How to Maximize Your Amazon Business Value

If you are looking to sell your Amazon business in the next year, or you want to aggressively grow your business in 2022, watch this webinar today! We partnered with experts from Cahoot and Empire Flippers to answer questions about how to make the most of your Amazon business value this year.

Watch the webinar recording to learn:

When is the right time to sell an FBA business - before or after Q4?
How long does it take to sell?
What are the pros and cons of selling privately vs. using a broker?
How do logistics and fulfillment play into the sale of an FBA business?
How do product reviews play into the valuation of an Amazon business?

Watch the webinar today!

Webinar Recap

Whether you’re planning to sell your Amazon business or aggressively grow your brand this year, one thing you’ll need is a winning strategy. eComEngine wants to help you find it, so we partnered with industry experts Manish Chowdhary, Founder of Cahoot, and Gregory Elfrink, Director of Marketing at Empire Flippers, to bring you this must-watch webinar filled with useful tips and actionable guidance to help you maximize your Amazon business value.

When to Sell an FBA Business

A new year has begun and you might be wondering whether it’s better to sell an FBA business before or after Q4. Our experts explained that there isn’t one right answer to that question. If you’re looking to sell with the least amount of competition and the most buyers, Elfrink advises that Q4 is a great time to sell. End-of-year buyers may be trying to add to their portfolio or take advantage of tax breaks, making them highly motivated.

On the flip side, selling an Amazon business in Q1 is very common. Having a successful Q4 increases valuation because it’s based on profit. However, other important factors should be considered carefully.

According to Elfrink, “The real answer I would give is you shouldn't consider timing the market at all…I always tell people, you should time the market by looking at your personal and business goals.” He explains that many business owners are happy when they sell but are often left wondering “Well, what do I do now?” Take some time to plan your next steps before putting your business on the market.

Should You Sell Privately or Use a Broker?

What are the pros and cons of selling privately versus using a broker? While it’s absolutely possible to sell your Amazon business privately, brokers make the process much easier.

Chowdhary echoed this sentiment, explaining, “This is a very emotionally charged journey for the seller because they put their heart and soul into their business. Having a third party like Greg at Empire Flippers creates that distance.” This allows business owners to step away and continue focusing on successfully running their business until it’s sold.

How Logistics and Fulfillment Impact the Sale of Your FBA Business

Do logistics and fulfillment play a key role in your valuation and the sale of your FBA business? Absolutely. As Chowdhary succinctly explained, “The great businesses are bought, not sold.” To maximize your Amazon business value, you need to run the best version of your business at all times in order to create intense competition. Making your business attractive to buyers in this highly competitive space requires effort, but is worth it in the end.

“The way I like to think about it is that the acquirer should want to model the other businesses in their portfolio to emulate yours as opposed to the other way around, because what is a buyer looking for? A buyer is looking for an undervalued asset,” says Chowdhary. You don’t want your business to look like a fixer-upper, you want it to be the showhome.

Amazon Reviews and the Valuation of Your Business

Do product reviews play into the valuation of an Amazon business? Absolutely! Product reviews say a lot about the products you sell and how you treat your customers. Your brand’s reputation could make or break the sale of your Amazon business, as buyers will be less interested in a brand that customers don’t like or trust.

“Reviews are extremely important as a buyer because this is direct feedback from your consumer,” said Elfrink. “Reviews are critical to your success both as an Amazon seller, even if you're not going to sell the business, as well as actually selling the business.”

As Colleen Quattlebaum, eComEngine’s Director of Marketing, advised, “If you're preparing your business to sell, make sure you're asking for reviews on every order, that you're monitoring reviews, and that you're following policy and doing it the right way. No black hat tactics because it's not going to get you anywhere.”

Maximize Your Amazon Business Value

We’ve recapped some of the highlights, but there’s so much more in the webinar. Not only will you get more in-depth guidance on the topics we’ve just covered, but you’ll also hear Elfrink and Chowdhary answer questions from Amazon business owners on a wide range of topics including:

What is a reasonable multiple range to expect on EBITDA?
If using a broker, what is a reasonable fee to pay for the broker on the sale?
What are buyers looking for after the sale in terms of operations?
Much, much more!

This webinar is a must-see for anyone looking to grow or sell their Amazon business this year. Be ready to take notes!

Recommended Resources From This Webinar

Blog post: Top Amazon Aggregators in 2022
Guide: Getting Amazon Reviews

Colleen: Thanks, everybody, for joining us today for our webinar on how to maximize your Amazon business value. My name is Colleen Quattlebaum. So hello, good to meet everybody. I'm the director of marketing at eComEngine. I've been here for about seven years. We have an awesome team here. We have several tools to support Amazon sellers, one of which is FeedbackFive, which is a feedback and review management tool. We also have RestockPro, which is an FBA inventory management tool, and a couple of other tools as well.

Colleen: But I work closely with Becky, who you just heard behind the scenes, on providing content and just helpful value to the Amazon sellers in our community. I'm excited today to bring you some helpful information from Manish and Greg, two of our partners and good friends here in the industry. They are Amazon experts and have a lot of knowledge to share. Just a little bit of background on each of them. Manish is the founder and CEO at Cahoot. That is the world's first peer-to-peer fulfillment network for retailers.

Colleen: Their company was recently named to Fast Company's World's Most Innovative Companies list. That's a huge honor and it's definitely a very innovative solution that they offer. He can definitely tell you more about that later. But Manish's specialties include everything from e-commerce strategy, business methods, innovation, as well as omnichannel supply chain and logistics optimization. So he's going to provide a lot of information on the fulfillment and logistics and how that helps you to maximize your business value today.

Colleen: Greg Elfrink from Empire Flippers. His company is the number one curated marketplace for buying and selling online businesses. They have many different business models, including working with eCommerce businesses, SaaS, content sites. But what's most important to you is they're also experts in helping FBA companies sell. As director of marketing, Greg keeps his finger on the pulse of the whole Amazon industry and really all of e-commerce and he regularly speaks at conferences all around the world. So you may have seen him on some landing pages for conferences or maybe even in person.

Colleen: A few things that we're going to discuss today. Again, the topic is about how to maximize your business value, but whether you're looking to sell this year or in the future or not, you're still going to walk away with some good tips to help you to become a better business. We'll discuss how to make the most of your Amazon business value, when the right time is to sell an FBA business, how long it takes to sell, some of the pros and cons of selling privately versus using a broker, and how logistics and fulfillment play into the sale of an FBA business.

