Selling Your Amazon Business
How one Amazon seller prepared his business for sale using A2X
As an Amazon seller, your financial accounts should offer insight into your business, showing successes and opportunities and helping to pinpoint trouble areas.
Then, when it comes time to sell, being able to give potential buyers a clear picture of financial health will help ensure you get the best price for your business.
This case study outlines some key steps for Amazon sellers and their accountants to gain ‘financial health’ and explains how they have successfully used A2X to ‘tidy’ their books and go on to sell their businesses.
Clean books are important to buyers
As a leading international online business broker and presenter, Mark Daoust helps broker online business sales. It’s means he’s seen first-hand how much a sale-price can be affected by financial statements that are unclear, or don’t include enough detail.
Buyers, he says, are motivated by three main factors:
- Financial return - is this a smart financial investment?
- Niche - is there a unique market for this product?
- Lifestyle - will running this business fit with my lifestyle?
While niche and lifestyle are definitely motivating factors, financial return and ROI are the driving forces. Mark states:
“In short, if there’s no return on investment, there’s no incentive to buy the business.”
The primary way a buyer can see an online business’s potential and financial viability is to review the financials. As Mark points out, if books are unclear there’s the real risk of a lower-than-expected offer, or even worse - no offer at all.
How can clean books be achieved?
Here are three ways to ensure your books truly reflect your business:
- Having accounting software such as A2X in place will make it quicker and easier to reconcile sales data. This is particularly important when using Amazon - sellers will know from experience that Amazon reporting often leaves off the detail needed to properly reconcile accounts, and can make it almost impossible to reconcile sales month to month. A2X software resolves these bookkeeping issues, making it simple to post Amazon sales and fees and to reconcile accounts, with the right level of detail.
- Take a moment to track expenses by line item - short term pain will be a long-term gain. On a financial report a ‘miscellaneous’ category that includes a mixture of expenses doesn’t give a buyer accurate insights into your business. Breaking down expenses will assist to give an accurate reflection of your books.
- Use an e-commerce accounting system, like QuickBooks or Xero, and use their methods of tagging or categorizing expenses. This is especially important if sellers use shared resources for different brands. Tagging items makes it easier to separate expenses for each brand, giving the potential buyer a more accurate insight into the particular business that’s for sale.
How one Amazon seller prepared his business for sale using A2X
Nick Losciuto had a booming Amazon seller business that he was preparing to sell. Nick very quickly realized he needed to ‘tidy up’ his financials to make the most of its true value. Tidy, transparent books he says are an essential part of attracting the right buyer for your business, and the best valuation.
“The institutional investors and private equity firms - they pay the best prices - are looking for very organized books. They don’t have the time to go through your books and investigate the surprises they’d certainly find.”
Nick spent time looking around for a solution that would allow him to ‘tidy up his books’, finally stumbling on the Xero accounting system and A2X.
After an initial test run, Nick was astonished at A2X’s simplicity. He plugged in his Amazon account, did some basic set-up and was able to start transferring Amazon information into his financial system right away.
With A2X, Nick had loaded all his information into Xero within just a few days. It was a complete contrast with the previous software company Nick had been working with, which had spent six unsuccessful months trying to complete this same process.
“I’d had such little luck and hadn’t seen anything good out there, I was leery of trying it. That made me even happier when I did.”
Simplicity is the key
Nick says the value of A2X is in the simplicity - it transfers all the necessary Amazon transaction information without all the extra work. He also found it very organized, with easily customizable fields.
To Nick, achieving proper accrual accounting for his Amazon business had begun to seem impossible - with A2X he’d “finally figured it out.”
“It was a relief. A2X is much, much easier than the other systems we were trying to use, so I was pretty surprised! It all worked seamlessly.”
Both Nick’s accountant and bookkeeper were new to Xero and A2X, but the simplicity of the system meant that this was no barrier. Nick says he was able to coach them through the basics. After just a month, Nick was able to hand his Amazon accounting over to them entirely - freeing him up from time-wasting manual bookkeeping for the first time in months.
“After the first month of working out the details, they were able to take over and manage the data themselves. I didn’t have to touch it.”
Nick went on this sell his business successfully thanks to finding A2X and Xero.
Why accurate and verifiable books are important when selling your Amazon business:
Bill is the founder and CEO of Elements Brands. Elements Brands is a portfolio of high quality consumer products brands with a specific focus on the household goods, organics, and enthusiast markets.
Bill has this to say about A2X:
“If you’re selling your business, keeping perfect accounting records is key. As a buyer, I’m immediately comfortable when I see that a seller is using a software solution like A2X - it lets me know immediately that the numbers are accurate and verifiable”
Jeremiah Kovacs, owner and founder of MuseMinded, states:
“A2X has two main advantages for Amazon sellers looking to sell their business:
You can tidy up several months or years of Amazon payouts in a short amount of time, so if you haven’t been on top of things and you’re looking for a quick turn around, A2X will absolutely save the day.
A2X automatically reports sales according to proper accounting methods (i.e. gross sales and not net sales), which will really help set your buyer at ease, knowing they are getting transparent and properly organized financials.”
So, Amazon marketplace sellers, you may one day weigh up the prospect of selling your business. And, of course, you will want to get the best possible price. It’s never too early to ensure potential buyers see your business in the best possible light!