How to Negotiate When Buying an Amazon Business

Effective negotiation is critical when buying an Amazon business. With the right approach, you’ll have a much easier time acquiring a promising business and favorable deal terms. With the wrong approach, you’ll likely encounter rejection, or worse — a bad deal.

This article will discuss the importance of sound negotiation strategies when buying an Amazon FBA business. We’ll also provide actionable tips for landing a great deal.

5 Reasons that Negotiation is Important When Buying an Amazon Business

As a buyer, it’s easy to think that sellers only care about the numbers. Higher offers are always better, right?

Actually, the answer is no. Of course, the financial offer is important, but there are a lot of other factors that most sellers look at. In fact, smart sellers examine buyers very closely before accepting an offer. This is especially true if the business is highly desirable.

“If you don’t make a favorable impression, there’s a good chance they’ll reject your offer.”

For many, buying an FBA business is a much better option than getting on Amazon and starting from scratch. However, it’s critical that you navigate the acquisition process competently. 

When you approach the buying process, it’s important to remember that the seller is sizing you up, just like you’re assessing them and their business. If you don’t make a favorable impression, there’s a good chance they’ll reject your offer.

Below, we’ve listed five reasons why effective negotiation is critical throughout the buying process. You’ll notice that each of the reasons is built on the previous point. 

Effective Negotiation:

1. Creates goodwill 
2. Builds trust and confidence
3. Enables better deal terms
4. Achieves a lower price
5. Increases chances that your offer will be accepted

Honest Negotiation Creates Goodwill 

It’s easy to think of negotiation as a brutal process involving manipulation and cutthroat tactics. However, when buying an Amazon business, that approach won’t get you very far. 

Put yourself in the seller’s shoes. Most Amazon sellers have invested years of their life building their business. To them, it’s more than just an asset that generates a positive ROI. More than likely, it represents a significant part of themselves. Therefore, they don’t want it to fall into the hands of just anyone.

“Most Amazon sellers have invested years of their life building their business. To them, it’s more than just an asset that generates a positive ROI.”

Sellers want to know that their prized business will be handed off to someone who is smart, competent, and honest. If you can prove that you embody those qualities, you’ll create goodwill between yourself and the seller. The negotiation process is where you demonstrate your competence and character and create that goodwill. 

Effective Negotiation Builds Trust and Confidence

Goodwill precedes trust and confidence. In fact, when buying a business, they really go hand-in-hand. 

In addition to having the seller like you, you also want them to have trust in you and your abilities. If you negotiate well, they’ll perceive you as capable and trustworthy. In some ways, the negotiation process isn’t so different from a job interview. Except, the “job” you’re applying for is the opportunity to take over their life’s work. 

“Building trust and confidence throughout the negotiation process will help you in several key areas.”

Building trust and confidence throughout the negotiation process will help you in several key areas.

Better Deal Terms

Goodwill, trust, and confidence lead to one natural outcome. The seller will be more willing to offer you favorable deal terms. This is especially true if seller financing or consulting agreements are potentially involved.

Often, there is a moderate to high level of involvement that the seller needs to have following the sale. On the lower end of buyer-seller involvement, the seller will need to work with you through the due diligence process. They’ll also likely need to provide 30 days of training, and perhaps lay out a clear four-year plan for the business.

“If the seller trusts you and your abilities to lead their business, they’ll be much more likely to agree to a deal that requires their continued involvement.”

Even that level of engagement requires a certain level of trust and confidence. Essentially, they’ll need to feel confident that you have the funds to buy their business and will cooperate throughout the transition period. However, if the seller is going to be more involved, they’ll need to be comfortable engaging with you at a much higher level.

If the seller trusts you and your abilities to lead their business, they’ll be much more likely to agree to a deal that requires their continued involvement. This could mean staying on for a few extra months to run the business or train your staff. Or, it could mean offering seller financing, which obviously reduces your required up-front investment.

Lower Price

For many buyers, the ultimate goal of negotiation is to secure a lower price. Effective negotiation can certainly help you achieve that goal.

Engaging with the seller in a respectful yet strong way maximizes the chances of getting a favorable purchase price. 

Having Your Offer Accepted

If you’re trying to buy a desirable Amazon business, there’s a good chance that the seller is receiving multiple offers. With several competitive offers to choose from, the seller will likely pick a buyer whom they like and trust.

If you don’t earn the trust and respect of the seller, they’ll likely reject your offer. This can be true even if your offer is the highest.

At the end of the day, it’s important that your hard work pays off in the form of a successful deal. Effective negotiation can help to ensure that your offer is accepted and you become the next owner. 

Discussion Points When Negotiating to Buy an Amazon Business

It’s important to be prepared when negotiating with a seller. To do that, it’s a good idea to write down a list of topics and questions to address with them. In general, you should choose discussion points based on two primary goals:

• Acquire a full and complete understanding of the business
• Show the seller that you’re a qualified buyer

“It’s important to be prepared when negotiating with a seller.”