Colleen: We'll also touch on how product reviews can impact your business valuation. During this entire webinar, feel free to put any questions in the chat because we're all resources here to help answer your questions. Obviously, we want to address these things, but even more importantly, we want to answer your specific questions. So we'll definitely keep an eye on the Q&A section of Zoom. We'll take a look at that periodically throughout the webinars so we can answer your questions.

Colleen: All right. I'm going to go and stop sharing my screen. Instead of just giving a presentation, we are going to just stay on video and you'll get to see all of us today having a conversation. To get started, I'll turn to you, Greg. Let's just get started with the basics. What should sellers be thinking about if they want to prepare their business to sell either this year or in the near future?

Gregory: Yeah. When it comes to prepping for sell, there's a few things to consider. I think number one, the most important thing for any FBA seller and e-commerce in general is to get actual professional to do your book, so to create your profit and loss statements. If someone wanted to sell with us, for instance, we would create that P&L for them on their behalf. But you want to go privately or whatever, I highly, highly recommend getting an accountant that's actually used to eCommerce or a bookkeeper that's used to Amazon FBA, someone who's a professional, because one thing we see is this is the place where most people make the error.

Gregory: This could be a really big error, and sometimes when we make the P&Ls, people realize they're making less money than they thought. One other thing on that is when you do this, have that bookkeeper do everything in accrual. That could literally be the difference between hundreds of thousands of dollars when you go sell. Those are just the two quick things to consider.

Colleen: Okay, great. Then Manish, just to kick things off with you and your expertise, how do logistics and fulfillment play into the sale of an FBA business?

Manish: Well, thank you, Colleen. Thanks to all the audience for joining. Logistics and fulfillment, I mean, I think the great businesses are bought, not sold. So think about your business, running the best version of your business at any time, and you want to create intense competition. I'm sure Greg will touch on that because when you run a great business, there will be a lot of buyers interested in buying your business.

Manish: The way I like to think about it is that the acquirer should like to want to model their other business in their portfolio to emulate yours as opposed to the other way around, because what is a buyer looking for? A buyer is looking for an undervalued asset. Meaning if they buy something for X, they want to make 2X over that. Thinking about logistics and fulfillment in general, it falls in the larger category of operations. The value of any business is determined primarily by a couple of key performance indicators, or KPIs.

Manish: It's either a function of your multiple of your revenue, which is your top line sales, or it's a function, it's a percent, it's a multiple of your EBITDA, which is your profit, your income before tax, depreciation, and amortization. I'm sure Greg is... If you want to jump in that, Greg, to help me out. Logistics and fulfillment is a huge cost element in one's balance sheet and day-to-day business. By managing your key KPIs and taking or keeping a close eye on logistics and fulfillment all the way from sourcing your inventory...

Manish: If you're sourcing it from offshore, you need to think about what is it going to cost to bring it to the United States or whichever country you're selling and then what is it going to cost to transport them? Then finally, how are you going to it into the hands of the consumer? And looking at holistically what your cost is going to look like and that will determine your profitability. So the high-level logistics and fulfillment today can make or break your business and your competitive advantage.

Gregory: For sure. Just to add onto that, so we just recently had a... Unfortunately, I haven't had the time to super deep dive into it. But we have a business that we just listed for $30 million. It's an Amazon FBA business. Its primary focus of how it runs his business, just to emphasize what Manish is saying on how important logistics is, it's not marketing that made that a $30 million business, as much as breaks my heart as a marketer myself.

Gregory: It was really their ingenious way that they did their logistics, inventory ordering, and when they order it, and how it gets to the warehouses that made that business so powerful and was able to reach its scale that it did. So logistics, as far as valuations go, especially in commerce, ridiculously important, especially in trying times like this when supply chains aren't exactly an easy thing to manage at the moment.

Colleen: Yeah. Yeah. Well, so more specifically, what exactly are buyers looking for when it comes to fulfillment strategy, so when they're evaluating a business? Manish or Greg, what do you see that they're looking for specifically?

Gregory: Yeah. When it comes to buying a business, a buyer's looking at things holistically. Logistics is one aspect of it. Obviously, it can be a very important aspect. And sometimes, it's okay actually if the seller's doing it wrong because that actually might be an opportunity for the buyer, because some buyers love to see that you're doing things wrong, because if they improve it, they're going to get such a better thing, a better business.

Gregory: Let's say, for example, you have an eCommerce business, Amazon FBA business, and you are putting your inventory 100% in Amazon's warehouses rather than subsidizing that with a 3PL. Right there, that's cost savings for the buyer when they switch it over to a different kind of inventory, or hold their inventory that's not live on the marketplace. That's something they would be looking at. They would be looking at how does your supply chain look like? Do you have redundancy in there? Are your hands strung to one factory, one producer, or one freight company? All that kind of stuff.

Gregory: So they would, especially now, like to have redundancy. One thing we've seen is even sellers prepping to sell, sometimes they will get backup manufacturers, say from different countries. They might have their main one say in China, another one in Vietnam, or even Mexico, has started becoming a place where some sellers are sourcing products as a backup redundancy to their own supply chain. Buyers like that. They like to see that, because if one thing goes wrong, the business isn't tanking, there's other solutions there to help them.

Manish: Sure. I mean, I'm sure all the buyers are looking very intently at the account health, the Amazon account health. I know Colleen you'll touch on that from a reviews perspective. But supply chain and logistics, managing that for your Amazon account is a very, very important topic because of IPI, which stands for Inventory Performance Index, what is your restock limit? I mean, there are buyers, I'm sure, would buy your account just because it has outstanding health.

Manish: Or your sale can fall apart if everything looks great but you screwed up your metrics and now your account is not as valuable as it once was. So I think staying on top of those, how do you have a great IPI score and how do you have great restock limits, talking about sourcing, redundancy in your suppliers, do you have any trade secrets? Are you simply a retailer that's buying and doing arbitrage where there's a lot of competition and your success has primarily resided because of your ability to source?

