Many saw Fulfillment By Amazon (FBA) as a huge opportunity when it first rolled out, and they were right! There are thousands of people who have harnessed Amazon FBA to create very profitable businesses.
A good revenue-generating Amazon FBA business is going to attract a lot of attention in the markets. While they do require more work and time investment, a typical FBA business will often have higher (sometimes far higher) revenues than traditional content sites.
That doesn’t mean that every Amazon FBA business is perfect though – or even capable of being sold.
So how does an investor find a good deal? How do they tell the good businesses versus the problematic ones?
Let’s dive into this!
Where To Buy an Amazon FBA Business
There are multiple places to find a good Amazon FBA business for sale, but five stick out from the rest.
1. Private Sale
Private sale is one of the best ways to acquire an Amazon FBA business from a current owner. There are Amazon FBA business owners who put out feelers via forums,newsletters, and Facebook Groups, but many times approaching the business owner via supplied contact information is how these start.
Since 2020/2021 and the rise of Amazon aggregators, many owners know that they can sell their businesses and cash in on all of their efforts over the previous years. Some aren’t aware of how valuable an FBA business can be to the right buyer.
The drawback is that private sales can take a lot of work and investment to pull off. An extensive due diligence period is crucial. However, private sales represent one of the best ways to find and acquire an Amazon FBA business for a below-market multiple.
2. Empire Flippers
Empire Flippers is very well-known for being one of the largest marketplaces for online business acquisitions in the world. Many dozens of FBA businesses can be found listed for sale at any given time.
The income between different listings can vary greatly, so whatever style and size of an FBA business an investor is looking for, there’s a good chance they will be able to find it.
Most of the listings are in the six or even seven figures, so that is a budget consideration that is important to keep in mind.
Flippa is the largest open marketplace in the world for buying and selling online businesses. This means there are plenty of listings of businesses for sale that follows the FBA model. Basic information is given such as monthly revenue, website age, and asking price.
While it may seem like there are many amazing deals early on, keep in mind that Flippa is an unvetted marketplace.
This means due diligence is crucial to making sure that all the reported numbers are not fabricated.
Going through potential FBA business sales on Flippa will require extra work and due diligence but there are some great deals to be found.
4. QuietLight Brokerage
QuietLight Brokerage is one of the premier destinations for online businesses for sale.
On their marketplace, you can normally find dozens of FBA deals listed at attractive multiples. With experienced brokers and detailed business summaries on every deal, you’ll have enough information to quickly make a decision on whether or not this is the right FBA business for you.
They primarily specialize in businesses valued at $250k – $5 million+.
5. MicroAcquire Marketplace
The MicroAcquire marketplace is an overlooked option for finding an FBA business for sale. Although MicroAcquire primarily focuses on SaaS businesses and small technology startups, there are some eCommerce deals and Amazon FBA businesses on the marketplace.
Finding a diamond in the rough will be more difficult, but most prospective buyers overlook this marketplace making it a good place to potentially find a deal.
Amazon FBA Business Model Explained
Fulfillment by Amazon means you actually send the products you intend to sell to an Amazon warehouse under the FBA program. They take care of safely storing the items and shipping them when ordered.
There are fees for storage and shipping, but this means that Amazon takes care of the logistical side of things allowing sellers to easily scale up with logistical hassles.
This allows an FBA owner to sell many different products and is used by people practicing retail arbitrage, individuals mass dropshipping products, and even stores/companies creating their own products to sell.
The step-by-step process Amazon outlines for getting started with FBA can be found here.
Once the items are shipped to the Amazon warehouse, Amazon takes care of delivery to the final customer and all of the customer support from there.
Buy an Amazon FBA Business or Build From Scratch?
Once an investor decides on the Amazon FBA model, there’s a major question that comes up:
- Should I buy an existing Amazon FBA business?
- Should I build a new Amazon FBA business from scratch?
There are plenty of success stories that come from both options. In terms of budget and time, building an FBA business from scratch typically requires a minimum budget of $5k and at least 12 months to achieve any semblance of scale.
Building from scratch does have the added benefit though of teaching a relative newcomer the ins and outs of the Amazon algorithm and how to operate/grow an Amazon FBA business.
