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Ways of selling on Amazon FBA business

There are 4 ways to sell an Amazon FBA business: Marketplace, Auction, DIY and via a Broker:


Marketplace

  • Timeframe - as with any business, this can vary. However, on average it can take 6-9 months.
  • Personal involvement - as a seller, it is your job to take care of the sale from start to finish. This involves vetting buyers, getting NDA agreements signed, answering questions, negotiating between various buyers, preparing a contract for sale and facilitating the transaction through escrow.
  • Fees - listing fee, legal expenses and taxes.

Business listing marketplaces tend to be crowded spaces with thousands of listings. If your business doesn't stand out from the crowd, it might be tough to find many interested buyers (putting the bargaining power in the buyer's hands). If you are experienced at buying and selling businesses, and have the time to run a listing, it can be a viable way to sell a business without incurring the fees of a broker. However, if you are a very busy person, or inexperienced at selling businesses, this might not be the best avenue to pursue.

To list your business for sale on a marketplace, you need to provide a description of the business, and some basic financials (prospectus). A popular business marketplace is www.bizbuysell.com.

Auction

  • Timeframe - you set the amount of time that the auction lists for. 1-4 weeks is a common amount of time to find a buyer and sell the business. This time constraint can be great for creating competition between buyers. However, this often results in businesses simply not selling for the amount that you desire within the timeframe given.
  • Personal involvement - similar to a marketplace listing. You provide business information and basic financials, then handle everything from end to end.
  • Fees - listing fee, 10-15% success fee, legal expenses and taxes. You are paying a similar price to a broker, but you have to do all of the work.

Auction websites like www.flippa.com are great for selling businesses worth less than $5,000 with a quick turnaround time (flippa is also very popular for selling domain names). Buyers come to these auction marketplaces looking for a deal - expect 0.5- 1.5x earnings multiple. Often, these buyers are not seasoned business people, and it is not uncommon for it to be their first purchase, so you may need to guide them through the process. Selling via auction is a great way to gain a quick sale on a low value business, but is not necessarily ideal for medium-large FBA businesses.

DIY

  • Timeframe - depends on who you know, and how desirable your business is. Say 3-24 months.
  • Personal involvement - you do everything from start to finish, and don't have the advertising reach of a marketplace, classifieds or auction network. Being a direct transaction, this method can be the most time consuming (unless you have already been approached by someone looking to buy your business).
  • Fees - legal fees and taxes. This is by far the cheapest option to sell your business (given that you get the right price).

Generally, this method would involve researching potential buyers and cold calling on them to see if they are interested in purchasing your business. Potential buyers are often your competitors, so you do run the risk of divulging confidential information to those who value it most. If you are well established in the industry and have lots of contacts, it can often make sense to sell the business yourself. The DIY method lacks the competitive advantage of having lots of potential buyers, and tends to have a relatively low success rate. It is common for people to sell their business privately if they get approached by an interested buyer.

Broker

  • Timeframe - many successful businesses that are sold through a broker tend to take 1-2 months to sell. However, it can take longer.
  • Personal involvement - a broker does most of the work. Good brokers will help you to develop a prospectus, create marketing materials and promote it within their networks, help with due diligence, draft a sales agreement, and facilitate the financial exchange through an escrow service. This makes your job as the business owner a breeze.
  • Fees - 10-15% commission, legal expenses and taxes. Some brokers also charge retainers. Brokers can help to reduce legal expenses by providing quality templates of legal agreements - your lawyer can simply review and edit the document rather than developing one from scratch.

If your business is worth more than $25,000 and you don’t have the time, experience or patience to sell your business, then listing with a broker is most likely your best option. Brokers are experienced in selling businesses and can easily answer any questions you may have along the way. They can help to maximize the sale value, and advise on appropriate terms to protect you legally.

To work with a broker, it is important to have all the required information at hand, and be organized. Their contacts tend to be ready and able to buy when the right deal presents itself.

Compared to selling privately or via marketplace, brokers do cost more. However, good brokers know how to get top dollar for your business (selling businesses is, after all, their forte). If you pay 15% in fees, but your business sells for 25% more, then you’re still winning at the end of the day!

Not all brokers are made equal, and choosing the wrong broker can hurt your bottom line. Here is a good article about things to look out for when choosing a broker.