5 Tips From an Aggregator on How to Prepare Your Amazon Business for Exit
In 2021, 60,000 Amazon sellers exceeded $1 million in sales on the Amazon marketplace, and over 3,000 had more than $10 million in sales1. For many sellers, this is the eventual dream – to make a six figure turnover and handsome profits.
Building an online business is hard work, and Amazon sellers know how challenging it is to optimize Amazon PPC, improve BSR, create new products, handle supply chain among many other things. As your business grows bigger on Amazon, complexity kicks in. There may come a time when you are considering how to take your business further and one of these options can be to sell your business to an Amazon FBA Aggregator, and use the funds to start another new business or to rest and enjoy the fruits of your labor and success.
Accel Club, an Amazon FBA aggregator headquartered in Amsterdam, speaks with many Amazon sellers interested in an exit strategy on a daily basis. Through these discussions, we can share with you the key areas where sellers may often overlook or have done very well in and that contributed to smooth and successful outcomes.
Here are 5 tips that can help you prepare for a successful business exit.
1. Register Your Trademarks, Patents & Protect Your Intellectual Property (IP) Rights
Registering trademarks and IP can be a tedious process and costly at times, and many business owners tend to procrastinate or deprioritise this task given that there are typically more pressing matters to attend to.
Most Amazon brand buyers prefer private label companies, and trademark registry is critical to their decision to acquire. The brand buyers focus on this so much because properly registering the trademark is important to prevent competitors from selling products under your brand or even registering your brand under their name to take a cut of your sales. Furthermore, it is important that you obtain IP rights not only in the markets you are selling your products but also in the country of manufacture.
For instance, if your products are manufactured in China and sold on Amazon US, it is likely you’d have registered your trademark in the US which is good. However, you might not have realized that although you’re not selling your products in China, it is still important to apply for trademark protection in China. Another third party who has trademarked your design or brand name could stop you from shipping your products.
2. Concentrate on Amazon
Some sellers have been opening up storefronts on their own websites or through other third-party seller platforms, and those are great additional sales channels. However, maintaining stable performance on Amazon should remain your top priority prior to exit.
Amazon is still the most favored sale channel among Aggregators and they will take into consideration the percentage of sale contribution from Amazon. This does not mean you shouldn’t create your Shopify website or explore more channels.
Aggregators are capable of scaling your brand across multiple platforms and channels; what they’re looking for is a well-organized business that they can evaluate accurately so that they know how much to pay for it and how much of their resources will be needed to further grow the business.
3. Maintain Good Account Health
Similar to our own physical health where practicing a healthy lifestyle is a means to living a good life and reducing health issues, maintaining a healthy Amazon Account ensures your business viability and even buybox.
It is reasonable to say no Amazon FBA buyer wants to buy a brand only to have the account suspended, and thus putting the entire asset at risk. If you had used any rebate campaigns in the past,or your product inserts do not comply with Amazon policies, or you have multiple accounts, this should be disclosed from the outset as these factors might increase the risk of account suspension.
While most aggregators understand that infringements happen to the best of sellers, it’s very important to be transparent about account health from the start of negotiations because issues with account health may become a deal breaker even for the most profitable and growing business.
4. Maintain a Robust Number of High Performing SKUs
Sometimes, less is more. If you are in several categories and/or wide product range, focus on driving performance of select SKUs with growth potential. Spreading it too thin with too many SKUs may not work in your favor.
In general, buyers appreciate high demand products that have recurring sales and are non-seasonal in nature. However, it really boils down to the performance of the products in sales and profits, and market share on Amazon.
That said, while having a large sales volume is impressive, it is equally important to ensure a healthy profit margin. If you’re looking to take your brand to market and sell it at a reasonable valuation, make sure that your product portfolio generates a good level of profitability, which is over 15% of sales in EBITDA. Focus on steady growth and avoid artificially pumping up your sales numbers with heavy marketing spend.
5. Simplify Your Business Process and Automate Where Possible
The simpler the business behind the profits, the more enticing it is to buyers. Automation of key business processes (e.g., procurements, inventory management, customer service) will help to boost profitability and increase transparency, which are both appreciated by the buyers.
Well-organized business with a lean team structure, simplified supply chain and operations can be evaluated more accurately as Aggregators can better determine the value of the business and amount of resources needed to further grow the business after the acquisition.
If you’d like to learn more about the process or discuss your exit strategy or obtain a free valuation of your Amazon business, get in touch with Accel Club today!
1 Source: www.marketplacepulse.com. Feb 11, 2022 t.ly/1vnk
Sebastien Stanley-Jones is Director of Global Business Development at Accel Club. He was previously Director of Business development at Moonshot Brands (YC W21) and prior to that a founding member at Clearco, leading the in-market and product development function (Clearco is the only Canadian investment by Softbank). He holds a Masters in Innovation from Smith School of Business.
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