How to Make a Competitive Offer When Buying an Amazon Business

There are numerous benefits to acquiring an established Amazon FBA business. Not only does it allow you to skip the startup grind, but it also can provide enormous ROI and growth potential. If you’re on the hunt for an FBA brand, it’s essential that you know how to make a competitive offer when buying an Amazon business. 

With the recent rapid growth of e-commerce, there has been a parallel increase in the number of Amazon businesses bought and sold. This increased demand means that the bidding process can get quite competitive, especially if the business is highly attractive. In fact, it is not uncommon for the owner of a successful FBA business to receive upwards of 10 offers. 

As a potential buyer, it’s critical to understand what a competitive offer looks like in order to stand out from the pack and win the deal. This article will explain how to craft a great offer.

Buying Process

Before we get into more detail on how to make an attractive offer, let’s briefly go over the process for buying an Amazon business in order to better conceptualize how this environment is organized. 

Steps for Buying an Amazon Business

Buying an Amazon brand involves several carefully orchestrated steps. Given the stakes, it can be a sensitive process that must be navigated mindfully. While there is a lot of detail that goes into buying and selling an Amazon business, the steps involved can be briefly summarized below:

• Identify a business
• Negotiate a deal
• Sign a Letter of Intent
• Verify Financials with Due diligence
• Sign the Asset Purchase Agreement (APA)
• Close the deal
• Transition and training

Identify a Business to Make a Competitive Offer On

Becoming a business owner likely represents a significant decision in your life. As such, you will want to ensure that you do your homework and purchase a business that is right for your needs. 

Each business for sale should have a marketing package providing an in-depth overview of the business. In most scenarios, before you obtain the marketing package, you will need to sign a non-disclosure agreement to protect the privacy of the business. Reviewing the marketing package, possibly with the help of an advisor, will allow you to determine which business meets your needs in terms of size, revenues, profit margin, work involved, and more. 

Negotiate a Deal

Once you have decided that you have a business you are satisfied with, you must meet the seller, make an offer, and negotiate a deal. We will go into this further below. 

Sign a Letter of Intent

After making a successful offer, you and the seller sign a Letter of Intent (LOI) basically stating that you intend to buy the business as long as the information that has been provided is factually accurate. While the deal can still fall apart after signing the letter of intent, you should only sign the letter if you fully intend to purchase the business.

Due Diligence

During the due diligence process, you have the opportunity to carefully comb through the company’s financial statements and other sources of information. By doing so, you will be able to verify that everything contained in the marketing package is factually accurate. This is often done by looking at their Amazon Seller Central dashboard. This is a very important step, as you want to be sure that you know the exact nature of what you are purchasing.

Asset Purchase Agreement

If everything checks out during due diligence, then you and the seller move forward in drafting an Asset Purchase Agreement (APA). This agreement specifically details the terms of the deal. Once it has been finalized, both parties sign.

Close the Deal

Closing the deal involves making the agreed-upon payment and transferring the assets. The buyer will place the money into an escrow account, the seller transfers the assets, and then the money is released to the seller. Transferred assets often include inventory, physical and non-physical business assets, and the Amazon seller account, among other things. 

Transition and Training

After the Amazon business account and FBA site has been transferred, there is often a transition period when the seller trains the buyer in the daily operations of running the business. While this period can be whatever the buyer and seller agree to, a standard starting point is 40 hours of training. This could include emails, phone conversations, video calls, or face-to-face meetings. 

Getting Advice and Support When Making a Competitive Offer

The steps that we have mentioned above only provide a very brief overview of the process. Obviously, each step contains a lot more detail than can be discussed here. As mentioned, the selling process can be quite sensitive. There are a number of issues that could arise during the process that could derail the entire deal.

Given the attention to detail that is required, it often makes sense for would-be-buyers to acquire some help. A business advisor can help you find, analyze, and choose a business that meets your needs. In addition, they can help to guide you through the negotiation process, as well as the rest of the steps involved. 

There are also experts who specialize in completing the due diligence process on your behalf. They are trained and experienced in carefully verifying that all of the information provided is accurate. 

The decision to buy a business is a significant one. Investing in the right help can make the difference between buying a business that falls flat and buying a business that ultimately transforms your life. 

