Selling Your Amazon Business in 2023? Here’s How to Succeed in Today’s Market

If you are planning to sell your Amazon business in 2023, it is crucial to take into account the recent developments within the marketplace. Things changed dramatically since the height of the pandemic ecommerce boom in 2021. Valuations have shifted and buyers’ acquisition criteria have changed, making it more important than ever for sellers to implement an effective exit strategy to realize their goals. Those who understand the current landscape can still flourish, while those who are stuck in the past will struggle. 

In this article, we discuss several key aspects related to selling your Amazon business in 2023, including:

• How to address rising advertising costs
• The key steps you must take to prepare your Amazon business for sale
• How to articulate your business’s unique opportunities to attract growth-minded buyers

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Address Rising Advertising Costs

The biggest trend to be aware of when it comes to selling your Amazon business in 2023 is the industry-wide growth in advertising costs. Below, we go into some specifics on the matter, as well as what you can do to mitigate the impact it has when it comes time to sell your Amazon business. 

Defining ACoS

Rising advertising costs are illustrated by increasing ACoS and TACoS across the Amazon market. To understand this, we’ll first take a quick look at what ACoS and TACoS are before jumping into the reasons why they are rising. 

ACoS stands for advertising cost of sales. It captures the ratio between the amount of money you invest in your PPC advertising campaign and the amount of sales the campaign generates. 

In other words, ACoS = (advertising spend/total revenue from advertising spend) x 100. For example, if you spent $100 on PPC Amazon ads and generated $400 in sales revenue from those ads, your ACoS would be 25%. The math works out as follows: ($100/$400)x100 = 25%. 

Defining TACoS

TACoS stands for total advertising costs of sales. While similar to ACoS, there is a key difference: TACoS is a measure of the ratio between the amount of money you invest in your PPC advertising campaign and the total sales revenue generated, irrespective of whether it came from your advertising campaign or other sources. 

In other words, TACoS = (advertising spend/total revenue) x 100. 

To return to the example above, let’s say you spend $100 on ads and get $800 in total revenue. In this case, your TACoS would be ($100/$800) x 100. Once calculated, it comes out to 12.5%.

Rising advertising costs are not good for you as a business owner. As advertising costs rise, profitability falls. This serves to reduce the overall value of your business, leading to a lower payout when you do decide to sell. Obviously, you have an interest in addressing rising advertising costs as part of any successful exit strategy. 

“Rising advertising costs are illustrated by increasing ACoS and TACoS across the Amazon market.”

Why are ACoS and TACoS increasing?

Fortunately for you, rising ACoS and TACoS is an industry-wide phenomenon on Amazon. If you are experiencing it, so are your competitors. 

One of the main factors fueling rising ACoS and TACoS is the increasingly competitive Amazon marketplace. As shopping has moved online in ever-greater numbers in recent years, Amazon businesses have boomed, naturally attracting more companies to enter the marketplace.

This increased competition means that more businesses are bidding for PPC ads, which drives up their cost. As advertising costs rise, profitability goes down. At the same time, increased competition can make it harder to earn sales, further increasing ACoS and TACoS. 

Until (or if) the market stabilizes and competition goes down, you must find ways to address rising advertising costs in order to outcompete your competitors. 

How to address rising ad costs

While you can’t control external market conditions, you can educate yourself and optimize your own operations in order to contain rising costs. When it comes to PPC advertising spend, you should:

• Fix your targeting
• Improve your conversion rate
• Monitor your ad metrics

To fix your targeting, first get clarity on specifically who your target audience is. While this may take some trial and error, you should get a better idea as time goes on. 

At the same time, be sure you are choosing the right target keywords. Again, you will learn what works and what doesn’t as you gain data from your ad campaigns over time.

Evaluate and take steps to improve your conversion rate as well. Optimizing your page content is a good place to start. Product images, titles, and product copy are all important when it comes to helping a page visitor become a paying customer. Constantly look for ways to improve your conversion rate. 

Lastly, remember to monitor your ad performance over time. As you gather data, see what works and what doesn’t. By doing so, you will be able to implement changes that continue to improve your targeting and conversion rates. Over time, small improvements can add up to big results.

“While you can’t control external market conditions, you can educate yourself and optimize your own operations in order to contain rising costs.”