Manish: If there's nothing proprietary or nothing special about it, that would present as a risk or it'll certainly undermine or undervalue your business compared to if you have special products that you're designing and you've got a lot of redundancy and where you can manufacture it, how can you bring into the country? Even going back into carrier contracts if you're shipping from your own warehouse, does your UPS rates or FedEx rates are outstanding versus they're not so good? So, I mean, I can keep going, but I know, Colleen, you want to probably address this from reviews and marketing perspective.

Colleen: Yeah. And Inventory Performance Index, as you mentioned, Becky just shared a link in there. Probably most of you on this call are familiar with it. But if you don't have a good IPI score, you're subjected to overage fees obviously, which tap into your bottom line, and the restock limits, limitations of how much you can send into FBA, reduces how much you can sell. All of those factors go in. And IPI threshold was just changed in the last few weeks to 400.

Colleen: Make sure that you're keeping an eye on that on a regular basis because it's not a metric that can be changed overnight. It takes time. Just keep a close eye on it for sure. Then as you mentioned, account health. Obviously, yeah, reviews play a big part of that as well. I mean, they provide a lot of social proof. They show whether your products are on an upward trend or a downward trend, which I'm sure businesses who are looking to buy a company or a brand would be looking closely at that sort of thing.

Colleen: In addition to reviews, then feedback as well talks about you as the seller. Are you offering good customer service? Do you have a good reputation? Are there any issues with you as an Amazon seller? But Greg, what do you see when it comes to product reviews? What do you see? How does that play into the business valuation?

Gregory: Yeah. Obviously, reviews are a pretty critical point for Amazon FBA business. When you're valuing a business, there's this concept of goodwill. Usually, when a broker is talking about goodwill, they're talking about brand basically, how good is your brand? This is a very nebulous thing actually to quantify in almost every business model except for Amazon FBA, because the reviews are so transparent. As a buyer, I always recommend people to go through those reviews, barring fake reviews and stuff.

Gregory: Obviously, if people come with us, we make sure that's not happening because that's a huge red flag. But for legitimate reviews, I always suggest to buyers, yes, look at the five star reviews, look at the one star reviews, but discount those because those are your super fans and your super haters. Well, super fans are awesome, but neither of them are adding super value to the buyer. Usually, it's the reviews between two stars and four stars where you're going to get people who have critical, negative feedback and critical, positive feedback that can really give you a sense of the brand.

Gregory: Now, if everyone is five-star reviews and they are legitimate, maybe you have a unicorn on your hands here where people are just so thrilled. But yeah, reviews are extremely important as a buyer, because this is direct feedback from your consumer, and in an ecosystem like Amazon, that can be quite difficult for the entrepreneur to reach out to their own customers because Amazon's always been a little bit leery with that. Reviews are critical to your success both as an Amazon seller, even if you're not going to sell the business, as well as actually selling the business.

Gregory: Yeah, and to your point, that seller feedback as well on customer service, I can give some really good ideas for the buyer on how they can improve the experience potentially. So very, very critical.

Colleen: Yeah. So if you're preparing your business to sell, make sure you're asking for reviews on every order, that you're monitoring reviews, and that you're following policy and doing it the right way. No black hat tactics because it's not going to get you anywhere.

Gregory: For sure. Don't do the black hat stuff. It is a shortcut that leads to a very long cut because you're going to go in reverse very quickly.

Manish: Speaking of reviews, there is just a wealth of knowledge and wealth of information in those reviews. We had a client that was selling cookies and they placed their inventory in Amazon. They had these fine Italian cookies that were expensive, but FBA was shipping them in poly bags, so the reviews were, "The crumbs taste awesome. I wish we got the full cookie."

Gregory: Oh, no!

Manish: So you have to take that into account, that logistics and fulfillment play a role. While you could maximize your profitability by going on a certain channel, it is having a negative impact on your consumer sentiment and your business, goodwill, so to speak. So, correcting those from a logistic standpoint. Second thing, you could have the fantastic product, but if it arrives one week late or after a major event as a birthday, you're not going to get a great review. I mean, you are automatically down a notch. So logistics and fulfillment and reviews are very closely tied because it's just a measure of customers' happiness with your entire product and service.

Gregory: So true. That cookie thing is funny. I feel terrible for that seller. What a way to find out!

Colleen: Well, I guess with fulfillment logistics, so you mentioned the cookie situation, what are some watchouts or risks, things that people should watch out for when it comes to logistics and fulfillment, Manish? Is there anything that they should steer away from if they're looking to sell a business, things that could go wrong?

Manish: Sure. I mean, Amazon is highly driven by sales rank as we know. There are hundreds of millions of products on Amazon and sellers work so hard to get a high sales rank. Once you get that high sales rank and if you got a stock that's literally sucking all the wind out of your sale and it just basically it has this very chain reaction, your best seller goes out of stock, then your sales rank takes a tank, sales rank goes down, your sell-through rate goes down, and because your sell-through rate goes down, your IPI score goes down.

Manish: And if your IPI score goes down, Amazon readjusts your storage limits, which puts it down. Now you can't send inventory back into Amazon FBA. So, certainly be very mindful of not running out of stock. Given what Amazon has been doing with FBA, the rules are constantly changing. Over the holidays, Amazon wanted the IPI score to be 450. Early January, they dropped it to 400. Honestly, we don't know what it's going to be tomorrow. And it is never always in the benefit of the seller.

Manish: It is what benefits Amazon the most, they do, and they really don't give you much notice. So as a seller, you always want to have a backup strategy. Never put all your eggs in one basket. FBA fees have gone up dramatically just earlier this month. And that is causing a lot of ripple effect. I mean, people who may have been previously blindly assuming the FBA is the best way to go or is the cheapest way to go, I think they need to reevaluate that, especially if you're selling larger, bulky items.

Manish: I mean, just imagine. If you can make $2 more per unit on any item, that's going to have a massive impact on your bottom line, on your profitability. But also, it sends a signal to the buyer that you are a sophisticated operator, that they want you to stick around even after the sale because there's value. I'm sure Greg is going to talk about the soft elements of the sale, right? It's not just the metrics, the top line, and the bottom line, the expertise that you bring as an operator to the business is very valuable.

Manish: I think these are some things that sellers must be aware of. Have a backup fulfillment strategy. The other thing we see quite often is, when you want to offer a backup fulfillment, there are two kinds of providers out there, one that specializes in sending inventory to FBA. They are the FBA forwarding companies that generally operate as dark stores, they are lower cost by design. Then there are ones that help you fulfill the FBM orders, so the direct-to-consumer orders.

