Part of the “Summer Episodes”
This quick episode tells you why Amazon got me up early this morning. I’m not going to tell you why here – you’ll have to listen!
This episode is one of the **Summer Series** of bite-sized chunks of Amazon Strategic Goodness!
#85 The sea…and Natural Rhythms
It’s funny how interacting personally with basic natural forces reminds you of some Business basics for Amazon. Here are a couple of thoughts that have struck me while swimming in the sea off the South-East coast of England:
There is a natural rhythm to everything in business. Just like the ebb and flow of the tide, it’s almost like a force of nature. If we learn to recognise hear or see those rhythms, we can work with them not against them.
Examples of natural rhythms include:
If you can schedule things in these various levels of business in a way that works with the natural rhythms rather than against them, you’ll find you are riding the waves rather than fighting against the tide!
This episode is one of the **Summer Series** of bite-sized chunks of Amazon Strategic Goodness!
#83 Episode -Why your customer chooses you.
Differentiation -example: Hairdressers in Haslemere
Part of the **Summer Series** of bite-sized chunks of Amazon Strategic Goodness!
Richard Branson is famous as a serial entrepreneur. And a very rich and consistently successful one at that.
So when someone asked him for his best way to be productive, what do you think he said? Listen to the podcast to find out!
This episode is part of the **Summer Series** of bite-sized chunks of Amazon Strategic Goodness!
Typically, from about $20k to $2.5mil, you’re looking at individual investors. Above that, from $2.5 to $5 million there is a bit of a black hole because individual investors don’t have that kind of capital. Some do, but it’s rare. Above that $5 million mark your are looking at private equity firms and larger businesses.
Let’s talk about the $20k to $2.5 million. These individual investors’ primary driver is fear of loss. They don’t want to lose their investment. So they are looking for an ROI better that what they would get if they left it in a bank or mutual fund. Within this groups of investors, you have a few different types.
Many of the buyers Coran worked with early this year, didn’t know anything about Amazon. They were former business people that have retired and got bored with brick-and-mortar businesses so they started buying up FBA businesses. This type of buyer has business experience, but may not be tech-savvy or have and understanding of online business. They will typically look for a business that have been around longer.
You may need to educate them on how easy it is to run an FBA business compared to something with staff, overhead, or property. You can offer support and virtual hand-holding until they can run the business themselves. You will also want to upfront about everything, good and bad, about your business because if they find something down the road, they will bolt faster than other types of investors. Like we said, they have that fear of loss.
Another thing you’ll want to do is create procedures. Write them out as if it’s for your grandmother. Stuff like writing out how to log in to seller central. If you have staff or contractors that can transfer to the new owners, that would be awesome. Also, if there is opportunity for discounts from your suppliers for larger purchases, have that as well.
You also have high-paid executives make $100-200k a year and are looking to replace their income so they can live a life of leisure.
Another is actual online entrepreneurs and other FBA businesses that may have rolled other businesses for profit. They have a large pool of capital and are looking for a competitive advantage. They will be looking for ways to boost the business’ profit. Not only are they looking to get a better return than the bank, but are also looking to add value.
Keep the buyer types in mind, but don’t build your business around it. You would limit your buyer pool to one particular type. However, it would be very difficult to build your business so narrow as to limit it to one buyer type unless you built a massive business to appeal to private equity.
Writing procedures will always be a big help. Have your spouse of a friend, that doesn’t know anything about selling on Amazon, follow your procedure and see if they can do it. Get your staff to write procedures about what their doing.
We discussed the gold standard before and how you need to have so many products, be defensible, diverse traffic, and age. As you fall short in different categories, that narrows the pool of buyers as well as lowers the value of your business.
As far as selling to another Amazon business, Coran hasn’t done that yet but it’s an interesting idea. Typically a strategic buyer will be willing to pay a premium because they will be looking to apply their expertise to the business and add value. However, most of the FBA businesses Coran deals with tend to struggle with cash-flow and have a hard time keeping up with inventory. So an Amazon business will have to be fairly large in order to have the capital need to make that purchase.
Also, if you open your business up to your competitors, it will give them an inside look into your business with could hurt you in the long-run.
Coran only works with a handful of qualified buyers and sellers at a time. The buyers are legitimate. They have the cash and have typically bought before and if he brings them the right business then he knows they are buying.
The next level down depends on how you advertise your business. If you’re using a broker, you’ll need to talk to them. For Coran, if that initial buyer pool isn’t interested, but it’s still a good business, he go wider and tap into his network of classified sites and other brokers that may have buyers. In that case, they will talk among themselves trying to find buyers for that business. They keep the information out of the public space as much as possible.
One thing that’s helpful is to add more products to a packet. A recent sale he did was where they had twice the amount of items to package, their packaging was great. If you don’t skimp on the packaging and your brand is strong, it adds a layer of protection that someone will have to get past if they want to compete.
Absolutely. Unless you can build out 50 or 100 products, which would take a ton of capital, you’ll need every advantage you can get.
