The Ultimate Checklist for Preparing to Sell Your Amazon Business: 8 Key Steps to Achieve a Successful Exit

Effectively preparing to sell your Amazon business is crucial to achieving a successful and profitable exit. In fact, failing to plan ahead can often lead to subpar offers, which is disappointing to say the least. Given that your business is likely one of your most valuable assets, it pays (literally) to take the steps needed ahead of time in order to achieve a profitable sale.

In this article, we discuss eight steps you need to do to prepare your Amazon business for a successful exit. These include:

• Finding an experienced business Advisor
• Getting a valuation for your Amazon business
• Setting clear goals
• Creating a plan
• Deciding the best time to sell your Amazon business
• Optimizing your operations to increase the value of your Amazon business
• Creating a marketing package
• Listing your business for sale

Related Article: How Long Does It Take to Sell Your Amazon FBA Business?

Find an Experienced Business Advisor

Selling your Amazon business is not a simple endeavor. From getting an accurate valuation and creating a cohesive optimization strategy to attracting qualified buyers and successfully navigating the sales process, there are many steps to navigate along the way. 

At the same time, much is riding on how your exit plays out. Even simple missteps—at any stage of the journey—can lead to you selling your business for less than you could.

Given the complexity and weight of getting it right, many business owners elect to work with an experienced business Advisor (i.e., business broker) when selling their company.

Your business Advisor works with you throughout the journey, from preparing to sell your business to successfully closing the deal. They will help with:

• Business valuation
• Goal setting
• Creating an optimization plan
• Creating a marketing package
• Listing your business for sale
• Finding potential buyers
• Negotiating with prospective buyers
• Navigating the due-diligence process
• Drafting and signing the APA (asset purchase agreement) and other documents
• Closing

Advisors do charge a fee for their services. Typically, the fee is a percentage of the final sale price for your business, paid after it is successfully sold.

While any prudent entrepreneur seeks to avoid extra costs, the right Advisor should more than make up for their expense in the form of a higher sale price, better deal terms, and a smoother selling experience.

Throughout the exit process, you will be working closely with your Advisor. As such, it is important to take the time necessary to choose the right one for your goals and needs.

“Given the complexity and weight of getting it right, many business owners elect to work with an experienced business Advisor, or business broker, when selling their company.”

Criteria for choosing a business Advisor

When evaluating a potential Advisor, it is important to ask yourself several questions to help you determine if they are a good fit. These include:

• Is their experience and expertise a good match for your business?
• Do they have your best interests at heart?
• Do they set realistic expectations?
• How is your rapport?

For starters, evaluate whether or not a given Advisor has the right experience and expertise for you and your business. Do they specialize in selling Amazon businesses, or do they focus on a different business model? Do they have experience selling Amazon businesses in your niche or industry?

By finding an Advisor with relevant experience and expertise, they will be better positioned to help you navigate the intricacies of your unique exit journey.

At the same time, be sure to choose an Advisor who has your best interests at heart. Do they seem like they are trying to make a quick buck off the sale of your Amazon FBA business, or are they making a sincere effort to help you achieve your goals?

Working with an Advisor who genuinely keeps your best interests at heart can make a big difference in terms of sale price, deal terms, and overall success.

Your business broker should set realistic expectations from the start. It can be easy to get caught up in ideas of fantastical valuations and over-the-top success when selling your company. Your broker should be able to tell you which thoughts and ideas are feasible and which aren’t.

Lastly, make sure you have a good rapport with your business Advisor. After all, you will be spending countless hours with them over an extended period of time. On top of that, you will be navigating stressful situations and making important decisions together.

By working with someone you naturally get along with, the experience will be much easier and more enjoyable.

Get a Valuation for Your Amazon Business

Once you have chosen an experienced Advisor, you will work together to assess your business’s worth. Getting a valuation is a crucial part of adequately preparing to sell your business. It is the bedrock upon which future decisions and strategies are built.

