discretionary, it would lead to an unfairly inflated valuation. Potential buyers would spot your error and be unlikely to pay your asking price.
Given its importance, many entrepreneurs choose to work with a business Advisor who is experienced in selling Amazon businesses when it comes to creating their valuation.
“The multiple is a number that serves to assess both objective and subjective features of your business that determine its overall value.”
Thinking of Selling Your Business?
Get a free, individually-tailored valuation and business-readiness assessment. Sell when you're ready. Not a minute before.
Two businesses that have the same SDE could sell for dramatically different prices. This variability is captured in the multiple. The multiple is a number that serves to assess both objective and subjective features of your business that determine its overall value.
Ultimately, the multiple your business receives is determined by how much a buyer is willing to pay for it. However, there are a variety of factors to pay attention to when determining an appropriate multiple for your business prior to listing it. Lumped into several categories, these factors influence how valuable your business will be to a new owner. These include:
By evaluating and understanding how your company stacks up across these four categories, you can gain a better idea about specific actions you can take to improve your business prior to listing it.
Companies that exhibit strong growth signal to interested buyers that there is a good chance they will continue to grow into the future. Since most buyers are looking to gain a return on their investment, growth is a very attractive quality.
As you can imagine, two businesses with equal SDE figures but divergent growth patterns (i.e., one is growing and one is declining) would receive very different offer values.
As a successful Amazon seller, it is important to also take note of potential areas for future growth. If a new owner could make several optimizations to your business that would lead to growth down the road, this would make the business more attractive to them. This, in turn, could raise its current price.
Current market trends are also important when it comes to determining the multiple value for your company. If your industry is growing, your business has a greater chance of future success than if your industry was in decline. Again, these growth trends trickle down to affect the overall sale price of your business.
The more risk your business entails, the less valuable it will be, assuming other factors are equal. A comprehensive valuation will assess the risk associated with your business as well as ways to mitigate those risks.
There are many different things that can create risk. In general, if part of your business’s success relies on any single point of failure, your business has a greater chance of decline. For example, if you only sell one product on your Amazon store, you could be in trouble if you encounter serious supply chain issues.
Other potential areas of risk include trademark vulnerabilities or legal challenges.
The ease with which your business can be successfully transferred to another owner is referred to as transferability. If your business is difficult to transfer without negatively impacting the performance of the business, its value will suffer. This value decline will show up as a reduced multiple.
There are several different things that can influence the transferability of your business. For one, if your operations are disorganized and solely rely on your knowledge, it will be more difficult for someone to successfully take it over. In addition, if your business is tied in some way to your likeness or personality, it may not function very well under new ownership.
“If your business is difficult to transfer without negatively impacting the performance of the business, its value will suffer.”
Lastly, any serious buyer will want to see that you have created detailed and thorough documentation for your business. This includes accurate financial records as well as easy-to-follow standard operating procedures.
Accurate documentation makes it easier for an interested buyer to evaluate the performance of your business during the buying process. This helps to instill trust that the business performs as you claim it does. In addition, thorough documentation assures the buyer that you have run your company in a responsible manner.
By assessing your company on all four factors, you can determine an appropriate price point prior to listing your Amazon FBA business. In addition, the knowledge you gain from conducting a thorough valuation will help you better prepare your Amazon business for sale.
“In order to maximize the sale price of your Amazon business and win more favorable deal terms, preparation is key.”
How to Prepare Your Amazon Business for Sale
Before we look at what’s involved in selling your Amazon FBA business, let’s examine what steps you may need to take in order to be adequately prepared for your exit. In order to maximize the sale price of your Amazon business and win more favorable deal terms, preparation is key.
Determine the right time to sell your Amazon FBA business
As an Amazon seller, the first order of business is to determine the right time for you to sell your business. In a perfect world, it is advisable to start preparing your business for exit 12–24 months prior to listing it. This allows you ample time to make the necessary improvements that will create a more profitable exit.
There are many factors you must consider when determining when to sell your business, including:
- Personal considerations
- The age of your business
- Your skill set
- Market considerations
For starters, your level of interest in managing the business is relevant to deciding the right time to sell it.
If your interest and passion for the business are high, you may be quite happy staying involved long into the future. If you find yourself disinterested, unmotivated, or drained by the business, however, it may be time to move on.
It is also helpful to think about the outside opportunities that are available to you. For example, let’s say the opportunity to join a colleague’s new company becomes available. In this case, you may need to free up time to pursue that opportunity by selling your Amazon FBA business.
Your personal finances naturally play a large role in determining when to sell your business. If you need a large chunk of cash for a down payment on a house or to pay down a large, unexpected debt, you may think about selling your business sooner than later. Keep in mind, however, that you will lose whatever income you had from the business once it is sold.
Similar to your personal finances, your expected tax burden can impact the optimal time to sell your company. By speaking with an experienced accountant, you can determine the best time to sell your business in order to legally minimize your taxes from the sale.
“If you find yourself disinterested, unmotivated, or drained by the business, it may be time to move on.”