Manish: And sellers are often splitting their inventory. They're storing the inventory in multiple providers. That certainly reduces or increases your total cost of operations, because the minute you start splitting inventory, you're not able to take advantage of consolidation. So look for a provider. I know for Cahoot, we work with strategic sellers who want to consolidate all their operations so that we can reduce their overall cost. So, these are some factors. I mean, I can touch on more, but I think this is a very, very important time, especially with the changing FBA environment.

Gregory: Yeah. It's funny, with all the changes that are happening with Amazon right now, there's probably some people in the audience are extremely frustrated. I have a lot of friends who are FBA sellers who are also frustrated. We've actually seen an influx of people selling their businesses, because they're just like, "I'm done with this. This is so infuriating. All the changes are happening so rapidly, often without much warning at all."

Gregory: I would just add to the point. When you're selling a business, if you have a stockout, it's not the end of the world. It could feel like that. From a buyer perspective, that could be seen as an opportunity for them, that you aren't super good at forecasting of what you need, and that could be something you can get back at as long as you're not losing your PSR because that's extremely important, your account health, everything that we just talked about.

Gregory: But if a buyer looks at a relatively healthy account that is having some of these issues, well, they could buy that business, hook up with Manish over at Cahoot, plug that in, and suddenly they are going to be much more successful. To Manish's point, I think it was in 2020 when the pandemics on the supply chain was really, really high pressure. I mean, it still is high pressure, but when it was brand new. We actually saw sellers switching from FBA model to a FBM model. And there was all sorts of new services that they were gunning for Amazon's business basically, to become the new two-day shipper, to use them instead of Amazon. And that led to some pretty interesting innovations there.

Colleen: Yeah. And Seller Fulfilled Prime too. What's your thought about that?

Gregory: I am sorry. Seller time what?

Colleen: Seller Fulfilled Prime.

Gregory: I'm actually not super familiar with Seller Fulfilled Prime. But yeah, Manish, you can talk about it more than me.

Manish: Yeah. Yeah. I mean, if your account has Seller Fulfilled Prime approved, I mean, you already have a bright star right on your account. I mean, those accounts are so few and far between now. Many of them who had Seller Fulfilled Prime have been permanently suspended and Amazon is of course not awarding anymore. But the beauty of Seller Fulfilled Prime is you can break free for all of FBA shackles, meaning you don't have any inventory limits. Of course, managing and maintaining SFP account in good standing is a very, very tall order. It's a very tall task.

Manish: So if your account has Seller Fulfilled Prime and your products lend themselves for FBM fulfillment, come talk to us. We can certainly help you with some analysis and that will certainly free you up from worrying about any kind of inventory limits because you still get the Prime badge. You still are able to target and sell to the Prime customer, but you will fulfill the orders from your warehouse or a network of 3PL locations and not be worried about restock, receiving delays.

Manish: That's another big thing at Amazon, that it's taking significantly longer to get inventory into Amazon warehouses. And of course, we all know about the pain of removing inventory. So the Seller Fulfilled Prime is a great option. You can turbo charge your FBM with Seller Fulfilled Prime. Cahoot is one of the few, very few, networks of its size that actually does Seller Fulfilled Prime.

Colleen: Okay. That sounds like SFP is a unicorn. If you're not SFP now, then yeah, just move on, find other ways to upgrade and improve your profitability and such. Well, Greg, we've talked a lot about fulfillment and logistics. Let's talk a little bit about competition. How does that play into the valuation of a business?

Gregory: Sure. Competition is always something you want to take into account as a buyer. Especially with the seller, it's a little bit less of a concern because like, "I'm about to not be competition. I'm selling the business." But you standing out from a crowded space is important. This goes back a bit on the reviews. If I'm selling a spatula and there's 300 other sellers selling a spatula, what makes mine so much better? What is my competitive advantage? When it comes to valuing a business, we often call this a moat. How deep is your moat?

Gregory: Pretend you have a castle and it's surrounded by a lake to keep the enemies out. If your moat is deep and wide, that means it's very difficult for someone to come up and compete against you. Having a high BSR, really high quality reviews, hundreds and hundreds of high quality reviews, all these accessory products that people are buying, having really good external traffic sources with cheap cost to get people there to Amazon's page and convert because external traffic can be really important for organic Amazon marketing.

Gregory: All of these are factors that people will look at, and looking at your logistics also. A buyer is probably looking at some of your competitors when they are in that mode to buy, or at least they're trying to to get a general sense. So, seeing all the things that you are doing as your unique selling proposition, it's like this holistic picture. Well, how deep is your moat? A good way to look at a valuation is, the less risky your business is as an investment, the better valuation you're going to get as a seller.

Gregory: You're going to be able to command a higher price because the volatility on the asset is lower in the eyes of most buyers. That's a good way to look at valuation, so just how deep is your moat? Ask yourself that in traffic, in revenue, in the logistics. Do you have product diversity, traffic diversity? All these kind of things lend yourself to being a competitor that would be very difficult to compete against. And that's a very valuable business to own in general.

Colleen: Great. I love that analogy. Yeah, that'll stick with us-

Gregory: Well, I have to explain-

Colleen: ...visually like that.

Gregory: I sometimes use it and I don't explain. What is he talking about? Castles. What?

Colleen: All right. What is it today? January 20th, 2022. I'm just thinking, fourth quarter just ended, we're at the beginning of a new year. People had a lot of holiday sales hopefully, their numbers were strong in Q4. Is now a good time to sell or is there a different time of year that's a good time to sell, maybe going into fourth quarter or after fourth quarter? What do you recommend, as far as timing, the most optimal time?

Gregory: Sure. There's two and a half answers I'll give here. If you want to sell with the least amount of competition and the most amount of buyers, Q4 is the best time to sell because this is when buyers they're buying businesses and are addings to their portfolio. Sometimes there's tax writeoffs depending on how they're structured as well. So they are often looking for those purchases to buy at the end of the year. Now, most sellers are actually selling in Q1. That's the second half of the first point.

Gregory: They sell in Q1 because at the holiday season, right? So their EBITDA can go dramatically up because now they have another 12 months, but also they just got through what is typically the high season for most e-commerce businesses, which can drastically increase their revenue, which increases their valuation at the end of the day because it's based off profit. Those are two things to consider. The real answer I would give is you shouldn't consider timing the market at all. I've had a lot of friends who have lost a lot of money trying to do this.