Find other ways to drive sales

Given that advertising costs on Amazon are increasing across the board, it is important to find other ways to drive sales. This could include:

• Amazon affiliate marketing
• Social media marketing
• Google Ads
• Content marketing
• Email marketing

Amazon affiliate marketing (aka the Amazon Associates Program) is a great way to build awareness of your brand and sell your products to outside audiences. By partnering with an affiliate, you can gain instant access to their readers or followers in exchange for a portion of sales generated through the affiliate relationship.

At the same time, build your company’s own audience on social media. Facebook, Instagram, TikTok, and more are all viable options. As you nurture your audience, you can direct them to your Amazon listings to drive sales. In addition, you can partner with influencers to build authority and access a wider audience. 

Google Ads can be another great way to increase traffic to your listings and drive sales. As with Amazon PPC ads, you must take time to get your targeting right. Once you find an ad campaign that works, however, you can rapidly scale it to dramatically increase traffic. 

Content marketing is another great way to build brand awareness, reach new customers, and drive sales. By creating engaging or educational blog posts, you can connect with potential customers who are searching for relevant terms. Over time, a portion of your readers will become loyal customers.

Building an email list goes hand-in-hand with content marketing. By obtaining customer email addresses, sometimes in exchange for a valuable piece of content or as the entrance to a giveaway, you can stay in touch with your audience and nurture your leads over time. When you launch new products or run promotions, you can notify your email list ahead of time to build demand and drive sales.

Key Steps to Prepare to Sell Your Amazon Business

Regardless of external conditions or increasing marketing costs, there are several things you need to do in order to prepare to sell your Amazon business. These include:

• Getting a valuation
• Cleaning up your financial records
• Creating clear documentation
• Minimizing risk
• Optimizing your business to drive growth

Get a valuation

Getting a professional valuation is the first step in preparing to sell your Amazon business. For starters, it provides you with a clear idea of how much you can expect to get for your Amazon business as it currently stands. 

More importantly, a valuation provides you with a clear idea of what drives the value of your business. With this knowledge, you can create an optimization strategy in order to achieve a more profitable exit. 

“Getting a professional valuation is the first step in preparing your Amazon business for sale.”

Clean up your financial records

If you haven’t already, clean up your financial records. Clear and orderly accounting records help potential buyers review the performance of your company to determine if they want to make an offer. It also makes the selling and due-diligence processes much easier and quicker.

In addition, orderly financial records signal that you run a professional operation, instilling confidence in potential buyers. 

Create clear documentation

Clear documentation includes standard operating procedures, supplier and vendor relationships, accounting records, third-party records, and more. By getting your documentation in order, you make your business much more attractive to prospective buyers. This helps to attract more offers, increasing its price and helping you win more favorable deal terms. 

Minimize risk

While all business ventures entail some risk, the more risk there is the less valuable a company will be. In order to drive up the value of your company and attract more potential buyers, it is helpful to go through your business operations and implement changes to mitigate risk. 

Risk can come from supply chain instability, legal issues, or any part of your business that relies on a single point of failure. 

Optimize your business to drive growth

From the perspective of a buyer, driving growth after acquisition is the best way to ensure a healthy return on investment. Strong past and current growth trends are a clear indicator of what a buyer can expect in the future. 

As such, implement policies that serve to drive growth. By doing so with ample time to spare before you list your business, you can work to increase the value of your business prior to selling it. 

“Any smart buyer will be looking for ways they can grow the business after they take over ownership.”

Know How to Articulate Your Business’s Unique Opportunities

As discussed, the advertising landscape has changed dramatically, leading to higher costs. However, whenever things change, there is always opportunity. In addition to taking the steps discussed above, it is important to know how to position your business in order to attract growth-minded buyers. 

Identify and articulate opportunities within your business

Any smart buyer will be looking for ways to grow the business after they take over ownership. Therefore, it is critical to know how to identify and communicate future growth opportunities to interested buyers.

As we discussed before, there are ways to reduce advertising costs despite the prevailing climate. Take note of the specific ways your company may be able to rein in advertising costs and communicate them to all interested parties. 

At the same time, look for other areas of your business operations where costs could be minimized or eliminated. If you can demonstrate several ways a buyer could expect to save on future costs, you will help your business stand out from other similar businesses.

One area that may be ripe for reducing costs and streamlining operations is your supply chain. Look for inefficiencies and create a clear plan for how a new owner could go about addressing them.

By recognizing and articulating your business’s unique opportunities, you differentiate your business from other sellers and identify your company as an attractive investment opportunity.