Selling My Amazon Business

I started my business because I wanted to build something valuable.  I sold it because it was time to build something else.

I loved the challenge of creating, then growing something scratch.   Although my Amazon business remained small (about $100K annual sales), it was fun to carefully select products, market and manage expenses to make it profitable.

Marketing is imperative and by selling on Amazon’s platform I had access to several tools that are low cost and high impact:  Optimize listings and Amazon sponsored products advertising. All my items were niche products which offset low reach with high conversion. I enjoyed figuring out how to market my products.

However, even good things can become burdensome. My business did not take much time but I had to keep on top of it every day. It was time to close down or sell. I decided to try to sell instead of fading away, both to extract value from what I built and to provide my vendors with an ongoing channel.

But how to sell? Obviously I needed to figure out who would benefit by purchasing my business, which was easy enough, but how to find and connect with buyers? How do I price it?

I searched online for business brokers and found the Michigan Business Brokers Association, contacted them to inquire about possible brokers who might be interested in my tiny business.

Larry Baumgart and Brad Scoffin from the local Advanced Business Advisors contacted me and we agreed they would represent me. Larry determined an offering price, 2 to 3 times cash flow and he and Brad used my information to create a marketing packet. They had a lot of interest and we closed the sale 4 months after I signed with them.

A few points for anyone interested in selling their business

1. Understand what you have to offer and who could benefit by purchasing it from you. My potential buyers were those who wanted to add an online/Amazon channel to their existing business, people close to retirement, businesses that want to expand their product line.
2. Understand your profitability.  Be prepared to explain differences between your business cash flow/income and your tax returns.
3. Have accurate inventory records.
4. Know and be able to explain what makes your business unique.  Just as you do for products, provide features and benefits for your business to prospective buyers.
5. Be patient and flexible.  It may take a year to sell a typical business.
6. The brokers will answer many questions but will also pass many on to you to explain.

The brokers have a standard document that describes the business, what it does, how it operates and includes summarized financials.  I provided the raw material which Brad and Larry used to fill in this marketing material, plus copies of our income tax returns, 1099s and both detailed and summarized financials.  In about 2 weeks they converted this information into a marketing brochure which they then advertised across the country.

The first offer came within about 6 weeks of signing with the broker, for full price with no onerous conditions.  Unfortunately the buyer had a serious health problem a couple weeks before close and backed out.  A second offer was not as good, significantly below asking price and with limitations and we declined.  The third offer came about 10 weeks after signing and was not quite acceptable; we countered and were able to agree on full price with acceptable conditions.  We closed February 1.

The timing was crucial for me because I signed the listing agreement the beginning of October, Christmas shopping season.  We Amazon sellers need to have inventory prepped and available beginning in September because Christmas sales start mid-September and ramp steadily up through mid-November, then explode through about December 20.  I had purchased considerable inventory for the holiday and needed to sell as much as possible.

I wanted to sell out my inventory partly to put money in my pocket, but mostly to make sure there wasn’t a lot of inventory left over that a buyer would need to purchase; the more inventory the greater the working capital the buyer would need and the less attractive the business would be.

I had done a great deal of keyword research and re-photographed several items, optimized about half my listings and tuned the advertising before the holiday season.  Almost everything sold out.  The downside to this was the sales in January were down 25% because I could not replenish certain products quickly enough.  This was overall advantageous to the buyer because he had much less product to buy and could pick and choose what he replenished.

The deal we reached included transition coaching for one month.  The buyer and I have a good relationship and continue to talk; I believe it is helpful for anyone to have a sounding board and I’d like to think I can provide some helpful ideas to him.  I am very glad that we get along so well because it could be miserable to deal with someone who looks for fault or is unpleasant or worst of all, who will not take needed action.

Selling an Online Business

1.  Beyond the basic points noted above that hold for selling any business, realize that what you are selling is intangible.  Many brokers are used to selling physical businesses, such as small manufacturing company, party stores.  You are selling intellectual property.
2. If your business requires specific know-how, then realize you may face a limited market.  For example, not everyone would want to buy this blog (no matter how profitable) because they would need to write about our topics or hire someone to do so.  Consulting businesses or professional services companies are especially limited.
3. Prospective buyers will ask about URLs and domains and service providers and may not understand the answers.  You may also need to educate the brokers although skilled brokers are flexible and can quickly see value.
4. Be able to explain your suppliers and fulfillment methods.
5. Buyers may not understand fee structures or marketing involved with online businesses.

Selling an Amazon Business

1.  Lots of people have used eBay and have a hazy understanding of how to list an item and ship it to a customer.  Most do not understand Amazon selling.  I stressed to the brokers several times that any buyer must know and follow Amazon’s rules.
2. Buyers asked many questions about my suppliers and why/how they were exclusive to me.  Buyers didn’t seem to understand how to go about finding products where one could be the sole seller.
3. My final buyer had read a lot of material about selling on Amazon and had taken a few online classes so he had a very good idea what he was getting into.  Some prospective buyers didn’t seem to realize they could not operate as they choose on Amazon.

Last point I want to stress is that your Amazon seller account is linked to, and is the same as your Amazon buyer account, your Amazon Kindle account, your Amazon Prime account and your Amazon Associates (referral marketing) account.  When you sell your Amazon account you sell the whole shebang.  My buyer got my seller account, including its feedback score, seller metrics, name, about 500 Kindle books, and a $20 gift card and visibility to my credit cards in my buyer account, and all my Associates links and future income from those links.

You know what?  That’s fine.  I can always re-buy my Kindles!