Business for Sale, Would I Buy It? | Two Hero SKU Amazon FBA Store
In this series, CapForge’s owner and founder gives us a little behind-the-scenes on what a good or bad business would be. CapForge helps tons of clients either buy or sell business and Matt was a business broker before starting CapForge. Let’s look at some of these businesses up for sale and see if Matt would be interested in buying them.
Video Transcript:
Alright in this edition of the “Would I Buy This Business for Sale” series, we’ve got an Amazon FBA business with two hero skus. So Amazon FBA is their program where you basically ship the product to Amazon’s warehouse and they take care of everything from there. So a lot of people actually don’t ever even touch their product. They’ll order from China or wherever they’re buying their product from and have it shipped directly to Amazon’s warehouse. Which is kind of the idea if you can, you know, run an Amazon product business and inventory-based business from a spare bedroom. You don’t need to have your garage stuff full of stuff or whatever, you don’t have to go down to the dock and the port and, you know, unload stuff from a shipping container yourself. It can really be a pretty hands-off business. That’s changed a little bit with some of the new things that Amazon is requiring now. It’s got a little harder to do it that way. Some people are switching to using 3PLs third party logistics systems, which is basically a warehouse between Amazon and China where you’d park your stuff and then have it send in Amazon as needed.
But let’s take a look at this. So two heroes skus, basically meaning, there’s two products that are driving the vast majority of sales. They may have some other products but they have two main products driving their sales. The sales claim is 1.2 million in gross revenue which is okay. The cash flow is 353,000 which is about 25% which in my experience, having literally hundreds and hundreds of e-commerce clients that we do the books for, 25% profit margin is pretty healthy for an Amazon Business. It is tough, a lot of people shop Amazon looking for the low-price option, so it’s tough to have a premium price and a good profit margin. It also now is the case that it’s almost impossible to do well on Amazon without spending on ads. Back in the old days. five or six years ago, even two or three years ago, you didn’t have to spend as much on ads if you had a good brand or a strong keyword that people are searching for lots of good reviews. But now it’s almost impossible to get traffic to your Amazon listing without spending money on sponsored ads and that just cuts farther into your profit. So 25% profit margin is high and that is something I definitely would wanna verify before proceeding to make the purchase. The asking price 1.1 million on $353,000 of cash flow is, that’s in line with what people are getting now. That’s a reasonable price for that amount of cash flow. And again that those margins sound high and I would wanna check that out for sure to make sure that that’s really what they’re getting.
Other than that, I mean, Amazon businesses are – the business uses a 3PL in Germany. So I wonder if this is actually European based business. It is represented by Chris at Quiet Light which is good. Quiet Light is a very professional brokerage for ecom businesses so hopefully that means they have vetted these numbers and they are legit. So it definitely helps when you’re buying a business to work with a broker who knows what they’re doing. A broker who doesn’t know what they’re doing or isn’t specialized in the kind of business they’re selling or is just kind of a clown in general, which is a lot of them, definitely makes the whole process of buying a quality business harder. So represented by a good brokerage and that makes me feel better about these numbers. And I would definitely be interested in looking into this one more if I was in the market for an Amazon FBA-type business.
