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134 Buying Wholesale for Amazon with Will Tjernlund – Part 3 of 3

Buying wholesale has been talked about a lot by more ambitious Amazon sellers. But is it still a viable business model, to approach a wholesaler and try to sell on Seller Central?

Buying wholesale from a  brand owner is still viable for sure; someone which owns one brand. As far as a wholesaler, that distributes several brands, it depends. They have to make their profit too, and there might not be enough margin to go around. They are also likely to be selling to other Amazon sellers which would cut into your sales.

If you go to Back Country, they would carry the Black Diamond brand, as well as many others. Will wouldn’t buy from them but rather buy directly from Black Diamond.

What do you do to get a product launched these days?

One of the big reasons Will got into Vendor Central is that he hates launching products. It’s much easier to start with a product that already has 10,000 reviews. His philosophy is not to do something that’s hard just because it’s hard. So many people are worried about building a brand and launching products from scratch. It’s a lot easy to just make money first. Then, when you want a challenge, build your brand.

One recent product launch Will and his team did, was they got ping pong accessories from China. Got them in, slapped labels on them, no real packaging to them. They sent them into Amazon. There was four different types that they bundled in two and four packs. They’ve sold about 357 units in a month in a half and they just got their first review.

They spent $1000 on PPC  to make $4000 so their A-cost is about 25% which is about break-even but gets them some traffic. It’s selling about seven units a day at $6 or $7 and he did nothing more than throw it up on Amazon. It’s all because he picked the right niche with the right keywords. He knew he could compete only on price.

If you are trying to go after a product that has 1500 reviews, then you will need 1500 reviews just to compete. What’s your strategy for getting 1500 reviews? If you do 1500 giveaways, that’s not sustainable. If someone wants to sell dog leashes because they love dogs, what can you do with that? You can’t put your love of dogs in the title. You can’t work with that. However, if you want to sell leashes because you see a gap in the market of seeing-eye dog leashes. They’re all 20ft long which makes no sense if the person is blind. It needs to be 4ft long. Great! You found a gap in the market. You found a specific keyword. There is a way to differentiate yourself and add value. Also, you didn’t need to do some crazy manufacturing. Just make a shorter leash.

Thinking off-Amazon, do you see any future with Wal-Mart’s third party seller platform?

No. No one really has that app on their phone. A lot of people will go out of their way to avoid shopping at Wal-Mart. Just Google “people of Wal-Mart”. There is a negative stigma. Much like eBay. Will they take a portion of the market? Yeah, but they won’t be a major competitor. People like the simple Amazon experience. Plus, if you’re going to buy something from walmart.com, why not just drive down the road and get it right now? The only real benefit Will sees from walmart.com is that if your product does well on their website, they might try to sell it in the stores and then you’ll be able to sell it in all the big-box stores.

Speaking of eBay, do you think their market share will shrink in the next couple years?

Will was recently talking with a hedge-fund manager that owns a part of eBay who said that eBay looks good compared to other retailers. Who are the competitors? Macy’s who’s closing thousands of stores. Sears who is closing thousands of stores. Of course their going to look good in comparison when the competition is about to go bankrupt. They may grow 3.5% year after year, but the S&P average was 18%. 3% isn’t that cool. The numbers of people that get online in America grows at 3%. So eBay is growing at the rate of the internet and slower than GDP.

If you’re wanting to get started in Vendor Express quickly, what would you look for in a product?

You will want to find a product in a category that Amazon isn’t sourcing and selling already. Then they will want to get their hands on it. Plus, if you have sales history on top of that, Amazon will love it. If you find that Amazon isn’t selling in climbing ropes, but they are selling 9 of the 10 dog leashes, then they’re not too excited to get anymore dog leases. Buying wholesale is a good way to start this. 

FBA selling VS. Vendor Central?

It really depends on a lot of factors. It depends on how much cash flow you have, what kind of distributor you have, what the competition is like. Let’s say you have one Chinese supplier that you buy iPhone cases from. They’re the only ones that are waterproof and you buy 10,000 at a time and you have $100,000 in the bank. From they, maybe you build momentum in Seller Central, then move it to Vendor Central so they see the momentum. In Seller Central, you might be ranked in the thousands for iPhone cases, but in Vendor Central you might be rank 1 for waterproof cases.