Given its importance, it is necessary to have an understanding of how business value is calculated. Furthermore, it is helpful to know the underlying forces that drive the value of your business.

The SDE Multiple Method of Calculating Business Value

The most common way of calculating the value of an Amazon FBA business is the SDE multiple method. According to the SDE multiple method, the value of a business is equal to the seller’s discretionary earnings, or SDE, times a multiple. In other words:

Business value = SDE x the multiple.

Let’s take a look under the hood to get a better understanding of SDE and the multiple.

“Getting a valuation is a crucial part of adequately preparing to sell your business. It is the bedrock upon which future decisions and strategies are built.”

Getting your SDE and add-backs right

SDE is calculated by looking at your company’s financial statements. It is used to describe the income available to the business owner for discretionary spending.

As such, it more accurately describes the true money-generating capacity of a business than income. SDE is a useful figure for accurately comparing businesses to each other.

To calculate SDE, start with income and add back all allowable discretionary expenses. These include:

• Interest
• Taxes
• Depreciation
• Amortization
• Noncash expenses
• Owner’s salary
• One-time investments

When calculating SDE, it is crucial to add back all discretionary expenses. Failure to include one can make a big difference in the assessed value of your Amazon business.

At the same time, including more add-backs than is allowable can also be detrimental. An astute potential buyer will notice the discrepancy and call you out on your mistake. In addition to lowering the value of your company, this can also potentially destroy trust and goodwill.

Knowing which add-backs to include and which should be left out is not always a straightforward process. Your Advisor will use your company’s financial records to create an accurate assessment of your SDE.

Understanding the multiple

SDE alone does not paint the whole picture. Two Amazon businesses with identical SDE figures could be valued very differently. This difference is due to the multiple.

The multiple encompasses both tangible and intangible aspects of business value into the valuation formula. While the multiple is determined by objective factors, it cannot be calculated solely by extrapolating from data provided on your financial statements.

Besides SDE, there is a huge range of individual factors that impact the value of your business. While each of these factors is important on its own, they can be categorized into four main groups known as the Four Pillars of Value. They include:

• Growth
• Risk
• Documentation
• Transferability

Your Advisor will evaluate your business to see how it stacks up on each of the Four Pillars of Value. They will then use this information to assess your multiple, completing the last piece of the valuation formula.

Growth

Almost all interested buyers are seeking to realize a healthy return on their investment. The most direct and surefire way to do so is to buy a business that grows into the future.

Past and current growth trends weigh heavily into calculations for expected future growth. Given this, your company’s growth patterns play a very large role in determining how attractive your business is to potential buyers. The more attractive your business is, the higher its value will be.

“Past and current growth trends weigh heavily into calculations for expected future growth.”

Risk

As a business owner, you understand that all ventures come with some level of risk. However, some small businesses incur more risk than others. The more risk of failure a business entails, the lower the expected payout. Given this, the riskier a business is the less valuable it will be for a potential buyer.

Risk can come in many forms. For starters, businesses that have a shorter proven track record are considered riskier. Businesses that have been around for a long time are considered less risky.

At the same time, potential buyers will evaluate your business to see if it is at risk of copyright infringement lawsuits or other similar legal challenges. The more legal exposure your business has, the riskier it becomes.

Documentation

Would you want to buy a business that is disorganized and fragmented, with no clear documentation to speak of? Or would you prefer to take over a business with clear documentation and orderly operations? The answer is pretty obvious.

Proper documentation makes it much easier for potential buyers to assess the performance of your company to determine if they are interested in making an offer. At the same time, it instills a measure of confidence that you run your business in an organized and professional manner.

Both of these factors make your business much more attractive to potential buyers, increasing its value.

