The Amazon Seller’s Guide to Business Brokers
There’s never been a better time to be an Amazon seller. And there’s also never been a better time to sell your Amazon business!
The ecommerce industry is HOT right now, as evidenced by the record-breaking sales that took place in 2020. And while much of the spike in sales was due to the COVID-19 pandemic, the industry as a whole is still projected to grow in future years. Because of that, there’s no shortage of buyers who are interested in acquiring Amazon businesses.
But selling a business is a complicated process that involves multiple steps along the way. If you’re inexperienced in this regard, you’ll need the help of a professional to facilitate the process. That’s where a business broker comes in.
What Does a Business Broker Do?
To put it simply, a business broker is an intermediary who assists in the purchase and sale of companies. They typically charge a percentage of the final sale (usually between 5-15%) for their services.
Listed below are some of the core services they provide:
1. Assess the Value of Your Business
Before you list your business for sale, you’ll need to know how much it is worth. A professional business broker can provide you with a valuation of your business, but in order to arrive at a figure, he or she will need to analyze your financial records—which is one of the reasons bookkeeping is so important.
“Generally, valuations are done by calculating a company’s tangible assets (machinery, real estate, etc.) and intangible assets (brand recognition and trademarks) versus the liabilities and debts it currently holds, though different methods may look at different metrics,” Business News Daily reports. “A company’s value is also impacted by how profitable it is on an annual basis.”
In the case of an ecommerce business, ALL the assets are usually intangible—the Amazon account, the brand designs, trademarks if you have them, your product ranking and reviews, plus any other platform accounts you may have like a Shopify store, Wal-Mart, eBay, etc.
Typically, the inventory you are holding at the time of sale is also transferred in full at whatever cost you paid to acquire it, so that ends up being a wash for you, meaning it neither adds nor subtracts from the total value of the business but is simply bought at cost by the new owner.
If you’ve fallen behind on your bookkeeping or you do not have financial records, we can help. Contact us for a free consultation.
2. Develop the Sales Memorandum
A sales memorandum is a prospectus of your business; it contains all the details that buyers or investors need in order to make an informed decision.
“A seller’s memorandum includes all those points one would normally expect to see in any business plan, to wit: an executive summary, a business description, financial requirements, target market niche, identification of top management, an operations review, analysis of strengths and weaknesses, and current financial statements and projections,” business brokerage platform Deal Studio explains.
Since it functions as an advertisement for your business, you’ll want to make sure the information is presented in an attractive, easy-to-read format. This is an area of expertise that business brokers excel at.
3. Market Your Business
Most brokerage firms have a marketing department dedicated to promoting your business to potential buyers. Another unique advantage is that they usually have an internal database of buyers that you wouldn’t have access to on your own.
Of course, getting your business in front of buyers is only half the equation; the other half is following up on any questions they may have, sending proposals, and negotiating offers. Most Amazon sellers don’t have time for this, which is why this service is well worth paying for.
The other key difference between a good broker and a not so good one is that the good brokers are heavily screening the potential buyers to make sure they can actually close the deal. It’s a waste of your time to spend hours discussing your business and sharing your financials with someone who won’t actually be able to buy the business or isn’t really serious about closing the deal. A good broker won’t waste your time or theirs unless they know for sure a buyer is qualified and serious.
4. Negotiate the Terms of the Sale
It’s exciting when you get your first offer. But don’t be surprised if that offer comes in low.
The good news is that price can be negotiated. In fact, it’s part of the broker’s job to negotiate on your behalf. But keep in mind that price isn’t the only factor to consider.
“Just because you didn’t get your asking price doesn’t mean that the offer has nothing to commend it,” says Sunbelt, a business brokerage firm based in Austin. “It may have other points to offset what you feel is a low figure, such as if the deal is to be seller-financed, higher payments or interest, a consulting agreement, more cash than you anticipated, or the promise of a buyer relationship that will make life easier. In evaluating an offer, take the long view and look for the ways in which the offer just might accomplish your objectives.”
5. Conduct Due Diligence
Buyers will often request a thorough investigation before going through with a purchase. It’s a safety precaution that ensures that all claims made during negotiations are valid.
A probe of this sort covers multiple aspects of the business, such as financial, operational, technical, legal, and traffic to the website. As you can imagine, this is a difficult step to get past if you’re trying to go it alone. If you’re using a broker, however, it’s no big deal, as they have the expertise needed to conduct due diligence.
6. Finalize the Sale
In order to finalize the sale, you’ll need to draft the contract or agreement. Brokers have a team that can prepare all the legal paperwork for you based on what was agreed upon during negotiations. Even though brokers are highly knowledgeable in this field, we still advise you to have an attorney review these documents prior to signing.
After all the paperwork has been signed, the broker will handle the payment and transfer of business assets.
7. Provide After-Sales Support
The broker’s role is to ensure a smooth transition from seller to buyer, and that doesn’t always end at the turnover of assets. Sometimes, there are still steps that need to be taken after the sale. The broker is responsible for tying up these loose ends.
What to Look For in a Business Broker
Knowing what to look for is key in selecting the right business broker. Below, we’ve outlined three steps you need to take before making your decision.
1. Research their credentials, track record, and client reviews
You’ll want to gauge their track record by asking how many companies he or she has sold within the past year. You should also inquire as to how many other listings they are currently managing to ensure they’ll have adequate time to dedicate to your company.