The age of your business
As an FBA seller, it is also important to consider the age of your business when choosing an appropriate time to sell. In general, older businesses with a proven track record are more valuable than newer companies. A business that has consistently demonstrated good performance is perceived as less risky than one that is just starting out.
For this reason, it may be worth holding off selling your business until it has a longer record of success if you have the option to wait.
Your skill set
Businesses require different skill sets at different stages of development. In the beginning, idea generation, product development, and hustle may all be valuable attributes or skills for an owner to have.
As the business grows and matures, the business may benefit from an owner who has expertise when it comes to building teams, expanding marketing efforts, and scaling operations.
As an Amazon seller, it is important to be honest with yourself about what skill sets you possess and what skill sets the business requires at different stages. If you determine that you and the business are no longer a good match, it may be time to consider selling it to someone who is available to take it to the next level.
Lastly, the state of your market or industry has an impact on the optimal time to sell your business. If you can do so, it is advisable to choose a period when your market is exhibiting strong growth to list your business. This will help you attract more interested buyers. This increased demand will help you achieve a higher sale price and more favorable deal terms.
The right time to sell your business will depend on your unique combination of all of these factors; no two situations are the same. While waiting for your business to mature or market conditions to improve before selling might be possible for some, others may need to sell sooner as a result of their personal situation. Take some time to reflect on the appropriate time for you to sell your company.
Buy a Profitable Online Business
Outsmart the startup game and check out our listings. You can request a summary on any business without any further obligation.
Get a valuation
Once you have determined the right time to sell your business, it is helpful to get a business valuation. As we have discussed, the valuation will let you know how much you can expect to sell your company for as it is right now. It will also give you an idea of what you need to do in order to prepare your business for the market.
Clean up your financial statements
If you haven’t done so already, clean up your financial statements prior to selling your Amazon business. Hire an accountant to go through your records and create cohesive and orderly financial documentation.
By taking this step, you will increase the value of your business and create a much easier selling process for yourself when you do list your business. In addition, you will make it much easier for yourself to run your business prior to selling it.
Create standard operating procedures
Standard operating procedures are essentially an instruction manual for how to run your business. They may include procedures for ordering and managing inventory, sourcing new products, creating new Amazon listings, managing your marketing channels, and more.
Clear standard operating procedures help keep you organized and efficient while running your business. In addition, they make it much easier for a new person to take over management.
By creating clear standard operating procedures, you reduce the workload and stress for a potential new owner. This, in turn, will make your business much more attractive, driving up your sale price.
Creating standard operating procedures can take some time depending on the complexity of your business operations. Start long before you plan to sell and gradually cover all areas of your business. The effort you put in now will pay dividends when you decide to sell.
Work to grow your business
If your business is not in a growth period, work to create growth before listing it for sale. Of course, this may not happen overnight, depending on what needs to happen in order to drive growth.
Growth may come from optimizing your existing Amazon marketing channels or implementing new marketing efforts. Or, you may want to consider launching additional products in order to drive Amazon sales to increase your revenue. Whatever steps are required for your unique situation, start now.
Create efficient teams
The easier your Amazon FBA business is to manage for a new owner, the more interested buyers you will attract and the higher your sale price will be. By creating effective teams to make your Amazon business model more efficient, you minimize the time input required from yourself or a new owner.
Depending on the complexity and size of your business, you could hire individuals or teams to handle your:
- Customer service requests
- Supply chain logistics
- Amazon product research
- Product listings
- General operations
When a new owner takes over, they have the option to keep the team in place in order to make the business easier to manage.
“The easier your Amazon FBA business is to manage for a new owner, the more interested buyers you will attract and the higher your sale price will be.”
Eliminate areas of risk
Once you identify areas of risk within your business, you can work to minimize or eliminate them prior to selling your company. A good first step is to eliminate areas of your business that rely on a single point of failure.
For example, if your marketing efforts rely solely on Google Ads, your business could decline quickly if the ad platform were to undergo changes. By adding other marketing channels like content marketing, Amazon PPC ads, Facebook advertising, social media marketing, email marketing, or other forms of Amazon advertising, you would diversify your marketing efforts and reduce risk.
In addition, make sure you are not the target of any patent infringement claims or lawsuits. If your business has patented products, ensure that your patent claim rests on solid ground. Also, ensure your brand is protected by using the Amazon Brand Registry tools available to you.
By taking the time to prepare your business for sale, you help create an easier and more profitable exit process when you do decide it is time to sell your Amazon business.
10 Steps to Selling Your Amazon Business
Once you have decided to sell your Amazon FBA business and prepared it for the market, there are a number of steps to take in order to list and sell your company successfully. Here, we review how to sell your business.
“Given the complexity of selling a business and the importance of getting it right, hiring an Advisor often leads to better overall outcomes.”
Choose a brokerage firm
While some online business owners decide to sell their business on their own, many opt to hire a business broker, or Advisor, to help guide them through the process. The right Advisor, one who is experienced with selling Amazon businesses, will assist you at all stages. This includes valuing your business, creating your marketing package, negotiating with interested parties, signing the paperwork, and closing the deal.