Clear documentation includes:

• Orderly financial statements and accounting records
• Clear standard operating procedures (SOPs)
• An organized Amazon seller account
• Orderly third-party accounts
• Organized documentation of third-party relationships and communications

Your Advisor will assess your documentation to determine how well it measures up. They will highlight the areas you excel in as well as any areas that need to be cleaned up.

Transferability

Regardless of how profitable your business is, it is only valuable to a buyer if they can take over ownership without negatively impacting its performance. This is referred to as transferability.

There are several different issues that can impede transferability. For one, if your image or likeness is tied up in your business, a new owner would find it hard to replace you once they have bought the business. While this may be less likely with an Amazon business, it is important to keep in mind.

At the same time, how you structure your business has an impact on transferability. If operations rely solely on you and the knowledge you have in your head, this will make it more difficult for a new owner to take over.

However, if you have built out automated teams and clear standard operating procedures, things will be much easier.

Later, we will look at how you can use the Four Pillars of Value to prepare your business for the market. For now, we turn our attention to the next step: setting your exit goals.

Set Clear Goals

Once you have taken stock of your business and received your valuation, it is time to set your exit goals. There are several things to consider when doing so, including:

• Deciding when you want to have your business sold
• Determining how much you want to sell your business for
• Choosing your preferred deal structure

Decide when you want to have your business sold

First, make some decisions about when you want to be all done selling your business. Do you want to sell it as soon as possible, or do you want to wait a year or two? Below, we will go into several things you should take into account when deciding on the best time to sell your business.

While it is good to set goals regarding timing your exit, recognize that this is an area that is not fully in your control. Be sure to take into account external conditions when setting these goals.

Establish your target sale value

Understand how much your business is currently worth and create an ambitious yet realistic goal regarding how much you want to sell it for. Do you want to sell it right away for its current value? Or do you want to take the time and energy necessary to increase its value before selling?

Get clear on your exit-value goal. As we will see, you will use it to help create and implement a cohesive exit strategy.

“The deal structure you accept has a large impact on your post-sale life. Make your considerations carefully and set your goals accordingly.”

Think about your preferred deal structure

Lastly, choose your preferred deal structure. Do you want an all-cash offer and a clean break? Or would you prefer to stay involved in business operations in exchange for an expected larger future payout? Are you willing to accept installment payments over the course of several years?

The deal structure you accept has a large impact on your post-sale life. Make your considerations carefully and set your goals accordingly. Of course, the final deal structure will depend on your bargaining position with the potential buyer.

However, it is important to get clear on what you are aiming for ahead of time.

Create a Plan

After you have set your exit goals, create a plan to allow yourself to achieve those goals. Your plan is a road map to help you sell your business when you want, for the amount that you want, and with the deal terms of your choosing.

Be sure to make your plan actionable and specific. Do not create a plan that says something like, “Drive growth to increase value” (more on this later). Instead, focus on the specific things that you will do in order to meet your goals.

Your plan should also be achievable. Setting unrealistic time horizons or packing too many tasks into too short of a time will only leave you frustrated. Be ambitious but realistic. Break larger tasks down into their component pieces and set a timeline.

Lastly, keep in mind that you are very likely to encounter unexpected bumps along the way. Leave enough room for flexibility. When you do encounter a challenge, reassess and compensate as needed.

Decide the Best Time to Sell Your Amazon Business

Timing your exit right is a crucial part of achieving a successful sale. When it comes to finding the right time to sell, there are several things to think about. These include:

• Business considerations
• Market considerations
• Personal considerations

Business considerations

The state of your business when you sell it has a large impact on the overall success of your exit. Given that, it often makes sense to take the time to fully prepare your business prior to listing it.

Unless your business is already in tip-top shape, it is recommended to leave yourself 12–24 months to adequately prepare your business. Some of the necessary changes may take time to implement, and once implemented, it may take some time to see the payoff.

In the next section, we discuss some of the optimizations you may want to consider.