There is a company in Hong Kong that does Vendor Central so they don’t have to pay taxes in each state whenever they sell in Seller Central. There is all sorts of different scenarios that will affect the decision. Amazon pays for inbound shipping when they order from you in Vendor Central. So if you have a large product that is expensive to ship, you can save a lot of money by using Vendor Central.

What are your predictions for 2017 and beyond?

So 2017, third-party sales will still grow from 2016. However, at the same time, Amazon will condense. If you look at their earnings report, the number of items offered for sale has gone down; the number of items fulfilled have gone up. Amazon is clearing up a lot of junk sellers. You have people like Will going through and condensing their listings. Once they get rid of the riff-raff, it’ll be much more simple, and you can tell who the private labelers are that care, and who’s selling junk. Eventually, the junk ones will phase out. The sales of third-party sellers will go up, but the amount of third-party sellers and third-party products may fall over time. So, by the time 2018 rolls around, everyone will try to find a way to differentiate themselves because the third-party selling will become a thing of the past.

Where to find Will:
goatconsulting.com
Email him at [email protected] for a Vendor Central VS Seller Central profit calculator.
Twitter: @wtjern
Facebook: facebook.com/tjernlund

1

#77 Selling an Amazon Business with Coran Woodmass of The FBA Broker – Part 1

How did you get started with this?

Just over 3 years ago, Coran and his wife left Australia and their corporate jobs and began traveling. They had online businesses at the time and soon began buying and selling websites to fund their traveling. He liked the process of building a company to sell it rather than building to for the income. He struggled to keep his attention on one thing.

For this interview Coran create a package of tools for Amazing FBA listeners at http://thefbabroker.com/amazing. So do check that out.

How did you get involved with sales of Amazon companies?

About a year ago he got into the brokerage side of things after people began asking him to review and vet websites that were for sale and help negotiate the sales. As of about a month ago he has been dealing exclusively with FBA businesses.

Should I sell my FBA business now or hold it?

Most people do this backwards. They build up a business and it’s making money and then they decide they want to sell it. Maybe they want to focus on something else, maybe they want to cash out and pay off the investment. That’s a terrible time to sell. Odds are, you won’t be structured in a way that is attractive to sellers. The first thing you need to think about is who you are going to sell to and what they are looking for.

Let’s say you have a private label business that’s been operation for an year and half to two years. So you have a bit of history and you beginning to think about exiting. Reasons that Coran decided to sell his companies were that he might need the cash flow for something else or he was getting bored with the business.

How do I know if Can I sell my Amazon Business?

Coran breaks Amazon businesses down into three types, retail arbitrage/wholesaling, private label, and unique or proprietary.

For retail arbitrage/wholesaling, unless you have exclusive rights to selling on Amazon, the chances of your income being taken away is very high. What an investor is looking for is a return on investment. They will pay a certain multiple for a business with the intention of getting that money back first. So with wholesaling, for almost all cases, your only asset is your inventory, so if you lose your means of selling it, you’re just stuck with a load of stock.

Private label is the most popular way to sell on Amazon. There is a barrier of entry so your products have a shelf life of 6-12 months. That means that if you have one product that you haven’t differentiated, you just stuck your label on a product and built the brand, it’s not super defensible. So it will sell at a lower multiple. You can definitely sell these companies, you just have to put a little work into it.

Unique or proprietary products are much more defensible. You may have taken negative comments on your products and tweaked them. So you might have a unique mold or something that makes your product unique, that will sell at a higher multiple. The more you can make a private label product better or unique, the better it will be when it comes time to sell.

For example, Greg Mercer at Jungle Scout ran a case study where he made his chop sticks a little longer. While not super defensible, it is unique, and if you build your brand around that it sets you up in a better position.

How long do you need to be in business before selling?

There is a debate among brokers as to what the minimum amount of time is. For Coran, a year is still young. You certainly want 12 months of history. There are a few reasons for this. One, you want to see if there is any seasonality involved. An investor wants to work out their return on the longest history possible. There is also something to be said for a product that takes time to gain traction. Seems a bit counter-intuitive but an investor will look at a product and think, “What’s to stop me from doing this myself?”, so a product that takes time to get established show the investor that this company is worth buying because it will take that much more time to get it going if he/she wanted to start from scratch.