On the other hand, getting started can be expensive and time consuming. If this won’t be the main focus of the investor’s attention, buying an existing business with cash flow makes a lot of sense.
Both routes can lead to success, but a lot of learning (or very good support) is important along the way.
If you don’t have prior experience with Amazon FBA, it’s best to start by starting your own FBA business. That allows you to make mistakes without the stress of mismanaging a business you (potentially) paid 6 figures+ for.
If you’re looking to grow and rapidly scale an FBA business though, buying one makes sense. You can quickly take your expertise, make changes, and watch the business grow. This also takes far less time than starting an FBA business.
Amazon FBA Store Business Valuation: 4 Metrics
Several factors go into sales valuation for this style of business. Understanding these will help to come up with a fair and accurate valuation.
The Valuation Formula
The average profit considering all of the revenues minus operational costs. Do not factor in growth costs that are one-time (e.g., a website redesign.
What about inventory? Existing inventory is not factored into the valuation. Inventory is valued separately and the buyer will need to pay for that at the time of close of the transaction. Note that usually existing inventory is valued at the actual landed cost the seller paid.
1. Revenue & Profits
The money numbers definitely matter. Keep a special eye on the revenue vs profit numbers. While content websites typically run at a net margin of 80-90%, introducing physical products, inventory, and Amazon FBA fees, brings that down significantly. Most FBA businesses run at a net margin between 15 – 25%.
The right business can be attractive as an asset to acquire either way but it’s important to understand the revenue, profit, and margins involved when running an Amazon FBA business.
2. Business Age
Business age matters and is factored into the monthly multiplier.
A long-established business with a proven track record of steady or growing revenues over time is going to fetch a higher valuation than a business thrown together 10 months ago that had some success during the holiday seasons.
Typically older businesses have more reviews, sales data, and a greater ability to forecast future demand – giving them a leg up on newer entrants.
3. Profitable PPC Campaigns
A common way FBA businesses grow is to use Amazon’s native ad platform to drive sales. This is called pay per click (PPC) marketing.
Since Amazon’s algorithm is based on conversion rate and sales velocity, PPC is a great way to get sales on new and established products. This has the added benefit of increasing organic ranking and organic sales as well.
As a buyer of a FBA business, make sure to get an understanding of the Total ACOS – the % of revenue spent on PPC and how that metric is changing over time. You will also want to monitor the ACOS (advertising cost of sales) and benchmark it against others in your category.
Furthermore, campaigns need to be tweaked regularly. Be sure to ask potential sellers how often they optimize their PPC to understand if there’s an opportunity to improve there.
Here is a good guide on Amazon PPC.
4. Recognizable Brand and Registration
Is the brand recognized? Is it a name that has received attention even if just in a narrow niche, or has the marketing not taken off?
Also, have the sellers taken an extra effort to get the brand registered through Amazon?
Brand registry provides a host of benefits for enrolled brands including A+ content, access to ad units such as Sponsored Brands/Sponsored Brands Video, and protection against hijackers.
7 Aspects of Due Diligence for Amazon FBA Businesses
Due diligence is always important, but especially so with an Amazon FBA business. Many of these require a sizable monthly investment, so it’s crucial to make sure all the numbers are correct as reported before actually buying.
1. Seller Account Health
Amazon provides every seller a page that monitors their seller account health (found here) that gives information on if they are in line with Amazon’s policies, if there are potential violations Amazon is warning them of, or even if the account is in danger of deactivation.
As a buyer, you will be taking over full ownership of the seller’s account. Seller account health is the first step of due diligence.
If there are any issues or if the seller account has ever been suspended in the past, this is a significant red flag.
2. Business Type
Find out what type of FBA business is being sold.
While most FBA business transactions are asset sales, there are rare situations where you might be required to perform a stock sale.
Private label is essentially the act of selling your own branded product through the Amazon platform. In this model, enterprising sellers typically look for high volume products that are easy to improve and source.
They then develop a similar product, find a manufacturer, and launch their product on Amazon.
Resellers, also commonly known as retail arbitrage, use Amazon FBA to store items they bought in person at low prices and then can mark up to sell at a much higher rate on Amazon.