Market considerations

The success of your exit also rests in part on external market factors and trends. If your market or industry is growing, your business will be worth more. If it is in decline, you may want to consider waiting to sell your business until market conditions are more favorable.

Seasonality also plays a role. If your business has a high season and a low season, time your exit to coincide with the lead-up to your high season. By doing so, you give yourself a better chance of attracting more interest and achieving a more profitable exit.

“The success of your exit also rests in part on external market factors and trends.”

Personal considerations

Of course, your personal circumstances can play a large role in determining the best time for you to sell your Amazon business. While this may not be a large factor for some individuals, for others it can essentially dictate the decision about when to sell.

There can be legitimate reasons to sell your business in a less-than-ideal circumstance. For instance, you may need the cash in order to make a down payment on a house. Or you may wish to invest the proceeds into a new business venture.

Or perhaps you want to free up time and energy to pursue a new and exciting business opportunity with a colleague. On the other hand, you may be feeling overwhelmed by the stress of running a business and feel it would be best for your health and sanity to get out sooner rather than later.

Only you can decide the right time to sell. By taking into account the state of your business, current market trends, and personal considerations, you can make the best decision for your specific situation.

Optimize Your Operations to Increase the Value of Your Amazon Business

As mentioned before, it’s important to leave yourself plenty of time to optimize your business prior to selling. Doing so will help you achieve a higher sales price and better deal terms.

Your optimization plan will depend on the specific needs of your business. However, it is helpful to focus on each of the Four Pillars of Value:

• Driving growth
• Minimizing areas of risk
• Improving your business documentation
• Increasing transferability

Drive growth

If your business is not already exhibiting strong growth, plan and implement appropriate pro-growth policies. Remember to leave yourself ample time to implement these policies as well as see the fruits of your labor.

For starters, you can consider launching additional products to your existing customer base. You can also review your marketing operations and add new channels in order to increase sales of your existing products.

Minimize areas of risk

Your valuation should provide you with a clear idea of the areas of your business that entail heightened risk. Armed with this information, set about initiating changes in order to address each risk.

Risk often occurs when your business’s success rests on a single point of failure. If you rely on one marketing channel for the bulk of your business, add other channels. Likewise, if one product in your lineup is responsible for the lion’s share of your sales, add other products to diversify your income.

Be sure to also eliminate potential legal risks. Review your products and operations to ensure you aren’t infringing on any patents. At the same time, make sure your business-formation and legal paperwork are up to date.

“Your valuation should provide you with a clear idea of the areas of your business that entail heightened risk.”

Improve your business documentation

Poor documentation can dissuade otherwise-interested buyers. If your documentation is not up to snuff, be sure to leave yourself enough time to improve it.

This includes your financial records. Unless you are a CPA, it most likely makes sense to hire a professional to help you get your accounting records in order. Depending on the current state of your recordkeeping, this cleanup process can take some time and energy.

If you haven’t already, create clear and concise standard operating procedures. These documents should spell out exactly how a new owner should run your Amazon business. This includes everything from your process for researching, sourcing, and launching products to marketing planning and execution.

Increase transferability

Clear documentation and standard operating procedures also make it easier to successfully transfer your business to a new owner.

You can further increase the transferability of your business by building automated processes. For more complex endeavors, this could include hiring assistants or teams to handle the workload.

Create a Marketing Package

When it is time to sell your business, you and your business Advisor will work together to create a marketing package for your company. Your Advisor will provide your marketing package to interested buyers who wish to learn more about your business.

As such, it should contain any information that will help potential buyers decide on whether or not they want to move forward. This includes financial information, operational information, and a written narrative highlighting different aspects of your company that a buyer would find relevant.

List Your Business for Sale

Lastly, it is time to list your business for sale! Your Advisor will advertise your business to their network of qualified buyers and create your public-facing business listing.

From here, you and your Advisor will evaluate offers as they come in and negotiate with potential buyers. All of the months of effort you put into preparing your business for sale are about to pay off!