Most importantly, when it come to age of a company, you want the company to be established. For online companies, that typically means 3 years. Compared to offline, like brick and mortar businesses, 10 years is a long time.

Even if you’re not thinking of selling your company soon, now is the time to start preparing for it. A year, year and a half out, you want to make sure your products are defensible and that you have products that will add value to your company when it comes time to sell.

Is there a minimum number of products you should have?

Coran is working on two businesses, trying to get them ready to be listed. One business is completely private labeled, very little in the way of differentiation. It’s just brand. He has 20 products. That business is attractive because of the wide range of products. Out of the 20 products, most of the income comes from three products. It is all on Amazon and bringing in a million in sales a year.

The other company has only one product that is unique. It’s is their own formulation and their own brand. 70% of their income is coming from Amazon. They also sell on Amazon US and Amazon UK. 30% of their income is coming from their Shopify store. So they have several layers of defensibility.

The gold standard, according to Coran, is a third company he is working with. They have 10+ uniquely formulated products. Multiple sales channel. 70% through their e-commerce channel, 30% on Amazon.

The less reliant you are on one thing, the better. Multiple products, multiple sales channels, multiple traffic sources. So if you have a private label and don’t want to focus on unique products, focus on finding sales channels outside Amazon. That way, if one thing takes a hit you have hedged your bets.

How is it valued?

You need to look at it from an investors perspective, they are looking for a return on investment (ROI). Their in for $1,000,000 and their making $200,000 a year on it, that’s the ROI. They way we value Amazon businesses is net profit. The best way to look at this is: what is your annual net profit. If your business has been around a year and making decent profit, that’s not as attractive to these kinds of buyers. The important thing to consider I: what is your profit right now? When working with clients, Coran finds that most people over-estimate their profits. Oftentimes it’s as much as half of what they thought it was once they put in their numbers. If you want to find out what your business is worth, use Coran’s tool for that.

What can make my business worth more?

Type of businesses

Reseller

Private label

Proprietary

Age

The longer your business has been around, the better

EBITDA

The more profit you’re bringing in, the more attractive your business will be

Defensibility

Diversification

Diversified products

Diversified traffic sources

Different niches

Seasonal Items

Competition

The strong the competition, the more wary investors will be

Do you have any tips for determining profit and loss?

Profit and Loss Template – Use this spreadsheet to help determine how much money your are actually making.

It starts with your total sales and revenue. From there it takes out the cost of sales. This is your Amazon fees, packaging, shipping, etc. All the costs associated with selling that item. Then it takes your operational costs out. The is refunds, ads, web hosting, salaries and other drawings, etc. All the costs that are associated with running your business. In the end you’re left with your net revenue.

In regards to salaries and other drawing from your business, when it comes to selling the business you can add that back into your profits. The reason is that your investor might not want to draw anything from the business. So you want to present them with the profits including what you are drawing from it. Then they can decide what they want from it. If they are looking for an income, they can look at the net revenue and determine how much they can draw. If they are looking for growth, they might want to leave everything in and use that to grow the company.

If you don’t add back your salary, it makes it much more difficult for them to find it. You want to make it as easy as possible for your buyer.

117 The 2nd way to increase Amazon Sales

This 2nd way of increasing sales is so neglected, you can get ahead simply by implementing anything in this area!

The simple idea is to increase the AOV=Average Order Value.

It can be more difficult to implement on Amazon than just getting new customers but is potentially much more profitable.

If someone usually buys a $10 widget at 50% margin, you get $5 profit per sale. If you usually sell say 10 orders of 1 $10 widget a day, your profit per month=$5X10X30=$1500

If you can increase the AOV by say just $1, you would end up with $11X50%X10X30 profit=$1650. $150 extra ie 10% extra.

Multiply such effects across several products and it can add to your bottom line quickly.

The simplest way to increase your AOV is simply to increase price! But you have to weigh up against conversion rate changes etc. to see whether that increases or decreases your price.

Another way is to bundle together products physically eg a 3-pack, 4-pack, 6-pack etc etc. Easy and very very easy to sell on Amazon.

Another way that is even easier is to offer a discount via a promotion code. Eg BOGOF (Buy One, Get One Free) or buy 3, get 10% etc etc.

If you set things up wrongly, you’ll make less profit, not more, so know your numbers going into this! Done right, this is a simple way to edge up your profit margin.