Find The Right Business For You

An important part of making a competitive offer for an Amazon FBA business is finding the right business for your needs and gathering relevant information. When evaluating a business, there are several different factors to consider. Let’s review some of those below. 

Valuing an Amazon Business

Whether you are looking to spend several hundred thousand dollars or upwards of several million, you want to find an Amazon business that lies within your value range. At Quiet Light, we talk about the Four Pillars of Value when discussing a business’s worth. The Four Pillars of Value includes:

• Growth
• Risk
• Transferability
• Documentation

Taken together, these factors will influence the final number value that is attached to any given business. 

Growth

Growth refers to both the past growth trends of the business, as well as future growth prospects. Assuming that you are purchasing a business to realize a return on your investment, you will want to find a business that has solid past growth as well as clear opportunities for future growth. An opportunity for future growth would be minimizing costs, adding another sales channel, or optimizing the business’s product listings.

Risk

All business activities carry some level of risk. If you are an entrepreneur, you have likely made peace with this fact on some level. However, it makes sense to minimize risk as much as possible, particularly when making such a large investment. As such, it is important to be able to determine which businesses pose an unnecessary risk and which ones are more stable bets. The less risk involved, the more valuable a business will be. 

Transferability

Transferability refers to the ease with which a given business can be transferred to a new owner. 

Are the owner’s name and personality connected with the business? Does the owner have clear instructions and operating procedures? The answers to these and other questions will determine how transferable a business is. The more transferable, the fewer headaches for you as the new owner. 

Documentation

Lastly, the more clearly a business’s operations have been documented, the more attractive that company will be to possible buyers, increasing the value. Proper financial documentation helps to instill confidence and clarity into the situation and makes it easy to verify that the business is performing as advertised. 

Key Performance Indicators

In addition to revenue, Amazon business sales, and other obvious metrics, there are several Key Performance Indicators (KPI) that are important to look at when making a purchasing decision. These seller metrics will help you understand the overall health and viability of the business. Some of these include:

• Seller rating
• Product rankings
• Order defect rank
• Conversion rate
• Product reviews
• Fulfillment performance 
• Inventory performance index

While we won’t go into each of these here, learning about these metrics and examining how a business scores on each one will help you make a fair offer. 

In addition, much of the offer process involves meetings and discussions between you and the seller. This is your opportunity to ask questions, gather information about the business, and make a connection with the seller. By doing your homework and learning about the business’s KPIs, you will come to these discussions prepared and informed. 

Factors to Consider Before Making a Competitive Offer

In addition to the KPIs, there are several other factors to consider when evaluating a business to determine what kind of offer you would like to make. These include:

• Barriers to entry
• Product quality
• Growth opportunities that play to your strengths

Barriers to Entry

If you are making the investment to purchase a business, you likely will want to know that the business environment will stay favorable to the continued operations of your business. One factor to consider is the competition that you will face now and in the future when selling on Amazon. Natural barriers to entry into your industry will help to protect your business from getting overrun by competitors.

Product Quality

Experienced business owners understand that a crucial factor in the success of an FBA business is the quality of its Amazon products. As such, finding a business with high quality product listings is a must. No one wants the headaches, stress, and inner conflict that can come from selling inferior products. 

Growth Opportunities that Play to Your Strengths

As an entrepreneur, you are probably capable in many areas of business. However, there are probably one or two things that you truly excel at, whether it is bookkeeping, digital marketing, or supply chain management. 

Try to identify a business that has many strong areas, but needs improvement in a domain in which you excel. This will position you to quickly and easily increase revenue once you take over management of that business. 

By properly valuing a company, evaluating its KPIs, and carefully choosing a business that displays the qualities you seek, you have the advantage of making a truly competitive business offer that can separate you from other potential buyers. 

Offer and Negotiation

As was mentioned earlier, many offer scenarios are competitive environments. A buyer likely will be comparing your offer against numerous others, especially if their business is an attractive and well-run business. As such, knowing how to separate yourself from the pack and make an attractive offer will help you win the deal. 

Financing

Before we get into discussing the negotiation process, it pays to briefly highlight some key factors when it comes to financing. In general, an all-cash offer will be more attractive to a potential seller when compared to other forms of financing. However, that doesn’t mean that you can’t put together an attractive offer and win the deal if you don’t have a huge pile of cash to invest in a business. 

