#1. Type of Business
There are several types of business models on Amazon, they are either aimed at creating their own brand, or at reselling third-party products.
Reseller model is:
- Retail arbitrage;
Branded products are:
- Private label;
- Proprietary products.
When it comes to selling your Amazon business, the buyers would rather look into acquiring an FBA, and Private label or proprietary products are more attractive for the investors, as far as they acquire and control the brand, supply chain, and the business process as a whole. The brand itself is an asset and the investor can hope that it will continue to sell in the future.
#2. Age and Sales History
When you buy a business, it is very important how long it’s been in the Amazon marketplace. You need to look at the success story and predictability rather than the huge income, which is, though, valuable as well. Consider stable sales and stay away from seasonal things or sales that drive short-term income.
As you would need to recover your investment, you need to be sure that the ROI is sustainable and when the business is several years old, you can see and analyze how it behaves to minimize risks. It’s good to have evidence that shoppers trust the brand, and that the items will perform in the long run. This is the reason why in general it is recommended to buy a business older than one year.
Also, there is a risk that the seller account could be or had been suspended, which, unfortunately, happens on Amazon. Check account health, and if you have doubts as to whether the account was suspended in the past or not, look at the sales history: periods with no sales activity will be the evidence.
#3. Expandability and Growth Potential
When any investor considers buying your business, the second thing (after net profit) he would look at is how much he can grow the business. This includes not only perfect listings, high rankings, positive reviews, etc., but also avoiding categories with extreme competition. It is important to ensure that you are able to grow the sales further. Having a number of solid brands in your portfolio, for instance, or selling in multiple marketplaces could justify the consistent business's success.
Global Sales add value to the storefront as well. Selling Internationally expands growth potential. Amazon currently has 20 marketplaces, giving perfect chances for their business expansion.
Also, you need to consider the risk of the items being replaced with new technology or better products. Research the competitors, and avoid categories with extreme competition.
#4. Accurate Numbers and Clean Financials
You need to always analyze main business metrics and product KPIs. The trends should be growing and you should be able to detect positive tendencies and growth potential of an Amazon store. There should be evidence of the business's consistency and smooth operations. Key metrics are net profit, inventory turnover levels, PPC spends (ACOS / TACOS), and COGS margins.
Another part is net profit, profitability, and expenses, especially when it comes to Amazon fees. You need to thoroughly go through the costs (COGS, Ad spend, on and off Amazon; storage fees; inventory; promo expenses, etc.)
Also, it is important to review the tax liabilities. In the majority of the cases, any prior tax liabilities applicable should remain with the seller, however, to be on the safe side, consult a Certified Public Accountant or an audit company.
#5. Perfect Listings and Positive Reviews
Review everything related to the listings. They should be optimized, updated, all researched keywords and backend keywords should be included, high-quality product images, bullets, videos, A+ content, customer reviews, and all other things that create a perfect product listing should be in. They drive traffic to the listing.
Consider the reputation of the brand, the ratio of positive and negative reviews, and the overall seller feedback. The positive sales history of the brand or product matters as Amazon would rank it higher. Therefore, it is very important to analyze the number of negative reviews; if they are few, it increases the account value.
#6. Product Diversification
If a storefront has a strong brand, but a narrow portfolio, this might be considered a business risk. It’s more attractive if there is a variety of products in the store. Moreover, if Amazon shoppers can find a lot of different items they can navigate between, this increases brand awareness and the time they spend visiting the listings. A wide portfolio enhances trust in the brand name as well.
#7. Optimized Supplier Chain
Review the manufacturer and supply channels and see if they are functioning properly. Consider if the seller’s relationships with the manufacturers can be transferred, if they are reliable, flexible, look at supply quality, and the delivery of consignments on time.
#8. Reason for Selling
Always ask the seller why they want to exit. The reasons can be fair, like raising funds, new projects, or, simply, retirement. However, you need to find this out to avoid unnecessary risks.
#9. Optimized Management
The level of seller involvement in the sales process matters, as well as the number of hours he spends to operate his business. In the far end, you are not going to buy yourself a 24-hour job for your own money. When buying a business, look into the efficiency of your business processes, how well they are organized, and how well are the employees and virtual assistants are incorporated in the operations.
#10. Intangible Assets
There is a number of intangible assets adding value to an Amazon account. These are trademarks, brands, branded domains and websites, social media accounts and followers, mailing lists, etc.