Given the complexity of selling a business and the importance of getting it right, hiring an Advisor often leads to better overall outcomes. While it does add extra cost, the right Advisor will more than make up for their expense by helping you achieve a higher sales price, win more favorable deal terms, and reduce the stress and energy needed to complete the transaction.
Get a valuation
If you haven’t gotten a valuation, work with your Advisor to create one. Or, if you received a valuation for your business but a significant amount of time has elapsed since then, you may need to repeat the process. This is especially true if you have made changes to your business since your last valuation.
Create a marketing package
Once you have prepared your business for sale, chosen your Advisor, and received a valuation, it is time to bring it to market. Creating your marketing package is an important step along the way.
When interested buyers want to learn more about your business, they need something to give them the information they need. The marketing package serves that purpose. It contains your business’s relevant details, including price, performance metrics, and a written description detailing what your company does.
You and your Advisor will work together to create a marketing package that accurately reflects your business and highlights its positive attributes.
List your business for sale
Once your marketing package is complete, it is time to list your Amazon business. There are many business listing websites available to choose from. Once listed, interested buyers can contact you through the site in order to learn more about your business.
In addition to listing your business on established sites, your Advisor will market your business to their networks, which will increase the number of qualified, interested buyers. The more interested parties you can attract, the greater the competition will be for your business.
As the offers start to come in, you and your Advisor will meet with interested parties and answer any questions they may have. During this period, you will likely be negotiating with a potential buyer to determine an acceptable price and deal terms.
Your Advisor will help you evaluate offers to determine which one is most likely to be the best fit for you. In addition, they will help you make counteroffers when appropriate. By successfully navigating this stage, you can choose the best offer and move forward in the selling process.
Sign a letter of intent
After you have chosen the best offer, you and the buyer sign a letter of intent. This document spells out the terms of the deal and certifies that you will both move forward with the transaction as long as certain conditions are met. While not a legally binding document, the letter of intent, or LOI, is a serious step toward selling your company.
During the due-diligence process, the buyer has the opportunity to carefully examine your business to verify that everything is as advertised. They will study your accounting records, verify your supplier relationships, and look at your standard operating procedures. As you can imagine, thorough accounting records and clear documentation help make this process a lot easier.
If they take issue with any aspect of your business, you and the buyer may renegotiate certain parts of the agreement. The due-diligence process can be stressful for both the buyer and the seller.
Draft and sign the asset purchase agreement
Once the buyer is satisfied with the due-diligence process, the parties draft and sign the asset purchase agreement, or APA. The APA is a legally binding document that spells out the exact terms of the sale.
Transfer assets and close the deal
After the APA is signed, the buyer puts the agreed-upon funds into an escrow account, the seller transfers the business assets, including the Amazon seller account, and the funds are released to the seller. The moment that you have worked so hard for has finally arrived.
Most selling agreements include a period of training after the sale. During this time, which usually lasts several months, you train the buyer on all aspects of running the business. This may include orienting them to the Amazon Seller Central account, the company’s marketing channels, and more. The training time required from you during this period depends on the outcome of your negotiations with the buyer when creating the deal terms.
“Your Advisor will help you evaluate offers to determine which one is most likely to be the best fit for you.”
The Typical Timeline for Selling an Amazon FBA Business
As an Amazon business owner thinking of selling your FBA company, you may be wondering how long it will take to sell. In this section, we will look at how long it could take you to sell your business.
Amazon FBA sale timeline
If this is the first time you are thinking about selling your business, you may benefit from postponing your sale for 12–24 months so that you have ample time to create a highly attractive and sellable business.
If you have prepared your business or have decided to sell it right now in whatever state it is in, the timeline will be much shorter. It still depends on a number of factors, however, many of which are outside of your control.
Once you contact an Advisor and agree on the terms of your relationship, your business could be listed for sale within a few weeks. If you are slow to provide the necessary information to create your marketing package, this could take longer.
After your business is listed, you may receive offers immediately, especially if it is an attractive business. It could also take quite some time to receive a qualified offer, just as some houses listed for sale take quite a while to find a buyer. Once an offer comes in, negotiations may take several days to a few weeks.
The due-diligence process, which starts after the asset purchase agreement has been signed, typically takes about 30 days. Again, this could be shorter or longer depending on the buyer’s tendencies and how well you have prepared your business for sale.
All told, the amount of time it takes from listing to closing and transferring the Amazon Seller Central account ranges from less than 30 days on the short end to over 150 days on the high end. Most deals close in the range of 30–90 days, however.
Factors that affect the length of time to sell your business
The amount of time it takes to sell your business is largely impacted by how well you prepare your business for sale. The more attractive your business is, the easier and faster it will sell, and vice versa.
If you fail to create orderly financial statements, sell when your business is in decline, and don’t have standard operating procedures, you may have a rough experience. Indeed, if you don’t receive any offers you may be forced to remove your business listing, improve your operations, and try again later.
Whether it’s launching more products on the Amazon marketplace to drive growth or cleaning up your financial statements, the work you put into preparing your business will pay dividends in the form of a higher sale price, better deal terms, and a faster and less stressful selling process.
Thinking of Selling Your Business?
Get a free, individually-tailored valuation and business-readiness assessment. Sell when you're ready. Not a minute before.