Why Sell Your Business to Amazon Aggregators
As the e-commerce space continues to skyrocket, Amazon aggregators are working around the clock to acquire small businesses and turn them into successful, profitable brands. These investment firms consist of e-commerce veterans that know the ins and outs of selling on Amazon. With bountiful resources at their disposal, the top aggregators in the industry are always on the lookout for owners who wish to sell their Amazon business.
But selling your business to Amazon aggregators isn’t as easy as you think. These companies want to make sure that your brand has the potential to drive revenue and reach a global scale. This article will discuss how to sell your business to Amazon aggregators so you can develop a sound exit strategy for your next venture.
Why should you sell your business to Amazon aggregators?
One of the main reasons you should consider selling your business to an Amazon aggregator is the lightning-fast transaction. Since aggregators are large investment firms, they have the means to acquire small businesses without the need for external financing. On average, it takes about 30 days for aggregators to close a private transaction, which is good if you want to exit as quickly as possible.
But that’s not the only reason you should sell your business to Amazon aggregators. Some owners want to enter a partnership and gain flexibility in managing their operations. This situation works great for both parties since the aggregators have the expertise to scale the business, and the owner can still earn a percentage of the profits.
Lastly, Amazon aggregators have the means to turn your brand into something special. Even if you plan on exiting the business, it’s good to know that the next owner(s) will look after the brand you worked so hard to develop.
What are the factors Amazon aggregators consider when buying a business?
Not all Amazon businesses look appealing in the eyes of Amazon aggregators. As experts in the industry, they have a keen eye on which brands have the most potential to scale on a global level. If you’re wondering whether your Amazon business meets their criteria, here are a couple of factors to consider before you decide to sell your brand:
1. Business type
Amazon aggregators primarily look for private-label brands or those that manufacture their products because their potential to scale is higher than wholesale or reseller businesses. If you run an online or retail arbitrage business on Amazon, you may find it difficult to sell your business to aggregators.
Trademarked brands are an ideal choice for Amazon aggregators due to the brand protection and ability to stand out from the competition. Knowing this, it’s a good idea to enroll your brand in Amazon’s brand registry program to make it more appealing in the eyes of aggregators.
2. Sales figures
Sales figures speak volumes about your brand’s performance and how it will fare going forward. While Amazon aggregators don’t have set figures when acquiring small businesses, they want to ensure that your brand can generate revenue. Some aggregators look for roughly 70-80% sales in the Amazon marketplace, while others look at cold, hard numbers when making a decision.
Amazon aggregators minimize their risk by acquiring as many profitable brands as possible. By diversifying their acquisitions, they can maximize their profits and maintain a favorable position in the marketplace.
3. Fulfillment method
There’s only one fulfillment method that Amazon aggregators look for, and that is Fulfilment by Amazon (FBA). Regardless of your brand’s profitability, aggregators don’t want to deal with manual shipping and warehousing. If your business uses the Fulfillment by Merchant method, expect aggregators to cross your brand out of their list for the reasons we mentioned.
4. Number of SKUs
When evaluating a business, Amazon aggregators look for brands that have fewer SKUs than your average brand. Why? Because they want to invest in a brand that carries high-quality products. Think of high-volume sales with two or more products that address the needs of their target audience.
The fewer SKUs your brand has, the higher the chances Amazon aggregators will consider buying your business.
5. Public perception
Brands live or die by their public perception, and Amazon aggregators know this all too well. The last thing they want is to acquire a brand that’s riddled with negative reviews, as it’s hard to generate revenue when the product fails to meet the needs/expectations of the intended audience.
Reviews are a part of social proof, and Amazon aggregators look for positive reviews when acquiring a business. The more positive feedback you have, the easier it’ll be to sell your brand to Amazon aggregators.
Amazon aggregators list market niches as an important consideration since they want to acquire a business that sells products consistently. Seasonal products or those with expiration dates aren’t as appealing to aggregators as clothing or jewelry.
If your brand is doing well in a niche with low competition, Amazon aggregators will be more than happy to purchase your business.
7. Financial records
If Amazon aggregators are willing to invest seven to eight figures for your brand, expect them to do their due diligence when evaluating your business. Before you start selling your brand, you want to make sure that you have accurate, up-to-date bookkeeping records.
Your company’s financial transactions are a reflection of your brand’s profitability, and aggregators use those numbers to get a pulse of how well your business performs. Do not fake your numbers under any circumstance as doing so will get you blacklisted.
8. Profit margins
Amazon aggregators have a preference when it comes to profit margins. Usually, they look for brands that net a profit percentage of around 15-30%, as it indicates the brand’s potential to scale up. Good profit margins indicate that a brand is well-positioned in the market and is capable of reaching the Best Sellers rank.
The minimum profit margin for Amazon aggregators is 10%, and anything below that is considered unappealing in their eyes.
Planning an exit strategy for your business requires thorough planning, and part of that is deciding whether or not to sell your brand to Amazon aggregators. One thing is for certain; Amazon aggregators have all the tools necessary to take your brand to the next level.
If you want to sell your brand and have it succeed in the future, you can’t go wrong by selling it to the brightest minds in the industry. Hopefully, this article provides you with the information you need to prepare your brand before you decide to sell it to Amazon aggregators.
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