Yes. Brand registry on Amazon is great. Having a patent or registered trademarks is very good. A patent is good because while expensive, and won’t increase the multiple that an investor is willing to go for, it will make it more attractive compared to other businesses. If a buyer is looking at three or four businesses they are trying to decide between, this may give you an edge to sway them towards your business.
Research existing patents on your private label items. Coran spoke of someone that is looking to expand their product line but is now caught up in a patent lawsuit over a very basic item. If you sell your business, the buyer will be liable for the history of every item so they will definitely be looking into any patent infringements prior to buying. Also, if there is a lawsuit while your selling, any possible sales will be over. If is shortly after a sale and there is an earn-out deal, it will complicate things.
When your selling a business with ongoing income, the multiple they paid is linked to that income. Often, to reduce the risk for the buyer, they will offer you 70% or 80% of the purchase price upfront. Then there will be an earn-out, which could mean different things. It might include 90 days of support, in which you help them run the business until they get a handle on it. Sometimes it will be linked to income, which is something Coran tries to avoid. He has seen earn-outs of up to 12 months. They might leave 10% to you in equity in order to keep you involved in running it.
Since you are, potentially, legally involved in the company for 3 to 12 months following the sale, you don’t want to sell something that violates patent laws.
Considering the complexity of patents, and patent laws, the best thing you can do would be to hire an attorney that specializes in patents. It will cost money, but when it’s time to sell your business this is the best way to do it.
As an ongoing business there are some tools that can help you do a quick patent search, but noting can compare to hiring an expert.
The important thing, if you find a buyer, hire a lawyer. You’ll want to protect yourself from any issues.
You can use services like escrow.com. It’s a very popular service when dealing with these types of transactions.
Flippa.com – The downside is that all transactions are public. So you don’t want to use this with an indefensible private label business. Definitely not recommended. They do have a service called deal flow, which is semi-brokerage. The listings can be confidential and you have access to more buyers.
Empireflippers.com – Coran has worked with them in the past and is highly recommended.
There are individual brokers out there. There are websites that have websites listings, but only if you have a lot of time to invest in it.
Coran, admits he may be biased, but he says the best way to go is with a broker. The deal structures can get complicated and you want someone who is going to be personally vested in achieving a successful sale.
As far as any FBA sales is concerned, they range from 1-3x EBITDA. With this situation, err on the lower side of things. Probably expect 2x, and you can move up or down from there. Let’s say the products are equal in revenue and you’re getting sales from somewhere other than Amazon. In this scenario you’re looking at 2-2.5x EBITDA; that would translate to about $120,000 – $150,000. In this. we’re talking about USD since most buyers use the US dollar.
We only deal in asset sales. So the company is on top of that and what we’re selling is everything underneath that. That would be your products, your brand, you website, your actual inventory, the central seller account, etc.
A sidenote about the seller central account, you can’t sell it outright. What you can do is transfer it to a new owner. Amazon doesn’t like it if you claim to be selling the account. So you just transfer business information, addresses, in the US it would be the EIN etc.
Things can get difficult if it’s a UK seller. Many in the US will be out automatically so it’s easier to just sell it to a buyer in the UK. However, since it’s an asset sell, you can definitely sell to someone in the US. The one thing that can be affected by selling to someone in another country are your suppliers and contractors. You will need to make sure they are comfortable working with someone in a different country. Some may have terms, like 60-90 day terms that might not be transferable. So you will need to work that out with your supplier. This is can be avoided if your selling within the same country. If your supplier is in China or other parts of Asian, they’re used to dealing with foreign companies.
Coran is currently speculating in the UK, he’s trying to build connections with buyers in the UK. In his experience, it is very limited since most buyers are in the US. If you want to build a UK business to sell, it will be difficult.
If you have a foothold in the US, even if it’s not the bulk of your sales, it will attract more US buyers so you would want to sell it all together.
Coran refers back to the gold standard. Being more defensible, have more products that are unique. People are becoming more familiar with the business model and are looking for where you are beyond Amazon.
Make sure to get the toolbox Coran set up exclusively for Amazing FBA listeners at thefbabroker.com/amazing. Also, take advantage of his off to have a one-on-one chat that is only available via this link.
Read The Snowball. It’s about Warren Buffet and talks about business and who’s buying and how to be defensible.
Q 1 Corinne
First, I am not an American but want to sell [on] Amazon.com
I have sent a few small packages to Amazon FBA.
There was no issue at all until I started sending 15 cartons.
When I sent this 15 cartons, I don’t have Federal tax ID number.
Thereby I needed to spend US$ 500 to have freight forwarder to help me.
Then I tried 8 cartons through DHL which declared $1200 for the customs. However, it is still got rejected by the customs.
It seems FEIN is required if i want to ship my inventory to FBA.
I am not trying to escape any tax issues, but to get a FEIN number, I would need a legal address in US. I am not in US.
How do you guys deal with this?