Gregory: People ask me all the time when to do this. I have a friend, he lost $200,000 in his valuation because he wanted to wait six months to get a 10% higher valuation. Then algorithm change happened and crushed him. So he lost that opportunity. He sold the business for half of what he was going to be able to sell it instead of that extra 10%. So I always tell people, you should time the market by looking at your personal and business goals. It sounds a bit woo-woo to some people, but this is extremely important in my view.

Gregory: When an entrepreneur sells their business, often they have so much emotional equity inside of that business. They identify with it, they poured all their blood, sweat, and tears into the business building it all those long, stressful nights. So when they go to actually sell the business, there's a weird thing that happens where they're happy for about five minutes, "Oh, I just got all this money," and then they're like, "Well, what do I do now?"

Gregory: Then they become restless and a little bit depressed, almost like this weird postpartum syndrome with their business. So I always tell people to consider your personal and business goals. If you sell your business now, would you get significantly closer to your ultimate personal and business goals. Personal goals shouldn't be tied to anything about making money. It should just be about lifestyle. Business could be tied to obviously business, but also your own financial freedom number, right? Are you getting significantly closer to that?

Gregory: If the answer is yes, then you are getting close to the right time to sell in my view. I wouldn't wait on this Q4 or Q1 stuff. What's that phrase? It's basically trying to save pennies while you lose dollars usually. It's putting you in a bad way because the internet is so volatile. You should sell when it gets you close to your goal, or ideally even achieve your goal.

Colleen: Yeah. I love that advice. Obviously, you want to maximize your valuation and get the most money, but the money isn't going to bring you happiness. You got to figure out what your personal goals are too. All right. Then since we're talking about timing, how long does it take to sell? What can one expect if they decided to sell now? Is it a six-month process? Does it depend?

Gregory: Oh, it always depends. Every business is very unique. But I will say, on average, once you get listed on our marketplace for instance, I believe the average days to sell is still about 24. 24 days, I think, it is. It's right around 24 to 26 days. We have a two-month exclusivity. Most other brokers, they do six-month exclusivity. We do two months because we sell the vast majority of the businesses in the first month. That includes seven-figure businesses. One of my friends, he listed a business for $1 million, just right above $1 million, and we sold that within 24 hours, all cash, which I won't say is normal.

Gregory: That was a very high quality business, so don't come on Empire Flippers that you're going to sell $1 million in 24 hours obviously. But yeah, if you have a high quality business that is run well, even if there are some flaws, maybe it's not perfect, and that's okay, you're looking at less than a month once you actually go to sell. Now, I'll caveat that with, if you go with us especially, it's going to take a little bit longer than a month technically, because you have to go through our vetting process.

Gregory: And that's one of the things why buyers love us, because we have a very intense vetting process and we reject 96... Yeah, 94% of businesses we reject. So if you get listed, you're in the top 6%, which is nice. But that process can take anywhere between a week to even upwards to a month depending on the complexity and the size of your business. But once you're live, usually you're sold within a month, or pretty close to it.

Colleen: And those that are rejected by Empire Flippers, do you give them advice and explain why so that maybe they can improve their business model and then come back?

Gregory: For sure. Yeah. Yeah. We have an entire team dedicated to exit planning. They do exit planning calls like every single day of the week. That could be as simple as a 30-minute call or it could be as complex as a six-month game plan where they're checking in once a month, like, "Are we hitting the numbers?" So most businesses we reject when it comes to FBA, it's nothing nefarious or nothing that's completely awful with the business.

Gregory: Usually, it hints back to the advice I gave at the beginning of this webinar, is mostly e-commerce entrepreneurs are very good at the creative, the marketing, maybe even the logistics, they're not always the best when it comes to their own P&L though. So, some of these FBA entrepreneurs, they realize, "Oh, I'm not making nearly as much money as I thought I was or this valuation is out of touch with what I thought I was going to get." That's when we often will create that exit plan, like, "Okay, well let's talk about what you really want and let's see how we can get there together."

Gregory: We'll even sometimes tell people, "Look, we don't think you should sell because we're seeing this trend in the P&L. You should come back to us in six months. You're going to get a way better valuation once you're at 12 month-average that reflects all this new growth that you have. Sometimes we tell sellers, "Don't sell with us yet. Hold on, we can get you way more money." But it's always up to the seller of course. Sometimes they'll go through with it anyway, because they're getting closer to personal and business goals. Yeah.

Colleen: We have a couple questions from the audience, so I want to go ahead and address these.

Gregory: Sure.

Colleen: Other folks that are attending, feel free to put some questions in the Q&A or the chat. The first one is, what is a reasonable, multiple range to expect on EBITDA?

Gregory: Sure. I got to caveat this because this might sound outrageous if I don't explain this. At Empire Flippers, we didn't grow up at a typical M&A. We grew up not really understanding the typical, corporate suit of the M&A world. So when you hear our EBITDA, we use a monthly EBITDA, not a annual EBITDA. And that's a legacy thing because we used to sell businesses that were only five months old back in like 2012, like way back in the day.

Gregory: I say that because the average EBITDA for say our average multiple for Amazon FBA business is sitting right around 45X right now. So if I didn't describe that, whoa, 45 times the annual earnings? No, no, no, no. 45 times the monthly earnings. You divide that by 12 and get the normal EBITDA. That's what I always have to explain. It's funny, when I see it out in the wild, someone says, "Oh, I sold my business for 50X." Oh, that's an Empire Flippers person.

Colleen: Still in good numbers.

Manish: One important thing, I think, you mentioned, timing. Interest rates play a huge role. It's no different than selling your house. Your house is probably worth a lot more. A large portion of that is because of the prevailing low interest rate, so buyers are going to pay more. So 2022 is probably a great year because interest rates are only going to go up from here, it's not going to go down. So I think one has to be mindful of that. So if you're planning on selling, now is the time to add more gas to the fire, get ready, be prepped.

Manish: That's one. Number two, the market conditions, which is we are still continuing to see massive growth in e-commerce, which of course create greater interest and exuberance into the kinds of businesses a buyer would want to acquire. So again, taking advantage of the, for lack of better word, COVID situation. I think that the online businesses are a lot more desirable than businesses like restaurants and hospitality and there is large a number of people interested. So I think this is a great time to take advantage. These conditions may not be available to you next year, so something to be very mindful of.