Below we’ve listed several discussion topics that can help you achieve both of these goals: 

• Seller’s story
• Their goals
• Details about the business
• Strengths and weaknesses of the business
• What you appreciate about the business
• Your own background and strengths

Get to Know the Seller

Everyone loves to talk about themselves, and Amazon sellers are no different. One of the first topics should always be the seller’s story.

“Show that you care about the process that they went through.”

Ask them why they started the business and what their experience was. What was their first product? What was their thought process when it came to building a brand, selling wholesale products, or engaging in retail arbitrage?  

Show that you care about the process that they went through. If they can sense that you genuinely care about how the business was built, they will immediately take you more seriously. Not to mention, understanding the business’s story can dramatically improve your experience as the new owner. 

What Are the Seller’s Goals?

Good negotiators always look for outcomes in which both parties realize their goals. In order to make an appealing offer, you need to know what the seller is seeking.

Of course, it’s probably safe to assume that the seller is seeking a nice payday. However, there are many other elements they may also have in mind. Do they want to make a clean break from the business? Or, do they want to maintain some equity? These are a few possibilities you may learn about if you ask.

Ask About the Business

Asking about the business is crucial. For starters, it’s a necessary step for understanding whether or not the business is a good fit for you. Additionally, the right questions show the seller that you know what you’re talking about. 

A few important question topics include:

• Wholesale supplier and vendor agreement contracts, including payment terms
• Supply chain logistics
• Fulfillment processes (FBA versus FBM)
• Online retailer relationships, if applicable
• Customer service protocols
• FBA fees
• Buy box percentage
• Profit margin
• Inventory performance
• Software tools (Jungle Scout, Helium 10, etc.)
• Amazon seller account performance

Understanding important elements such as its supply chain provides a much more nuanced picture of the business you’re considering acquiring. 

Strengths and Weaknesses 

Asking about the business’s strengths gives the seller a chance to boast. It also helps you understand where its greatest opportunities lie. 

Asking about the business’s weaknesses is important also, but it must be done tactfully. Don’t criticize the business! Rather, use language that won’t be perceived as criticism. For example, “what areas could be improved?” is a nice starting point.

Good Negotiators Use Compliments

One of the best ways to connect with a parent is to compliment their child. If you also compliment their parenting, they’ll like you even more.

Business owners are like parents. Usually, they see a part of themselves in their business. If you compliment their business, they’ll appreciate it immensely. Complimenting how they built the business is even better. It shows them that you understand and appreciate everything they put into it. Again, this builds both goodwill and confidence.

Why Are You a Qualified Buyer?

After hearing about the seller’s experiences and gaining a clear understanding of the FBA business, it’s time to talk about yourself a bit. 

Every seller wants to know that their potential buyer has what it takes to lead their business forward. Therefore, tell the seller what skills and qualities you can bring to the table. Don’t come across cocky or conceited, but do demonstrate your competence.

Challenges with Negotiating the Purchase Price for an Amazon Business

For some buyers, asking good questions is the easy part. Discussing the purchase price, however, is more difficult. 

Sometimes, there’s a fear that making an offer below the asking price will be perceived as disrespectful. That can definitely be true if the business is highly desirable and your offer is completely unreasonable. However, it is possible to make an offer below the purchase price if it’s done in the right way.

Explain Your Reasoning

When negotiating on price, it’s always helpful if you can state your reasoning. For example, a business is listed for $800,000 but you only want to offer $750,000, make sure you tell them why. Do you feel they included expenses in the addback schedule that don’t belong? Are there any single points of failure that concern you? Is there a competitive threat from third-party sellers that hasn’t been accounted for in the valuation?

It’s completely appropriate to address your thoughts and concerns about the business. However, it’s essential that you do so in an appropriate way and with sound reasoning. If you have a compelling case, it’s not unlikely that the seller will be open to a lower purchase price.

Having said all that, do not make a low-ball offer and then try to back it up with faulty reasoning. Owners who are selling a business are usually pretty smart. Such an attempt will be seen as sleazy and manipulative.

Best Practices for Negotiations When Buying an Amazon Business

When done right, negotiation is a collaborative process that leads to a positive outcome for both parties. Below, we’ve listed a few best practices to help ensure that everything goes smoothly:

• Ask effective, intentional questions
• Communicate well
• Respect the seller and their time
• Be yourself

Thoughtful and intentional questions are one of the primary drivers of effective negotiation. They both give you valuable insight and demonstrate your competence.

“Thoughtful and intentional questions are one of the primary drivers of effective negotiation.”

Another essential element of sound negotiation is intelligent communication. If the seller asks you a question, be sure to provide a thorough and articulate answer. Also, always communicate in a timely manner. Waiting five days to respond to a simple email isn’t going to make a positive impression.

Additionally, you always want to respect the seller and their time. For example, don’t ask the FBA seller about basic shipping tips that you can learn yourself through a simple Google search. 

Lastly, be yourself at all points throughout the negotiation process. Don’t hide behind a veil of mystery. Rather, let your personality shine through and let a human-to-human connection unfold. Tell them who you are, and why you’re interested in Amazon instead of a different type of businesses.

With detailed preparation, intelligent questions, and carrying yourself with respect, you’ll be well-positioned to make a positive impression and negotiate a mutually desirable deal for yourself and the seller.