A harder way but possible on Amazon, is to do cross-sells eg “this is also bought with X” (spatula with slotted spoon for example). It’s possible to influence this again using promo codes – you can offer a 25% discount off a slotted spoon, for example, when you buy a silicone spatula etc.

Another way that is hard to do on Amazon but possible, is to upsell eg from a $5 spatula to a $25 frying pan. Same kinds of methods.

Increasingly, we are looking at strategies that will work best when you have control – in other words, you start to build your own email lists (and other assets like social media subscribers/followers etc.).

There is one more basic way to increase sales that is used least of all by Amazon sellers but could be the most powerful of all…read on…to the next episode…

To find out more about the Amazing FBA London Mastermind mentioned in the episode, click here

#105 Finding a Killer Amazon Product part 5: Competition – Reviews and Listing quality

Competition - Photos and Reviews

Competition – Photos and Reviews

Everyone gets a bit obsessed with the wrong things when it comes to Amazon competition.

The first mistake is to get blinded by sales volume and ignoring the competition and what that will do to your profit margin.  If you can’t produce a differentiated product, don’t go into a market.

However, you need to assess the competition correctly.

REVIEWS  – WHAT REALLY MATTERS

The biggest red herring is to worry about the raw number of reviews the competition has without looking at the quality of the listing and of those reviews.

But it is true that you won’t look credible with 5 reviews if the nearest competitor has 200. A rule of thumb was that you want to aim to get at least 50% of the same number as your nearest competitor.

I’m not really convinced any more. Given that it’s also harder to get reviews than ever in the USA, I would focus on quality more than quantity. Still, it’s worth avoiding markets where you’re going to have to get more than 50-100 reviews unless you have really deep pockets, in my view.

More important is the average review, ie the average no. of stars. If everyone has 4.7-5.0 stars average, you’ll struggle to compete unless your product is amazing. If everyone has 3-4 stars, it makes me wonder whether you are just asking for trouble – read the reviews in detail and find out!

A sweet spot is when quite a few page 1 products have 3-4 star reviews and lots have 4.5-5 stars. This implies there are winning and losing products. Investigate – what makes the winners win? Can you solve the issue from the low rated products with a better product?

If the market looks over competitive, at this point I would just walk away unless I had really deep pockets and lots of Amazon experience.

COMPETITION ANALYSIS  – MAIN PHOTOS AND PRICES 

If the market still looks viable, I would investigate the competition in great detail. First, I would review the page 1 photos and price points. Are there crappy looking products selling for a decent price? It’s unusual but if so, you may have found a niche that is underserved. More likely, can you see a way to produce a more beautiful product?

IN DEPTH COMPETITION LISTING ANALYSIS

If, and only if, the market still looks viable, I would then look at every listing on page 1. How many of the (usually 9) available photos do they use? How good are they? Do they have lifestyle shots? (showing the product in use) Do they use models?

Photos are crucial on Amazon, so I’ve stopped worrying too much about the Bullet points looking great. But great photos make a huge difference.

Remember: it’s not going to be enough these days to do decent photos. You’ll need to have a genuinely better product to command solid prices and take sales off the competition! Don’t delude yourself about the power of photography in mature markets. Good photography is a price of entry now, not a way to win.

#104 Finding a Killer Amazon Product Part 4: Check Competition!

Competition - Brand Dominance

Competition – Brand Dominance

The next thing to do IF your product has good demand at a fair price (so probably over $30 at least), the next thing to do is to check the competition.

Here we look first at brand dominance. This comes in two forms:

  1. A big, well-known brand which takes a lot of the market at the higher price points

If you’re in the Cookware space, for example, if you see a product like “Russell Hobbs” and you can see that the spread of prices is $15-30 but only Russell Hobbs is commanding $25-30 a unit sales price whereas the rest only make $15-23, I’d be wary of entering that space

2. A private label type brand

You may well be able to beat these guys because they don’t have a large brand. But you need to have a really really visually differentiated product. Otherwise – you’ll just end up getting shopped on price. Amazon ads costs go up  – selling price comes down – profit disappears.

This is an incredibly common pattern – do not ignore differentiation! If you don’t think you can beat similar competition that is well established with a genuinely different and better product, DO NOT go into that market!