Gregory: I agree. To talk about that a bit, so we've seen multiples grow dramatically over the last two years. Especially the latter half of 2020 is really when just everything spiked as far as assets go. That combined with all the buying pressure has driven the multiples up. So there's this interesting confluence of events that are happening with the pandemic, especially for the FBA space, as far as the M&A side of FBA goes. So you have the aggregators, the rise of them, who are raising hundreds of millions of dollars.

Gregory: Pretty much all of them shop with us. I often joke that they're the children of Empire Flippers because the very first ones got their start more or less buying those businesses from us, because we were the very first person to sell FBA. So you have them, and they create all this hype that is like, wow, this is super interesting, and that creates more aggregators. But then that trickles down to these ultra-high-net-worth individuals who want to get involved in the game as well. Then you have these commercial real estate investors, who during COVID... Commercial real estate doesn't look that great.

Gregory: Strip malls are going the way of the dinosaur, right? They're not giving yield. Even apartment complexes are not as guaranteed as it used to be. So I know ultra-high-net-worth individuals and commercial real estate investors sold all of that stuff off or a big portion of their portfolio and they've come to us now and they're starting to buy businesses. That again is adding this competition. Now, that creates more and more press, news, all this stuff, and that comes down to the main street investor too, which I think this industry offers a really golden ticket for our main street investors willing to work hard, but they're also getting in on it.

Gregory: So from a seller perspective, all of these things are happening is absolutely amazing for you. I've been with Empire Flippers for almost six years, April will be six years, and I've never seen a better time to sell. This is the absolute best. From a buyer perspective, it is nice because there's so many businesses to sell. I've never seen so many businesses that they can choose from. But yeah, right now, if you're at a valuation that would get you closer to those personal and business goals, you couldn't ask for a better time to sell.

Gregory: Of course, I would give the advice... Whether you use a broker or not, brokers make this infinitely easier in my view, but you can do it without a broker, is make all these new buyers, all these buyers that are filling up the marketplace, compete, and you're going to walk away with some truly life-changing income. Life-changing exit rather.

Colleen: Great. And another question on that topic, when you're talking about brokers, we have a question. "If using a broker, what is a reasonable fee to pay for the broker on the sale?" Then maybe you can just talk about the pros and cons of selling privately versus using a broker.

Gregory: Yeah, sure, sure. It's harder for me to rattle off what our commission would be now because we used to it on a tier system, but now it's a blended commission rate. But if you want to go to just empireflippers.com/calc or /fees, you'll be able to type in what your valuation is and see it. But basically, anything underneath $1 million typically is right in that 15% range and it'll start going down from there. That's more fair than the way we used to have it, where you're a 970K business, you still get charged 15% because you're less than a million.

Gregory: That is a little bit fair for sellers on that front. But to answer your next question, I'm glad you asked this because this is a common myth. I call it the off-market fallacy where a... And this sounds like I'm being really promotional. I'm not. I have so many friends who have had this happen, who they didn't want to pay the broker commission. On the surface, it makes a ton of sense. Why would I go do that when the market is so hot? I can go find my own buyers. I can send an email. That's often the kind of feedback we get. Why would I pay that broker?

Gregory: Well, the thing is, the broker is like the super powerful ally of yours. It's similar if you have an Amazon ad agency that's killing it for you. These people are on the cutting edge of Amazon ads. Just like a broker, if they're good, it's on the cutting edge of the M&A thing. As a seller, selling your business is a highlight event. You do not do this every day. In fact, even a prolific seller would be hard pressed to sell more than a couple businesses every couple of years because it takes time to build this up.

Gregory: So you are already, if you go sell privately, at this massive disadvantage, especially if you're above seven figures in your valuation or eight figures, because the buyer buying from you, they aren't new. This is not a highlight event for them. They're buying businesses all the time, they know how it works. They would love to tell you, "Oh, absolutely. You should not pay that broker a commission." They want you to buy into the off-market fallacy because that means they're going get a better deal.

Gregory: And a better deal for them means a worse deal for you because they know the moment you go to the broker, the brokers knows what you're actually worth. And most of the entrepreneurs don't know what they're actually worth, because again, why would they? They don't do valuations every day, right? That's going to be furthest for their mind until the moment that they decide to go sell. The other thing that the buyers know is if you went with a broker, then all the floodgates of competition open up. That's really bad for the buyer, which is really good for the seller. So they don't like that.

Gregory: So what the buyer would do will do is, "Yes, of course let's avoid that commission. By the way, here's $1 million. If you accept my offer, you have three days to say yes." They will put that pressure on you, that scarcity as a marketing trick, that scarcity of the deal, that urgency, like, "Oh my God! I only have one deal." So scarcity, and urgency, "I only have three days." Marketers use this stuff all the time. I'm sure there's so many sellers who have used this for their own products, scarcity and urgency. It's great motivator.

Gregory: So you'll get these sellers like, "Wow! I could become a millionaire. Screw the commission." We had a deal recently where a person got a private offer, $1.4 million. Same thing, three days. He came to us because he knew about us, he heard me on a podcast or something, reached out to our sales team, and like, "Oh, no. We can get you way more money than this." We sold that exact same business a few weeks later for 2.1 million with 1.8 million upfront. Just the upfront amount is bigger than the entire offer the aggregator offered this person. That's the power of a broker.

Gregory: They know what you're worth, they have the buyer network, and they're not going to let you sell at a discount. They're going to let you sell what you're really worth and they open up the floodgates for all that competition to really start competing. The beautiful thing with the aggregators is they are hyper-competitive. We've had aggregators that said, "Hey, let me know if aggregator A makes an offer, because if they do, I will beat it." And that's their first due diligence check. Like, "Good enough for them. Good enough for me. I'll beat it."

Gregory: Because they just raise all this money and they have a mandate to buy businesses. That's part of their investment mandate and their thesis. These are some things to consider. The off-market fallacy I think is a real awful one because it plays so far into the hands of the buyers. It's a very easy thing for a seller to believe in as well, like, "Of course, I don't want to pay a commission." But just look at that seller, 2.1 million. You paid more commission than if we sold at 1.4, but he also walked away with a lot more money. So who won?