An important ratio to consider is listings to sales. In other words, how many of the listings they take end up finding a buyer and are successfully sold. Some places will list almost any business and at whatever price the seller asks for even if it isn’t close to what the market will pay. What you want is a broker who sells nearly all their listings because that means they are pricing them right, qualifying them well, and working with serious buyers. If a broker can’t sell most of their listings then you don’t want to take your business there!
Another thing to check for is reviews. What are previous clients saying? Are they satisfied with the service they received? Take this into account during your research.
2. Seek a broker who listens to your needs and prioritizes your interests
When you’re interviewing brokers, pay attention to how comfortable you are communicating with him or her. This is important, as you’ll be discussing your needs and goals with this person. Establishing a sense of trust is also important, considering your broker will be acting on your behalf.
A good broker will start with an overall assessment of your company (both strengths and weaknesses) in addition to clarifying your sales goals and reasons for selling. He or she will then develop a marketing strategy that aligns with your goals. Keep in mind that selling your business may stir up a lot of emotions; your broker can help guide you through this process by remaining objective.
3. Look for a broker with a strong sales strategy and confidentiality policy
Don’t be afraid to ask your broker about how they plan to market and promote your business, along with how they screen potential buyers. A good broker will be happy to outline their sales strategy and advertising budget for you. If confidentiality is important to you, ask about what steps they can take to protect your privacy.
Top Rated Amazon Business Brokers
Business brokers often specialize in certain industries or companies of a specific size. Below is a list of 8 top rated Amazon business brokers. Use this as a starting point in your search.
1. Quiet Light
Founded by Mark Daoust in 2007, Quiet Light is one of the most revered ecommerce business brokerages in the U.S., having been featured in top-notch publications like Forbes, Entrepreneur, Inc. Magazine, Go Daddy, and BuzzFeed. To date, Quiet Light has sold more than 500 websites, totaling more than $100,000,000 in transaction value.
This firm does a fantastic job at both screening qualified sellers and finding ready-to-go buyers. They also are happy to work with potential sellers months and even years ahead of the actual sale to help them get the best possible valuations. If you are new to the idea of buying or selling a business, definitely check out their podcast and newsletter!
Empire Flippers has made Inc. 5000’s list of fastest growing companies in America for four years in a row. Having helped buy and sell more than $100 million worth of online businesses, it’s no wonder that it’s one of the highest rated ecommerce brokerages in the U.S. They focus on the smaller end of deals and tend to concentrate on volume of listings in what they post.
Another reputable firm is The FBA Broker. Having only been around since 2016, the company has already been featured in Inc. Magazine, Web Retailer, AMZ Tracker, The Amazing Seller, and AM/PM Podcast. Founded by Coran Woodmass, an FBA business owner himself, it is the only firm on this list that exclusively caters to Amazon businesses. The FBA Broker tends to work with a lot of international-based sellers although they represent sellers from anywhere.
They also produce great content and a “state of the market” report that gives great insight into the current atmosphere for sellers and buyers and what to expect when you consider an exit or acquisition.
Website Closers has been around since 1998, making it one of the most established ecommerce brokerage firms in existence. It was co-founded by former corporate attorney Jason Guerrettaz and longtime broker Ron Matheson. They seem to focus on larger deals although they do have some smaller ones as well.
One thing that is unique about this firm is they use a formula to include the inventory cost as part of the overall valuation of the business. While they do include some “floor” and “ceiling” caps and other adjustments, this can sometimes cause complications versus simply valuing the inventory at cost at the time of the sale separate from the value of the business.
As a strategic advisement firm, Northbound Group focuses on helping sellers build their online businesses so they can get the maximum payout possible. The company was founded by Scott Deetz, who sold his first company for eight figures. The niche for this firm is larger sellers as well as working closely with the sellers before the sale to maximize margins and business performance in addition to listing it for sale. In this capacity they sometimes work alongside other brokers to help build value as opposed to strictly being transactional.
Started in 2013 by serial entrepreneur Robert Kale, Digital Exits has a long list of positive reviews from business owners who say they were able to sell their company within a short period of time. Click here to view a list of deals that they’ve closed.
Based out of San Juan, Puerto Rico, Latona’s is a mergers and acquisitions (M&A) firm that focuses on web properties. The company has been around since 2008 and has sold millions of dollars worth of companies. They generally focus on smaller deals as well as content, affiliate, and other online business models in addition to ecommerce.
In just 11 years, Flippa has sold 250,000 businesses. With four global offices, it is one of the largest ecommerce brokerage firms in the world. In the past, they tend to be focused on smaller deals, butthey have recently leveled up their efforts and now are doing plenty of six, seven and even eight figure deals. They also trade domain names and develop pre-revenue websites in addition to operating companies.
Fortunet is an investment banking firm focused on e-commerce sellers including Amazon, DTC, SaaS and agencies involved in this world. They represent sellers from beginning to end and do all their analysis and set up work inhouse to ensure the process is smooth and consistent from end to end. Their approach is more of an M&A banking style than a smaller business broker presentation and the clients they take on reflect that differentiation.
Paying a business broker 10-15% of the final sale price may seem like a hard pill to swallow, but chances are, they can get you a much higher sale price than you would have gotten on your own. Besides, you’ll be confident that everything was done correctly, and peace of mind like that is priceless.