Many individuals will use an SBA financed loan to purchase a business. This can be a great way to get into the Amazon business without having an excess of personal wealth, to begin with.

Whatever option you choose, it is important to have your financing ready to go.  This ensures when it comes time to make an offer, you can do so at will without needing to go back to a bank and secure financing. A delay on your part will make it easier for the seller to look around and see what other offers are out there.  

6 Ways to stand out in a competitive offer environment

While an offer environment may be competitive, there are several things that you can do to stand out and increase your chances of winning the deal. These include:

• Avoiding making a lowball offer
• Being kind
• Communicating well
• Managing expectations and being upfront
• Thinking of the seller’s interests
• Explaining what you can bring to the table

Don’t Lowball

Don’t approach the situation to determine how you can squeeze the lowest price out of the seller. Doing so is an easy recipe to lose out on the deal to other buyers. The business that the seller has created represents hours of effort, diligence, persistence, and hard work on their part. Recognize the value that they bring to the table, and be willing to make an offer that respects that value.

Be Kind

To some, this may seem out of place when talking about how to win a competitive offer. However, this is perhaps the most important thing that you can do to improve your chances. 

The seller will be working closely with the buyer that they choose throughout the selling process, and then again after the sale as they train the buyer to manage the business. The seller won’t want to go through the whole process with a jerk who is only looking out for themselves. At the end of the day, business deals are about human connection as much or more than they are about the numbers. 

Communicate Well

Engaging in prompt, clear, and respectful communication will make it easier for the seller to work with you. Be straightforward and honest in your communication, respond to questions and messages in a timely fashion, and don’t leave the seller guessing as to your intentions. Communicating well displays a level of professionalism that will make sellers want to work with you. 

Manage Expectations and Be Transparent

Don’t be the person that over-promises and under-delivers. Be clear about what you bring to the table and what you can deliver. Importantly, if something unfortunate happens while you are in negotiations, such as funding falling through, be upfront and professional in delivering the information. 

Think of the Seller’s Interest

As we touched on before, don’t approach the situation with your mind focused only on meeting your own specific needs. Ask the seller questions about their business, as well as what they want to see for it going forward. 

Part of this involves making an offer that helps the seller accomplish their goals. If they’re trying to make a clean break, make sure to avoid an offer that requires them to stay on. If they want to maintain some equity, perhaps offer to let them hold a minority stake in the company after the deal.

Being considerate and understanding of their needs will go a long way in creating space between you and other potential buyers. 

Explain What You Can Bring to the Table

Once you understand the needs of the seller and what their interests are, explain to them the unique skills and competencies that you bring to the table. Most business owners want to know that their business will be in good hands after the sale. Show them why you are in a unique position to help their business truly excel. 

Making a personal connection with the seller, showing that you care about their interests, being clear and honest in your communication, and demonstrating your competency will help to separate you from any other potential buyer and increase your chances of winning the deal.

Who can help you negotiate a competitive offer for an Amazon business?

Making a competitive offer on an Amazon FBA business and negotiating a deal encompasses a wide knowledge base and a familiarity with negotiation practices. For their part, a business owner will likely be working with a lawyer or business advisor of their own. If you are new to buying an Amazon business, it can help to have an experienced business advisor work with you to navigate the situation. 

Summary

Buying an Amazon FBA business and becoming an Amazon FBA seller is an attractive prospect. By buying the right business, you can obtain a terrific source of income as well as location and time independence and avoid the hassles that come from starting an FBA business from scratch. The right business will often receive numerous offers from many different interested buyers. Knowing how to stand out and make a competitive offer will increase your chances of success. 

Before making an offer, having knowledge of the buying process as well as what performance indicators to look for in a business will allow you to identify a strong and healthy business. Once you decide to put down an offer on a business, you will need to distinguish yourself in order to win the deal. 

Respecting the value of the business, making a genuine connection with the seller, being kind, communicating well, and demonstrating your competence will all go a long way to instilling trust and goodwill between you and the seller.

With the right approach, you can identify and purchase the right Amazon business for your needs, leading to an exciting and rewarding new career or project.