Colleen: Yeah. That's a great story. Excellent. So when buyers are buying, what are they looking for after the sale in terms of operations? Maybe it's different for aggregators versus non-aggregators, but what can a seller expect post-sale? Are they still involved consulting? What do you see?

Gregory: It is a little bit different as a non-aggregator and it does depend on the size of the business. If you're a very small FBA business, say a valuation of 150, $250,000, you probably won't be dealing with an aggregator all because usually they're looking at seven figures and up. And that would be a very diverse set of buyers, what they might want. For an aggregator though, for seven figure valuations and up, which is usually an aggregator purchase, not always, but usually, it could depend on what the deals of the term are.

Gregory: Most aggregators, the way they do it is they'll buy the business outright. Usually, there's going to be a stabilization payment and then an earn out based on some terms. But you don't really have to do anything. They take over everything, they integrate the business into their own processes. So aggregators spend a lot of money on R&D, processes, scaling those processes, creating their own internal tools, all that kind of stuff. So they would be slowly integrating that brand into that machine that they have built with their secret sauce as they often call it.

Gregory: Now, some aggregators, what they'll do, if they see... For example, let's say you're a seller who's extremely passionate about your brand, about the products that you're selling. You see so much potential, but you're not an aggregator, you're not someone who's raised $1 billion from all these venture capital firms and private equity firms, you're not one of them, you don't have that kind of cash. In this kind of case, there are certain types of aggregators who say, "Hey, look, okay, I will buy you out, the majority of your business, but you'll own a piece of the business.

Gregory: You become my main operator. We'll show you what's underneath our engine. You run it, we'll help you with support, all that kind of stuff." That can happen too. It's more rare to have the seller on as a pure consultant basis, unless it is something like that. But that can happen too. Usually though is outright buy where they'll start integrating it into their own machine. Sometimes, some seller retain equity.

Colleen: Interesting. Go ahead, Manish.

Manish: Speaking from logistics and fulfillment, one thing that a lot of folks don't realize is that many times when they're evaluating fulfillment partners, can I do it myself? Let's go and buy a warehouse. Let's go rent, lease a warehouse. Once acquirer, the buyer, buys it, they may not be interested in running your warehouse. So now, they're not going to buy that piece and now you're going to be left stuck with that lease because they will negotiate those terms. So I feel that in this age that we live in, outsourcing fulfillment makes a lot of sense.

Manish: It gives you flexibility because don't assume that the buyer is going to buy all your buildings, your equipment, your even potentially stranded inventory at Amazon that's not selling. So running an awesome business and thinking ahead is very, very important. From a fulfillment, that's one of the biggest items on your balance sheet if you have a building or if you have these large scale machinery. So you got to plan it in advance, and if you're thinking about selling two years from now, what choices you make today will play a role in what the final outcome will be. That's something to think about.

Gregory: Yeah. That is such an important point actually. This doesn't happen super commonly, but it has happened in the past where someone does own their own warehouse thinking, "Hey, I'm going take a over the whole vertical ecosystem." And it makes sense on paper, but when you're a smaller business, in this case, seven figures would still be a ridiculously small business to own your own warehouse and land and all that kind of stuff when there's so much easier service like yours to use, versus why would you go through this headache?

Gregory: And there's this thing, if you do this, you can actually break your own leg, so to speak, when it comes to selling your business because you're narrowing the pool of buyers. If I'm an ultra-high-net-worth individual, and say not an aggregator with access to hundreds of millions of dollars, honestly like, "Oh my God! To buy this business, I have to buy your land and your real estate you're and own this warehouse with these employees. Why don't I just outsource that with a 3PL. I don't want that." And you're going to be like, "Well, I don't want to own this land if I don't own the business."

Gregory: So now you're at this impasse. You are narrowing your buyer pool by doing that. There are certain cases where that can make sense. Say you're a multiple eight-figure business reaching towards a high eight-figure level, it could make sense to do that. But even at that level, there are services that you can use where you don't have to get involved with that at all. Even the aggregators often don't get involved. Most aggregators I know that are with hundreds of millions of dollars, they do not own in their own warehouse. They use various 3PL services and other outsource services.

Colleen: Well, I'm just going to quickly go ahead and share my screen here one last time because we're getting to the top of the next hour here. We have about 10 minutes left and I just want to open it up for questions, just remind you all and thank you all for coming. We did touch on a lot of topics today and we do have some special offers from our team. So I'll just put this up here while we're taking a look at any other questions that might come in. For FeedbackFive from eComEngine, we are offering a 60-day free trial.

Colleen: It is the number one rated feedback and review software in the Amazon app store. Just use that coupon code to get 60 days free. Or reach out to me, I'm happy to talk to you more about your review strategy. Then Cahoot is offering a free inbound, which is up to $200 off for any new customers. When you reach out to Cahoot, just mention this webinar and they'll be happy to hook you up with that. Then Empire Flippers has a free automated valuation. This tool uses real, sales-backed data. We will share that link in the chat for you. But again, any last minute tips from Manish or Greg while we are waiting for a couple questions to come in?

Manish: The only thing I would say is, as you go into this journey, hope for the best, but don't expect, don't slow down, don't assume that the business will be sold in 24 hours or 24 days. You got to still continue running your business. Don't stop buying inventory, don't lose your focus, and don't take your eye off the ball. I think you've got to run a great business. A lot of things can go wrong in the due diligence process. I think to touch on why to use a broker, I'm sure this is a very emotionally charged journey for a seller because they put their heart and soul into their business and it's like their baby and time to let it go.

Manish: Having a third party like a Greg, Empire Flippers, takes away, creates that distance, and they can work through those issues with the buyer because they're not directly dealing with the buyer and they can help save the deal. They can even get you a far better deal. So I certainly am a big proponent of that. It's just the same as if you were selling your house, you would want a broker. So manage the best version of your business until it's sold and money's in the bank and don't lose focus.

Gregory: For sure.

Colleen: Great advice.

Gregory: I agree 100% with you, Manish. One of things we do when a seller does sell with us, is we tell them, "Keep running your business as if you're not selling," for that exact reason. We've had in the past some sellers who are like, "Oh, it's on the marketplace." Don't do anything and they have stockouts or ad campaign suddenly going wild. Like, "Well, why isn't my business selling?" Well, maybe, cause it looks like it's going through quite a heavy storm right now.

