How to Sell an Amazon FBA Business

Profit by product, not by account

Buyers will not accept a single revenue number. They will want profit for each product, after the cost of goods, Amazon's referral and fulfillment fees, storage, returns, and advertising. Advertising deserves a separate look. The usual measure is advertising cost of sales, which is the ad spend divided by the sales those ads produced, and a buyer will watch how it moves over time. A business that sells well only while ad spend climbs has a different profile from one that sells steadily at a lower cost.

The next question is how much of the income comes from the top product. Many Amazon businesses have one best seller that carries the rest. A buyer will ask what happens if a competitor undercuts it, if the listing is suppressed, or if the supplier raises the price. Our post on customer concentration describes the same risk in other industries, and for an Amazon seller the concentration is in products and in a single marketplace.

Seasonality and trend matter too. Gift items, outdoor products and anything tied to a holiday will show a sharp peak, and a buyer will want at least two full years of monthly data so they can separate a growing product from a fashion. A product that has fallen in rank for six months will be priced for that fall. Reviews and ratings are looked at by listing, along with recent review velocity and any pattern of complaints about quality.

Brand rights and account health

What protects the products is the brand. Buyers pay more for a trademarked brand enrolled in Amazon's brand registry, because it gives the owner control of the listing and a path to remove hijackers and counterfeit sellers. If the brand is registered, the buyer will want to see the trademark filing and know who holds it. If your products are sold under someone else's brand or are generic white label goods that anyone can copy, expect the price to reflect that.

Account health is the other half. The seller account carries performance metrics, policy warnings, intellectual property complaints and any past suspensions. A buyer will ask for screenshots or read only access to the seller dashboard, and will study order defect rate, late shipment rate, returns and any complaints filed by rights holders. A history of suspensions that were reinstated is a reason for a buyer to ask hard questions. A clean record is worth more than most sellers expect.

Pay attention to how listings were created and who controls them. Product photos, copy, videos and the enhanced brand content on the listing all need to be owned by the business. If a freelancer made them under an agreement that does not assign the rights, fix that before a buyer finds it.

Suppliers, inventory and logistics

Supplier relationships often decide whether a buyer can keep the business running. Buyers will ask who makes each product, how long you have worked with them, how orders are placed and paid, the lead time, and what minimum quantities are required. They will want purchase orders, invoices, product specifications, quality inspection reports, and ideally written agreements. A supplier who has agreed to keep working with the new owner is a strong signal. A supplier who knows only the seller personally is a problem. Many buyers ask to be introduced to the factory contacts, and some ask for a short transition period to build that relationship.

Inventory is counted and priced carefully. Stock in Amazon warehouses, stock at a third party logistics company, often called a 3PL, and stock on the water will each be listed. Buyers usually buy inventory on top of the business price at your cost, and they will ask how old it is. Slow moving units, aged stock that is subject to extra storage fees and damaged goods are discounted or excluded. The same goes for inbound shipments and the cash tied up in them. Our post on earnouts, holdbacks and working capital helps explain how inventory is handled in the final numbers.

Product liability, compliance and certifications deserve attention, since some categories need testing or documentation to stay listed. Children's products, supplements, electronics, cosmetics and anything that touches food usually come with requirements, and rules vary by state and by product. Your attorney confirms what applies to your catalog. A buyer will ask for test reports, safety documentation, and your insurance coverage.

The records a buyer will ask for

Buyers and their lenders want business tax returns, monthly profit and loss statements, bank and credit card statements, and the transaction reports Amazon provides. They want the data to match. A seller whose Amazon payouts, bank deposits and tax returns line up is easy to underwrite. A seller whose numbers need a long explanation will see the deal slow down. Sales tax collection for most orders is handled by the marketplace, though sellers with other channels such as their own website will need to show how those taxes were handled.

Add backs get their share of attention. Owner pay, personal expenses run through the business, one time costs and software subscriptions are common items, and our guide to what counts as an add-back shows what holds up. Earnings for a business this size are normally measured as seller's discretionary earnings, which means what the business pays one working owner.

What transfers and how

An Amazon business moves in one of two forms. In an asset sale the buyer receives the brand, listings, inventory, supplier relationships and domain, and sets up their own seller account. In a sale of the entity, the company that holds the seller account changes hands. Many sellers and buyers prefer the entity sale because it keeps the account history, and many attorneys prefer the asset sale because it leaves old liabilities behind. Our post on asset sales compared with stock sales covers the difference. Amazon also has rules about transferring accounts, so check them with your attorney and plan the steps in order.

Everything outside Amazon belongs on the checklist. The brand name, trademark, website, domain, social accounts, email list, product photos, packaging files, supplier contacts and any software logins should all be in the company's name. If a few of them sit in your personal name, move them now. A buyer wants a complete list at closing and a plan for how you will help for a short period after.

What tends to sink a sale

These sales fail for a short list of reasons. The best product has a competitor who copies it. The brand is not protected. The supplier has not committed to the buyer. Ad spend has been rising for a year to hold sales steady. The account has a policy warning that was never disclosed. Or the seller's numbers from Amazon do not match the books, and nobody can explain the gap.

Buyer quality is a separate issue. Amazon businesses draw many casual inquiries from people who will not be able to close. We screen buyers for funds and experience before anyone sees your account details, which protects the business and your suppliers. Our post on buyer qualification describes how this works.

How to get ready

Put a year of effort into the things a buyer will look at. Register the trademark if you have not. Get supplier agreements in writing and make sure the factory knows you may introduce a new owner. Move your records to a standard monthly format that ties to your bank statements. Reduce your reliance on the top product if you can, by developing a second or third. Keep ad spend under control, and write down how you find products, order them, and manage listings. Business Advisors of America will help with the valuation and the sales materials, and if you want to see how we work with selling an Amazon FBA business, that page is the place to start.

This article shares our opinion and general information. It is not legal or tax advice. Always speak with a licensed attorney for legal advice, and a qualified tax professional for tax questions, before you act.