If you are considering selling price, I’d advise aiming for $30-40 upwards. It leaves a decent profit margin after Amazon ads, and means you’re less likely to enter into wars on price because price was not your main selling point in the first place. Both of which protect your overall profit margin.

Just because a product may cost more per unit, doesn’t mean that the upfront costs will require a huge budget. Most MOQs (minimum Order Quantities) from Chinese suppliers are in reality more like minimum amounts per order. So as long as you are spending $2000+, you can often get away with much lower MOQs than advertised.

Next we look into projected P & L in more detail.

But remember: Eliminate before you Investigate! Don’t spend valuable time analysing products you should just eliminate.

#102 Finding a Killer Amazon Product Part 2 – Set your Budget & Aim for the Most Expensive Products you can!

Setting your Budget

Setting your Budget

After gathering ideas, the big Second Phase is: FILTERING.

The first thing to say is: there is no single perfect formula. If you use the same formula as everyone else, you’ll end up with the same products, you’ll compete on price and you’ll make no profit (if you manage to make sales).

So DON’T choose “$20-40 sales price, 3000 units a month, lighter than 1 lb weight”!

The first thing to do in this Phase is: set a budget.

The main thing that makes a difference is how much budget you have to spend. If you haven’t got £3-4,000 or $5,000 USD, you don’t really have enough to do private label anyway, in which case I recommend Online Arbitrage, Retail Arbitrage or Wholesale.

Broadly, I would choose a product that you can sell for as high a price per unit as you can afford. If you have for example $5000 to spend on inventory for your first order, get 200 of something fantastic you can land for $25 and sell for say $75.

Don’t get obsessed with units sold per month. Traditionally you look for 3000 units/month sold on page 1 – which means per product, about 300 units a month or 10 a day.
I no longer care about that. I just want $10,000 – even $5000 a month of revenue per product. It’s in fact much better to have the same turnover from fewer, higher priced products because a lot of the costs per unit are similar  – so in other words, you make more profit if those units are higher priced.

#83 What 2 hairdressers can teach Amazon entrepreneurs

#83 Episode -Why your customer chooses you.

Differentiation -example: Hairdressers in Haslemere

  1. Think like a customer – go shopping for products like your own.
  2. First impression -look and feel (brand part one)
  3. Quality – perception and experience.
  4. Positioning (cheap and cheerful/expensive/exclusive)
  5. What people say about you (brand part two aka reputation)
  6. If they can’t differentiate on either they will shop on price
  7. Amazon is not the high street. Comparisons are near instant and brutal!So it’s even more important for us to differentiate than on the high street.

Part of the **Summer Series** of bite-sized chunks of Amazon Strategic Goodness!

#78 Selling an ecommerce business with Coran Woodmass – Part 2

Who would buy my business?

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.

Retirees

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.

Executives

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.

Online Entrepreneurs

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.

Should you have an idea of what kind of buyer you want when you start the business?

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.

What are the main things that you would need across all buyers?

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.

Let’s say you have a business that’s a year old and you need to sell it, what is the best way to go about it? Should you sell to another Amazon business?

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.

How do you build a sensible barrier so you don’t give inside information to a competitor?

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.

How do you make a product more defensible?

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.

Is brand strength important when trying to sell a business?

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.

Is intellectual property valuable when trying to sell?

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.

Pro tip:

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.

Earn-out deal:

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.

What are the best ways to protect yourself and avoid having patent issues?

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.

How do I find a buyer?

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.

Let’s say I have a business that is doing $5000 in EBITDA profit, it’s got 5 customized products but not original design, and had been in business for two years. What kind of multiple will that get?

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.

How does it work when selling a UK based company to someone in the US?

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.

Since it’s more difficult to sell a UK based company, is it viable to build up a UK based business?

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 business that sells in the US and the UK, can you sell all of it or would you need to split it and sell the US business to a US buyer and hang on to the UK wing?

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.

What’s working well right now with Amazon businesses that are selling well?

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.

How do listeners get hold of you or find out more about you?

thefbabroker.com

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.

Do you have any parting words of advice for anyone who is considering selling their Amazon business or building one to sell?

Read The Snowball. It’s about Warren Buffet and talks about business and who’s buying and how to be defensible.

#76 Importing to USA, Brand Building & Email followup: Q & A Tuesday No. 12

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. 

Q2 Ben

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.

Comments

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.

Q3 David

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!