Gregory: So you should still keep running your business as if you're not selling it, and just realize when you do go to sell your business, realize it's like adding a part-time job for a month or two depending on the length of the sell. So you're going to have some extra commitment to be able to do it. It's totally worth it if it makes sense for your goals. I think selling a business gives entrepreneurs the freedom that they were always promised. We were always promised to be the master of our own fate.

Gregory: But then we become successful and realize Amazon's the master of our fate. So when you sell your business, you divorce yourself of that. You truly do hit that entrepreneurial dream always promised by the gurus on the YouTube ads.

Colleen: Well, we do have one question here. How big is the selling price difference between an Amazon business that has designed and customized or formulated their product, such as a skincare product, versus an Amazon business that has minimal customization like apparel? Is there a big price difference based on that product, maybe the product or the customization?

Gregory: Sure. Well, first of all, apparel, very few people want to buy anything in apparel. It is a really tough niche to sell because there's so many variations you have to do. It's a real headache. If you're starting your FBA business, I wouldn't start in apparel. If you already are in apparel, I'm sorry if I was a bearer of bad news there. But to answer the other part of the question with the customization, that could be very powerful, especially if it's like a trademark, patent kind of thing where you have some kind of exclusive access to that formula.

Gregory: That can deepen your moat. That makes you a very difficult business to copy, especially if customers love it. If customers love your unique stuff or you do something uniquely better that your competitors either can't do or don't know how to do, that's going to increase your valuation for sure.

Colleen: Okay. Thanks. We have another question here. Do you see companies selling for more that have dedicated efforts towards a good email list or off Amazon marketing? Do those tend to sell for more money?

Gregory: Yes. I briefly touched on it here. But having diversity of traffic is super important because if you're getting 100% of your traffic from say Amazon Organic and they, for whatever reason, take you off of that top spot, your business is tanking, your one channel-only business. So having multiple sources of traffic is extremely powerful. And by sending buying traffic specifically to Amazon, Amazon's going to usually reward you in their algorithms. That's very powerful. What was the other part? It was traffic and?

Colleen: Yeah. Then we have another question related, because the first one was, yeah, do they sell for more if they have dedicated efforts towards good email list and off Amazon marketing? Then another one that came in around the same time asking if having a strong website business also helps with valuation. So to your point, absolutely. Yeah.

Gregory: Perfect. Yeah. I wanted to talk about email real-

Colleen: Yes, and yes.

Gregory: ... email real quick. There is a common misunderstanding of how email increases your valuation that I find a lot of internet marketers and internet entrepreneurs don't realize. So they'll build out their email list sometimes and not really use it and they'll ask me, "Hey, how much does 50,000 subscribers add to my valuation," and I'll tell them, "Well, how much has that added to your revenue?" "Well, not really much. I never email them because I don't want to annoy them." Don't be one of these people, don't do this.

Gregory: Use your email list because your email list does not increase your valuation whatsoever unless you actually use it. But having a very robust email list can be one of the greatest levers to increase your valuation because of all the different benefits it gives you. As far as the website goes, absolutely, we've sold FBA businesses that have website components, either as content, using the Amazon affiliate program, or as their own dedicated e-commerce store. And that's fantastic because multi-channel selling will also increase your valuation.

Colleen: To your point, just general marketing when it comes to emails, it doesn't matter how many emails you have, the quantity, it's the quality of that list, making sure that-

Gregory: For sure.

Colleen: ... they're engaged and they know your brand and they're loyal to you. If you haven't sent an email, who knows? The first time you send it, they might opt out.

Gregory: And that's great. You don't have to pay for the lead anymore.

Colleen: Yeah. Yeah. Another question about apparel now that you made that comment, that apparel is not desirable.

Gregory: Oh no!

Colleen: No. What about selling baby accessories like headbands or clips? Would that be better than apparel, more desirable? Or do you think that baby accessories would fall into the category of apparel?

Gregory: It depends. We discovered a business that was listed on our marketplace as apparel that was in a similar niche as this and we're like, "We definitely need to change this," because buyers will see apparel on the niche, like, "I'm not even looking at it." So we changed it to that niche and now they're getting actual looks and unlocks. Unlocks is when a buyer goes intimately on a business on a marketplace. But baby accessories, I think, they're a bit more of an exception. I think that is overall a pretty good niche to be honest. You have some of the issues of apparel, but not nearly as much.

Colleen: Okay, good. All right. Well, we'll hang tight here for another minute or two and see if there's any more question. That's all we have though for now. If you're still on, feel free to jump in. Oh, one just came in. What about patented travel pillows? If you have a patented travel pillow line, any feedback on that?

Gregory: Well, obviously you're going to get the absolute maximum valuation for a travel pillow. I love travel pillows.

Colleen: Greg travels the world regularly.

Gregory: Yeah. It's so dark in here because I'm in Bangkok right now. It's 3:00 AM here. I'm always traveling. To answer your question in a more general way, the travel pillow part, if it's a good revenue, just like any other business, that's going to help you if it's good product. It doesn't so much matter than niche. I often get asked, what is the best niche? The answer is there's none. All of them are good. If you're making money, it's all good.

Gregory: I think travel in general will probably come back in a big way in the next couple of years. So you're probably going to see a nice revenue bump here if you're holding onto the business. But as far as the patent goes, yes, this will increase your value because that goes back to your moat. That patent is yours. No one can do what you have. That's an exclusive, unique advantage you have. So yeah, so it will increase your valuation.

Colleen: Very good. It looks like we have time for one more. How helpful is it to have intellectual property rights such as trademarked brand name?

Gregory: Yep. Same thing as a patent.

Colleen: Increases your moat, right? Yeah.

Gregory: Yeah. Yeah. Increases your moat. Yep.

Colleen: Good. Good. All right. Well, thanks, everybody, for joining us today. A big thanks to Greg and Manish for your time. It's been a pleasure as always working with you all. Please take a look at each of their companies. They're awesome partners to the Amazon industry. They've helped so many sellers improve their profitability and maximize their business value. So reach out to any of us if you have any questions.

Colleen: I'll be sure to send out an email within the next day that has a recording to this webinar as well as links to everything that we shared today and the special offers. So you can certainly reply to that email if you have any questions or want to get in touch with any of us. But hope everybody has a great rest of your day and we'll catch up later.

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How to Maximize Your Amazon Business Value

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