December 11, 2023

Small Business

Business Nes

How much your Amazon FBA business is worth?

2 min read
Amazon Business Valuation - How to Do? | SageFund

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 its 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 into 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 so 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.

Are you an Amazon Seller? We have covered an detailed article on amazon fba sales tax