Operating Procedures for an Amazon FBA Business

operating procedures amazon fba business

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Aside from your financial statement, the most important document you must have when looking to sell your Amazon business is clean operating procedures. This could be as simple as a Word document with bullet points and photographs, or a screen recording of you going through the various steps to operate the business.

The reason we put such a premium on a businesses procedure documentation is because that is really the document that buyers use to judge a business. They will judge how organized it is, how each process has been overlooked, how effective the seller and their staff has been and ultimately, how much they are willing to pay for it.

SOP

Procedures by department / employee

Detailed Amazon sellers will know every inch of their product, every number on their seller dashboard and every procedure that needs to be done in order to run their business effectively. The majority of sellers will fall somewhere short of this, but in looking to sell an Amazon business for the highest valuation, getting each procedure documented is a must. 

Many large sellers will have a new employee or agency in charge of each facet of their business and will be able to pass that relationship on to the new owners. However, if they handle any portion of the business themselves or have an in-house employee handle it, those procedures should be documented in a way that paints a clear picture to the buyer.

How Long Will My Business Take to Sell?

The time it takes to sell your business is highly dependent on how large it is, how clean your books and records are and how many skus you have.

We have seen a meaningful increase in the number of buyers in the Amazon space which has shortened the time on market considerably.  It is still true with Amazon businesses and with other digital assets that the smaller the businesses (priced < $250K) sell faster than the larger ones. 

Aside from size of the business, the factors that will make it sell more quickly are”

  • Clean books

  • Outstanding product reviews

  • Passively run

This could either mean that the seller has an employee or team of employees that run the business.  Or, the business operations are streamlined enough so as to not need much attention from the seller.

  • 3 or more years old

  • 40 or less SKUs

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Will I Get A Cash Offer For My Amazon Business?

Cash is king, always has been and always will be.  For businesses under $250K, many transactions close for 100% cash or for a very simple deal that results in the seller getting cash within 3-6 months of closing.  For the larger businesses, only 15-25% will close for cash offers.  Your chances of getting a cash offer greatly increase if your business has been around for more than 3 years and if your have clean books and records.  Having US based tax returns for your business is also a plus as it will allow some qualified buyers to get SBA acquisition loans.  These situations are beneficial to both the buyers of Amazon businesses and the seller.

In addition to cash offers, there are a couple other deal structures that we see periodically, they are:

  • Hold Backs

A hold back means that a portion of the agreed upon purchase price is not paid at the time of close.  Instead, the cash is held by the seller until the business meets some agreed upon criteria.  This criteria can be as simple as 30 hours of training by the seller, or can be revenue based such as the business needing to hit $100K in revenue.

  • Earnout

An earnout provision typically states that the seller gets a cash payment at close and a percentage of revenue or profit if the business performs very well over the coming 12-18 months.

This structure is typically used for businesses that are rapidly growing.  The buyer is able to keep a portion of the upside and the seller mitigates some of their risk by getting a slightly lower purchase price.

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Amazon FBA Business Brokers

At Upward Exits, we work with buyers and sellers of digital businesses and have developed a reputation as being a top choice as Amazon Sellers Business Broker.  We have deliberately decided to keep a small staff and be selective on the deals that we take.  We aim to provide a true white glove experience with knowledgable professionals in lieu of hiring a staff of 40 and taking every deal that comes our way.

If you are interested in selling your business, we hope to be your first stop. You can fill out our contact form and we will be in touch with you.  If we don’t have the capacity to serve a you at this time, we will be happy to point you in the direction of one of our capable competitors.

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