A freight forwarder isn’t the same as a Customs Broker in the USA. Some companies do both, like Western Overseas Corporation. But it sounds like what you need is a Customs Broker.
You shouldn’t need a US address to get an EIN as a foreign entity (person or company). But if you need one (you do need a returns address for amazon or should at least have one), google. I used myaddressus.com – pretty cheap.
If you send in goods over the value of $2500, it’s a formal import so you’ll need a customs bond etc. At that point, I would use a Customs Broker, at least for the first time. That’s not the case here, but worth flagging up for future reference.
Here is my newbie experience post #3. So I’ve been selling for about 3 weeks in the UK. Where am I?
I picked a great product. It’s flying off the cyber-shelves. I am about ½ way up page 1 for all my main keywords. I told myself to be ‘happy’ with 5 units a day. I was averaging 10-12 units per day, but have increased my price and now average 7-8 units per day. I have had days of 10+ including a day of 16 units. These are not giveaways, all giveaways were done in the first week. So why did I increase the price?
This first ‘test run’ was 500 units. At the current rate, I’m going to run out quickly. So I’m trying to find the balance between maintaining sales, and not running out of inventory. Am still undercutting some competitors at the current price, but also more expensive than some others.
I believe the reasons it’s going well so far are:
1. Branding. My brand is easily one of the coolest, and as I expand I’ll grow as a brand, rather than as “Bob’s generic stuff” which several of my competitors are doing
2. Social media. Many ‘gurus’ say – avoid social media until you are well established on Amazon. This is not a good move, in my opinion. I have an active twitter and Instagram account, and a new facebook page. OK I haven’t got many followers, but t’s growing and I’m getting a bit of engagement.
3. Branding. I said it again because it’s so important. Branding is everything. Cool brands get bought. Generic crap doesn’t.
Alex You are doing well, but don’t talk about brand building. People don’t care. You drive them in your page and they just see information, reviews and price. Just set Ppc automatic. If doesn’t work move on.
Suzi I love to hear that you are growing a strong brand, and that you understand and appreciate how important it is. I cringe so hard when I hear people say your branding doesn’t matter…nothing can be further from the truth. Have you had any issues with counterfeits hopping on your listing(s)?
My response: it depends!
If you just want to make sales on Amazon short-term (say next 6 months), I think it’s true that brand doesn’t matter much. Initially, customers will not have heard of your brand yet, and they mostly go with good images and price. Also, it is not realistic to expect Amazon to cross-sell your products even if they are in the same niche.
However, if you want to create a defensible business to later sell, you definitely need to create a brand. Also, even if you’re never planning to sell, if you want to create a Shopify store, to diversify and lower the risk of Amazon controlling your business, you will need to develop a focussed suite of products. If you have multiple niches, you can develop multiple brand sites, but each one needs some unity for credibility.
Also if you do well, medium term even on Amazon, people can start searching for your brand or pay slightly higher prices for it, as long as you have lots of reviews by that stage.
EMAIL OPTIMIZATION: Hey Everyone…just a quick question regarding your post-purchase email autoresponder sequences. I am currently getting 8% and 9% conversion rates for feedback and reviews, respectively. I would like to increase this and was thinking of shortening each email to make more mobile friendly. Have any of you tested the length of copy an how this alters conversions? Thanks!
First of all, if you’re getting 8-9% conversion, you’re doing well. Average for most people I’ve spoken to about this (which was a while ago) was 5%, as it was for me last time I checked.
Regarding testing, I don’t know whether for example Feedback Genius or Salesbacker will do this for you automatically. I use a different system so I don’t think I have that option.
If you want to do it manually, then make sure you test a significantly statistically meaningful number. So I would be inclined to run three variations, one shorter and one longer, and I would try each of them for about 100 sales each.
Re. email follow-up sequences more broadly, I use three emails. Currently the 1st only offers help and a PDF and says thanks/please get in touch if any issues although Kevin King asks “why did you buy the product” which I may change to going forward.
The 2nd, after ben Cummings’s approach, asks the buyer to just hit REPLY and let me know why s/he bought the product. Similar to Kevin King but after the product has arrived. Only a small %age do but you do get replies in my experience.
THe 3rd then asks for Seller Feedback, which I can then follow up on and ask to be changed to review if it ends up being about the product. It’s a filtering mechanism.
THe point of the 2nd email is that if someone replies to that, they feel more obliged to follow through after the 3rd and actually write a review.
In David’s case, I’d be inclined not to mess with what is working too much but tweak it eg longer/shorter.
Or you could change the 1st email in the sequence. Or the 3rd. Test both variations and let us know!
EPISODE #73 -Overcoming Amazon Overwhelm
“Lack of time is lack of priorities” (Tim Ferriss). This will be addressed in a later episode in detail.
#72 How your Amazon Business serves your Amazon Goals
This is a quick podcast just provoking thought more than anything else: remember what your “Reason Why” is for creating an Amazon business in the first place. At this time of year, with beautiful weather in the UK (for once!) and in holiday season, it’s a natural time to reflect.