They often buy a wide variety of items that are already selling on Amazon, set the pricing, and then let FBA do the rest. This can be a great way to make money, but the business is built around the person doing the shopping and sale hunting to flip those items for a profit.
Because of this, these business are often unable to be sold.
Similar to private label, some sellers sell proprietary products protected by patents or other forms of IP on Amazon. This represents a significant moat to competition making these business more valuable than a standard private label FBA business.
During the transaction, make sure that you will assume ownership of all of the IP of the business as well though.
What is the competition in the space? Is it a highly competitive niche or is there potential to be only one big player, or at least one of a very few, in the space?
A great tool to use is Jungle Scout, which you can use to do preliminary research into a niche, product, category, etc., to understand long-term trends, competition, and much more.
4. Product Reviews
Having a lot of good product reviews, especially with a private label or proprietary property model of an FBA business is a major benefit. This means the business comes with built-in trust with Amazon customers, which is always a major plus.
5. Reason(s) For Selling
Why is the owner selling the business? Did they struggle to make it profitable? Are they just juggling too much? Was this the breakthrough business and now they just want to cash out and retire?
The reasons given for selling can tell a lot about the potential quality of a deal. Check out our deep-dive analysis of 89 sellers and their reasons to sell.
6. Growth Opportunities
What are the growth opportunities of the business? Is this a steady moneymaker that has leveled out because it reached its full potential already or is there a lot of room for more growth?
Knowing whether an FBA business has maxed out its potential or has room to scale up and grow can make a major difference when it comes to what it is worth to a potential buyer.
7. End Goal – Flip or Keep?
What is the end goal? If the goal is to flip the business at a later date then it’s important for the business to have a lot of room for potential growth.
On the other hand if keeping it is the goal, then a business that has maxed out most of its potential can still work if it’s offering safe steady revenue.
The end goal will affect how an investor wants to value a potential purpose.
How To Acquire an Amazon FBA Business
There are five major steps in the process of acquiring an Amazon FBA business. Most deals will follow these steps on a step-by-step basis.
1. Perform Rigorous Due Diligence
Confirm every single number multiple times using bank statements, tax returns, and Amazon reports. You want to be positive about the sales, revenue, and profit numbers before moving forward with any type of a deal. Their seller account must be in good health and things need to be running smoothly.
Check out this detailed guide on Amazon FBA due diligence.
2. Define the Multiple
According to DealFeed.io, an aggregator that analyzes business for sale from top brokers, the going multiple is 38X to 50X.
The multiple depends on industry trends, stability of the business, age of the business, competition, and brand.
Once you know the multiple (or if a broker has set one based on market trends), then you can use the valuation formula to calculate the valuation.
3. Make the Winning Offer
Many good Amazon FBA businesses in a marketplace will have multiple offers. Don’t push way out of your budget but put together an offer that is solid for the specific businesses that are interesting. If you make the winning offer, then the next steps come into play.
4. Amazon Seller Account Transfer
In 90% of cases when you takeover an Amazon business, you will be taking full ownership of the Amazon seller account. That is why it’s important to fully verify the account health prior to closing on a deal. In many cases, it is a simple process.
You change the contact information on the account, retake the tax interview, and change the credit cards/payment information on the account. In some cases, it can be more complicated. Here is a quick guide that covers this issue.
5. Website Transfer (if any)
If a website is attached to this FBA business, that needs to be transferred. This allows you as the buyer to have the complete business and keep it running smoothly or even improve it.
A successful FBA business may or may not have a website. If it doesn’t, that’s fine. If there is a website then that should be part of the deal.
There are many good reasons to be excited about the potential that an FBA business acquisition can provide.
- FBA businesses can typically scale much higher than content sites
- While Amazon handles the logistics side of things, it’s still important to have a solid plan or model in place for the business
- Rigorous due diligence is absolutely essential
- FBA businesses come in three main types
- Properly prepare for the highly detailed and sometimes technical steps of the business handover process – get experienced help if necessary
An Amazon FBA business for sale offers a major opportunity for the right investor, but it’s important to follow the advice here to make sure your investments are in great deals, not landmines.