For Amazon Business sellers, the opportunity to build a successful e-commerce venture can be incredibly rewarding. Something like 60% of all the cash you’ll ever get (on average) comes when you as an owner get to sell your entire Amazon business to a potential acquirer. But these 10 Amazon Business Seller Mistakes with Numbers can kill the deal before it even gets started.
When such an opportunity arises, it is crucial to avoid common mistakes that could undermine the credibility and value of the business. In this blog post, we will explore the top 10 critical mistakes that Amazon Business sellers should steer clear of when selling their business to a potential acquirer.
1.Insufficient Business Details:
When presenting your Amazon business to a potential acquirer, you need to give them enough information to consider whether to go further.
Sure, like any owner, you’re nervous about revealing sensitive information. It’s fine to wait until you’ve got a signed NDA before you go further. But even upfront, your potential buyer needs a certain basic level of information.
Failing to provide enough essential information about your business, such as the category it operates in, its market presence (e.g., US, UK, Europe), and approximate revenue figures, can deter potential buyers from showing further interest.
To capture their attention, ensure your elevator pitch includes crucial details that allow buyers to assess whether your business aligns with their acquisition criteria.
2. Concealing the Business Age:
One of the first things an acquirer would want to know is the age of your Amazon business. Being upfront about its age, whether it is relatively young or well-established, is vital in determining its value and risk profile. Concealing this information can raise suspicion and hinder the development of trust with potential buyers. This is a classic Amazon business seller mistake.
3. Ambiguous Trailing 12-Month Unit Sales:
Accurate sales figures are essential for acquirers to evaluate the overall health and potential of your Amazon business. Failing to disclose trailing 12-month unit sales can create uncertainty and make it difficult for buyers to assess the stock turnover rate and profitability.
4.Confusing Profit and Loss (P&L) Statements:
Ensure your P&L statements are well-organized, clear, and free of errors. Acquirers rely heavily on financial data to make informed decisions. Misleading or garbled P&L numbers can erode confidence in the business’s financial performance and deter serious buyers.
5. Misusing Financial Terminology:
Avoid using financial terms incorrectly or interchangeably, such as referring to trailing 24 months as “TTM” (trailing 12 months). Misusing financial terminology can create confusion and signal a lack of financial acumen to potential acquirers.
6. Overstating Inventory Value:
This is one of the commonest Amazon business seller mistakes. That’s probably because it takes a lot of emotional discipline to overcome this. You paid £50,000 for your inventory? Doesn’t mean it’s worth £50,000 to anyone else if it doesn’t sell fast enough! Attempting to sell excess inventory to potential acquirers can be a red flag. Be honest about your inventory levels and avoid inflating its value to secure a higher selling price. Instead, consider offering excess inventory as part of the deal or finding alternative solutions, such as donating or liquidating it.
7. Lack of Inventory Clarity:
Communicate the status and location of your inventory. If some inventory is not immediately available for sale, disclose this information to potential acquirers. Being transparent about inventory will help buyers assess potential stock issues and make informed decisions.
8. Uncertain Critical Financial Metrics:
Buyers heavily scrutinize financial metrics when evaluating a business. Avoid presenting unclear or misleading numbers, as this can undermine trust and credibility during the negotiation process.
9. Unrealistic Business Valuations:
Overinflating the value of your Amazon business can quickly turn off potential acquirers. Be realistic when setting a valuation and consider obtaining a professional appraisal to determine a fair market value.
10. Exaggerating numbers as opposed to building a Valuable Business:
The success of selling your Amazon business hinges on its underlying value. Focus on building a profitable, efficient, and sustainable business that will attract potential acquirers. Demonstrating a track record of growth and profitability will make your business more appealing and increase its market value.
Selling an Amazon business to a potential acquirer is a significant undertaking that requires careful preparation and attention to detail. Avoiding these ten critical mistakes will enhance your credibility and increase the chances of a successful sale. By presenting clear financial data, disclosing essential business details, and offering a realistic valuation, you can position your Amazon business for a successful and lucrative sale.
Remember, building a valuable business is not only about securing a higher selling price but also about creating an attractive investment opportunity for potential acquirers. Just as your product listings sell the products to consumers, so your numbers are the principle means of selling your business as a whole to business acquirers. Doing a little work to clean the numbers up could yield huge dividends for a few hours’ work.