Amazon had remained secretive about its use of third-party sellers for a long time. However, now more than 50% of the products on their platform are sold by Fulfilled by Amazon (FBA) merchants. Many online sellers joined the ranks of FBA sellers during the pandemic due to the economic crisis.
The marketplace for FBA businesses is growing exponentially. Early FBA merchants were able to make a lot of money within a short time. So it is natural that many of these merchants are thinking of selling their business while still making profits.
Potential investors value FBA businesses the same way as most other online companies. The value of an Amazon FBA business is usually 2 to 3x of its Seller Discretionary Earnings (SDE). SDE is the profit that remains with the owner once all the costs have been deducted from the gross revenues.
Business owners can also add their salaries to the final SDE amount. However, several factors can affect the SDE multiple for an FBA business. A potential buyer will judge these factors to understand how sustainable, scalable, and transferable the FBA business is. The value of the FBA seller will also depend on several market factors.
FBA sellers need not think of selling right away before they start preparing. But they must consider these factors early on to help them increase the value of their FBA business.
Amazon Brand Registry
If you manufacture or sell your own branded products on Amazon, you should apply to be a part of Amazon’s brand registry. It will allow you to have better control over your listing page on Amazon. It also offers protection for your company if somebody tries to copy your products and sell them on Amazon.
Your brand name should be registered as a trademark before you apply for the program. Amazon offers several rewards for brand-registered sellers. For example, once you get registered, you will get the software from Amazon, which will help you identify and report copycat sellers.
With better control over your listing page, you can create improvised titles, descriptions, and images for your products. A potential investor will feel confident about paying more for an Amazon brand-registered FBA seller.
Diverse Product Range
If you have a winning product, it increases your value as a successful Amazon FBA seller. Potential buyers are aware of this fact and would always look at it as one of the prime reasons to purchase an FBA business. However, buyers may not feel confident about purchasing your company if it has only one successful product.
The risk factor increases because there are chances of competition or supply issues that cannot be controlled. That is why most FBA sellers add complementary products to their stores to diversify their list. That way, you will reduce the risk and increase your chances of potential rewards, which will boost your business valuation.
Automated or Outsourced Operations
Many FBA entrepreneurs struggle with the delegation of the operations. They try to micromanage everything because they get used to it since the inception of the business. However, several operational aspects might seem confusing and labor-intensive to a potential buyer.
Therefore, you should try to find ways to reduce your operational workload by automating or outsourcing. For example, you can install a virtual assistant to manage several administrative jobs such as providing customer service, processing orders, managing inventory, and others.
Even if you do not wish to sell your business right away, automating or outsourcing these tasks will allow you to focus on growing your FBA business and its valuation.
Website and Social Media
Websites and social media are great ways to build a brand that people can trust. A website can help direct web traffic to your Amazon products, while social media can be used as a marketing tool. Posting content on both these platforms can prove beneficial to increase sales. Any potential buyer would consider a website and social media following as useful assets for your FBA business.
You can also prove your brand value with a high number of reviews on your Amazon product listing page. Many FBA sellers are not aware that they can request the Seller Central to send automated emails to your customers asking for reviews. It can help you add several positive reviews to your product listing page on Amazon.
You can also use one of the several available software to automate the process of asking and replying to positive reviews from your customers. Positive reviews can also improve your organic search ranking and increase the chances of being featured as an Amazon Choice product.
You can take advantage of these five tips to develop your Amazon FBA business and increase its valuation. It can help you build a profitable and streamlined organization that will set you on the track to success.