This transcript was generated from the episode audio and may contain minor errors.
[Music]
From time to time over the years, we've talked about Fulfilled by Amazon, the program where third-party sellers, such as any individual, any small business, can go on Amazon, sell products, and essentially reach Amazon's massive customer base. So today we've got an interesting question. I don't think we've ever looked at this part of it. Someone who has built up an Amazon-only brand, well, they've been selling stuff on Amazon. Amazon is their only channel, but they have been able to sell quite a bit.
I think they're earning $6,000 to $8,000 a month from their side hustle. And they're thinking about selling the business. And they're also worried about like, can they actually do this because they are so dependent on one platform? So we're gonna talk about that. Let's talk about valuation, channel risk.
What can we do to help this person increase the value of their business so they might be able to sell it for even more money? How can you sell an Amazon-only FBA brand for top dollar? That's today's question, detailed version, detailed question from our listener, that is, and my answer coming right up. [Music]
Hello from Boise. Your book, $100 Startup, pushed me to launch an Amazon FBA store that, man, it earns around $7,000 a month.
But 100% of orders come through Amazon's platform, right? I'm considering selling the business while the numbers look good. Yet potential buyers keep asking about channel risk and Shopify diversification. What's the smartest exit strategy for an FBA brand with zero off Amazon presence? Should I build a separate site first or lean into brokers who specialize in Amazon rollups?
I'd love to know what you think. [Music]
So when someone comes to buy your business, if they're interested in acquiring a small business or building up a bunch of side hustles, basically they're going to do everything they can to look at what are the weaknesses in this business, 'cause that's gonna drive down the price. It's gonna help them make the smartest decisions on the front end in terms of which businesses they acquire, and then once they identify businesses they wanna go after, well, they want to lower the price. And so they are gonna say like, what's not great about this business? This business is bringing in $7,000 a month, but all of the orders come through Amazon.
And it's true, like Amazon can change things, can change the rules, can change algorithms and so on. So if you think about that, you know, okay, this is the weakness. And you also think like who's gonna buy Amazon only brands? Well, it could be like a rollup aggregator, like somebody who's building out lots of Amazon portfolios. So they already are like in this space.
They move fast, they can pay quickly, that's good. But they also pay like the lower end of the market multiple. Like they're pretty much only gonna pay like two to three years annual profit. If you want to like sell more, for more than that, like if you want a quick exit, that's what you do. Like, but if you can wait a little bit, what I would say is spin up a little basic Shopify store, like just get a new channel coming in, start capturing customer emails wherever you can.
There's some tricks to do this with Amazon, 'cause Amazon won't give you the customer emails. But basically when you ship products include like a warranty registration insert or like a VIP coupon, basically anything you can do to capture email addresses and other contact information from your buyers. If you have a thousand of those, that helps potential buyers of your business breathe easier. So basically you start kind of spinning off a little bit, document your processes as well, write up some standard operating procedures on reordering inventory, handling ads, responding to reviews, like buyers also really appreciate the plug and play. So if you do these things, that's gonna at least increase your evaluation a bit or at least allow you to make more of an argument that even though historically the business has been dependent on Amazon, it doesn't have to be.
Like there are alternatives. I don't think you need to turn your Amazon brand into a full empire. That really hasn't been your goal here. You just need to show buyers the possibility of multiple channels. That's what I would do.
And I wish you well, I hope it works out. Let us know listeners, always welcome your input feedback questions as well. sidehustleschool.com for the complete archives of the podcast, 3,000 plus episodes. And of course new episodes drop every day. Listen on Spotify, Apple Music, wherever you get your podcasts.
My name is Chris Guillebeau. This is Side Hustle School. [Music]
From the Onward Project.
