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How Much Is My Amazon FBA Business Worth?

We at eBrands acquire small to mid-size high performing Amazon FBA businesses. We allow you the freedom to reach your next step in life.🤩 With eBrands it’s easy to sell and exit your business.

As an Amazon FBA seller, it is important to know the value of your business so that you can make the right decisions concerning your business.

In simple terms, the value of an Amazon FBA business is measured by its profitability and growth.👌

In order to determine the worth of your Amazon FBA business, you’ll need to assess a range of metrics. An accurate assessment of all profitability ratios that apply to Amazon FBA businesses will help you determine how efficiently your business generates profit, growth and value.  

The value of your Amazon FBA business comes into play when you’re considering selling your business.💎 You don’t want to underquote your business in which you’ve heavily invested a lot of resources to build or overestimate its true worth and end up losing potential buyers. 

Calculating your Amazon FBA business’s worth depends on several variables including net profit and an average multiple that is applied to the net profit. 📈💰

A buyer will use a multiple of your annual net profit (also called EBITDA). This multiple is commonly based on the buyer’s risk tolerance and the perceived value of your Amazon FBA business. 

The multiple depends on different factors, but generally speaking, it is usually between 24x and 48x your average net profit from the last twelve months. Meaning two to four times your annual net profit. So if you make an annual net profit of, for example, $400 000, then likely your valuation would be something between $800 000 and $1,600,000.

On top of the numbers above, here are some other factors lite time required to look at when determining how much your Amazon FBA business is worth.🤔➡️

1.Sales history

An Amazon FBA business with many years of operation and stable sales history is likely to have more value as compared to one with one or two years in business.👌

Buyers prefer companies with many years in operation as they can evaluate their track record and growth trends and future project earnings. A new business is quite unpredictable because there are no metrics that will help you to determine future earnings. 😬

2.Seasonality of your products

Your niche is another key factor that will determine the value of your Amazon FBA business. Typically, some niches are more profitable than others.

For example, unseasonal and fast-moving goods are more profitable as they sell quickly, unlike seasonal goods such as snow gear, swimwear, and beach tents. The competition can be a bit tough in profitable niches, therefore selling products with a patented competitive advantage is definitely a big plus. 😌💪

3.Bulk products vs customized products

Having your own customized branded products gives you a competitive advantage against copycat sellers who source products from other marketplaces. Therefore, offering your own manufactured and branded products makes your brand more valuable in the eyes of a buyer.🤑 

4.Time and effort required to run your Brand

The time and effort required to run your brand is one factor that defines the value of it. If your brand requires a big team to run daily operations, the salaries of the team can eat a big part of the profit margin.😬Buyers will need to count this in to their calculations as they look to buy your business.

For this reason, the less effort you have to put into running your brand - the better. 💪Your Amazon brand’s value will be calculated by multiplying the profits and this means the brand’s profits in total, including the cost of working hours.

Amazon FBA is well known as a source of passive income but it is a business like any other business and you have to look after it on a daily basis. The amount of time you have to put into it depends on how you have built your brand portfolio, its sourcing process and potential category related requirements. ➡️

For example, if you are selling a product with a lot of different size variations and the relationship with your supplier is complicated - the time invested into running those product listings can be a lot bigger than selling a simple product that comes from a reliable factory. If your product catalog includes products that require a lot of attention, be prepared that buyers will take that into account.

5.Relationship with your suppliers

A secure supply chain means your business is dependable when it comes to the fulfillment of orders and delivering products in time. Therefore, the worth of your Amazon FBA business is tied to the reliability of your supply chain.🤝

Thinking about selling your Amazon FBA brand?💰 We are here to help and would love to have a chat with you!👋 😊 Contact Robin Bade at robin@e-bands.co

Thinking about selling your consumer brand?

We are here to help and would love to have a chat with you!

Robin Bade

Chief Executive Officer

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