You can be on Entrepreneur’s cover!

Want to Sell Your Amazon FBA Business? Here Are 5 Lessons From Someone Who's Overseen $100 Million in FBA Acquisitions Set yourself up for an exit by making decisions that will make your Amazon FBA business more sellable in the future.

By Thomas Smale

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Last year, the majority of Amazon's $386 billion in revenue came from third-party sellers — some of whom made up to $3 million in sales each. And those numbers are only going to get bigger: Third-party sales are currently growing at 52% a year.

It's no surprise, then, that independent small and mid-size businesses are increasingly selling their goods via FBA (Fulfillment by Amazon). However, B2B and B2C stores aren't the only option for making money via Amazon. Selling to an FBA aggregator has become an instant source of revenue for many owners. If this is something you're considering now or down the road, set yourself up for the exit by making decisions now that will make you sellable in the future.

Related: How to Use Amazon FBA to Maximize Sales

As someone who has overseen over $100 million in Amazon FBA exits and acquisitions, here are five key lessons I recommend all FBA owners keep in mind:

1. Consider the exit from day one

Create a business idea from the onset that has the potential to be sold. This will make your job easier when you do decide that you want to sell. Have your exit in mind from the get-go. You want to always ensure that you are in a stable, growing market with low competition. The most popular and successful Amazon niches include kitchen, outdoor/sports, baby, pet and home care.

2. Keep your financials organized

Have all your financials prepared for the sale of your business, ideally on an accrual (not cash flow) basis. Keep all your accounts up to date and have all your detailed financials ready for when the time comes that you are serious about selling. Keep track of your business analytics and have data (such as traffic, email and ad campaign data) ready and available for when the time is right. You will want to show a buyer that you have good lead times and favorable supplier transfer terms. If you do not already have those, it is recommended that you focus on these aspects of your business to determine it is time for an exit.

Related: Start a Side Hustle on Amazon FBA and Earn Thousands of Dollars Every Year

3. Document, document, document

Document all your operating procedures and make sure that as a seller you have all your standard procedures and practices laid out clearly for a potential buyer to have in place. I know from experience that buyers will pay a premium price for a well-documented business, rather than one that has no standard operating procedures (SOPs) in place. Potential buyers are looking for an Amazon sellers account that is in good health, is growing in their number of positive reviews and has a consistent best seller's rank. Having all of this in place isn't only good if you are selling. This is a best practice overall.

4. Put yourself in the shoes of a buyer

Buyers are looking to acquire a business with an infrastructure that can scale, and although aggregator buyers are looking to actively run these businesses, it is hard for them to take over solopreneur operations. They want to see that your business is in an evergreen niche — meaning it will outlast popular fads and bring in a consistent income for a long period of time, not just for a few months. If your business is seasonal, now might be the time to explore diversifying your offerings. Scalable businesses that are evergreen are in high demand and bring in top dollar, with many acquisition businesses like Digital Acquisitions raising eight figures in capital. (Disclosure: Digital Acquisitions is a client of my firm.)

Related: Want to Make 6 Figures From Your Amazon FBA Business? Here's How.

5. Optimize exit timing

If you have ever considered divesting of your ecommerce business, now is the optimal time to do so. This is especially true because the Biden administration is proposing to increase the capital gains tax top rate significantly— from 20% to 39.6% plus an additional 3.8% surtax. Additionally, you can make the most of your sale by choosing to exit during a period of sustained growth, not after a seasonal peak. You should talk to an M&A advisor to optimize your sale for tax purposes.

Of course, the process of preparing to sell is more streamlined if you keep the above five lessons in mind. I have had clients who have executed these well from the beginning — built their business from the start as if they would sell down the line — and have found major success in doing so. Clients who did not implement these five attributes before selling their Amazon FBA business ended up not being able to meet their exit goals. Adhering to these lessons will not only set you and your business up for success, but by doing so early on you will also make your business more attractive for a buyer down the road.

Related: How to Qualify for an SBA Loan in 2021

Thomas Smale

Entrepreneur Leadership Network® Contributor

Founder of FE International

Thomas Smale co-founded FE International in 2010. He has been interviewed on podcasts, blogs and also spoken at a number of industry events on online businesses, exit strategy and selling businesses.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

This Dad Started a Side Hustle to Save for His Daughter's College Fund — Then It Earned $1 Million and Caught Apple's Attention

In 2015, Greg Kerr, now owner of Alchemy Merch, was working as musician when he noticed a lucrative opportunity.

Business News

Yes, You Can Buy a Foldable Tiny Home on Amazon — And Now It's Selling for Less Than $12,000

The waterproof and flameproof house was listed around $35,000 a few months ago.

Starting a Business

4 Common Mistakes That Will Spell Doom Your Ecommerce Business

It's hard to spot a success story before it happens, yet it's easy to tell if a business will struggle. With that in mind, here are the four most common mistakes people make that you should avoid when starting an ecommerce business.

Money & Finance

4 Things to Know About Credit Financing Your Business Following the 'Fed Pivot'

With cheap money behind us, you'll want to rethink how you finance your business

Side Hustle

This Insurance Agent Started a Side Hustle Inspired By Nostalgia for His Home State — Now It Earns Nearly $40,000 a Month

After moving to New York City, Danny Trejo started a business to stay in touch with his roots — literally.