How to Maximise the Value of your FBA Business & Prepare for Sale
Updated: Apr 22, 2022
Featuring Industry Experts: Una Brands & QueryStax
With investors increasingly capitalised and keen to acquire FBA businesses, it is imperative that brand owners keep their long-term strategy in mind to maximise the value of their FBA business.
FBA businesses are private label microbrands that operate using Amazon’s marketplace, fulfilment networks and payment systems. Teams running FBA businesses are typically small and lean – generally with fewer than five employees, and sometimes managing well over seven figures in sales.
The allure of FBA businesses, in the eyes of investors, is that, with the right team behind the wheel, their digital nature makes them highly scalable. If properly harnessed, the data generated from sales provides sellers with a clear, metric-driven path towards growth.
Starting and growing an FBA business, however is no small task, especially for small teams. Amazon’s constant release of new regulations requires FBA businesses to constantly monitor their Seller Central accounts to ensure that they are operating within Amazon’s requirements for inventory, listing, and general maintenance and more. Not doing so can result in account suspension, which, if permanent, is damaging enough to shut down an FBA business.
One daily task that many sellers leave by the wayside is downloading their marketplace and advertising data. Because Amazon does not provide sellers with visualization tools or extensive dashboards, many sellers describe Seller Central as a blackbox – the path between initial account setup and product sales is unclear. And, although Amazon does provide all the data needed for sellers to gain transparency into their account activity, multiple files are required to understand even basic questions like, “how many products have shipped by ASIN over time?”
When selling your FBA business, it is crucial to provide the potential acquirer with easy access to a record of your account activity. Storing and regularly reporting on Seller Central account data not only helps FBA businesses gain a better understanding of their customers, but also provides a potential acquirer with an easy and efficient way to conduct due diligence and analyse sales trends within the account.
Tools like QueryStax automate the process of downloading Amazon data, storing it, and producing regular reports which inform sellers about growth metrics, customer purchasing behaviour, and the effect of advertising on account performance.
Una Brands is an acquisition & growth company that acquires leading ecommerce businesses and invests to achieve rapid growth. We spoke to the co-founder, Adrian Johnston, to find out what makes an FBA business more valuable:
“Firstly, investors put significant value on the simplicity of your business, specifically in reference to the product line. Brands which have revenues derived from a few high performing SKUs are significantly more valuable than businesses with hundreds of SKUs. Operational simplicity provides investors with clarity and assurance of success in the future, and thus improves the business valuation.
Secondly, the financial performance of the business and the broader market are directly related to the valuation. It is optimal to sell the business during a period of time when you can clearly show long term sustainable growth, with limited volatility and strong positive market growth in the future.
Lastly, investors attribute significant value to brands which have a large number of very positive reviews and a strong best seller ranking. Typically acquirers look for products with more than 500 reviews and an average rating of at least 4.2. Having a large number of reviews creates a ‘review moat’ around the product which makes the product defensible in the face of increased competition. “
For individual FBA brand owners, tools like Querystax can assist to fill the gaps in maximising the value of the business prior to exiting.
Looking to explore exit opportunities? Contact Una Brands to discuss how they can take your business to the next level and to get a free, no obligation valuation.