Starting in the Amazon FBA business requires time, dedication, and a willingness to learn from trial and error. Success often takes three to six months as new sellers build momentum. To accelerate your journey, consider purchasing an existing Amazon seller account, much like buying a retail store. While the Amazon FBA model offers advantages for both buyers and sellers, remember that each business is unique, and there are important factors to consider before making a purchase.
This blog seeks to offer you valuable information about the process of purchasing and buying an Amazon FBA business. From the straightforward task of updating your seller central account to the vital considerations before transferring ownership, we’ll cover everything you need to know.
Key Considerations Before Acquiring an Amazon Business
Before diving into the purchase of an Amazon business, keep the following factors in mind:
Review Financial Records
Your first step in evaluating an Amazon FBA seller account should be to examine its financial records. Managing accounting can be complex, so consider utilizing accounting services like Xero or QuickBooks to simplify the process.
Understand Supplier Relationships
Suppliers are a pivotal component of any Amazon business, significantly influencing its success. Take the time to review agreements, and familiarize yourself with terms, lead times, and any potential hidden costs. Connect with the manufacturer to understand the dynamics of the partnership. Key discussion points should include:
- Pricing models and possible discounts for bulk orders.
- Lead times for production and shipping.
- Quality assurance standards and any necessary certifications for Amazon.
Establish clear communication with suppliers to ensure both parties understand the terms of the agreement. Avoid pushing for excessive cost savings, as this may damage your relationship and impact product quality. Additionally, ensure all legal aspects regarding the product are addressed; if necessary, consult an experienced attorney to review the process and safety documentation.
Familiarize Yourself with Advertising Metrics
To remain competitive in the marketplace, leveraging Amazon-sponsored ads is crucial. Gather as much advertising data as possible, keeping in mind that Amazon only retains data for the past 90 days. Analyze monthly and bi-monthly reports to gain insights into key Amazon seller metrics like CPC rates and ACoS, which will help you assess the profitability of ad campaigns and set realistic goals.
Assess Seller Account Health
Understanding the health of the Amazon account is vital for determining the viability of the Amazon FBA business. Sellers must adhere to specific criteria to maintain their accounts, and purchasing an account with poor metrics could lead to suspension. Check the account’s feedback score to gauge its overall health, as reinstating a suspended account can be challenging.
Calculate Amazon FBA Fees
Estimating profits can be tricky for Amazon sellers due to the complexity of Amazon’s FBA fee structure. Familiarize yourself with storage fees and referral fees, which can range from 8% to 20% of your gross revenue. Ensure you thoroughly review these figures to avoid being misled by inflated profit claims.
Evaluate Promotions and Giveaways
Utilizing product promotions and giveaways can be effective in influencing Amazon’s A9 algorithm and building sales history. However, while discounts can boost sales, they may not be sustainable long-term. Be sure to review the promotional history before making a decision.
Analyze the Competition
Before selecting a business to purchase, it’s crucial to study your competitors. Investigate their top-ranking keywords, customer reviews, and fulfillment methods.
Factors Affecting the Value of an Amazon FBA Business
In addition to the points mentioned, consider the following factors that can influence the value of an Amazon seller account:
Type of Business:
- Private Label: Owning your brand can be attractive to buyers due to consistent supply and established sales history.
- Reseller: This model involves purchasing products from wholesalers and reselling them on Amazon. While it can offer quick returns, it may be less lucrative due to market volatility.
- Proprietary Products: Selling unique items that only you offer can make your business stand out and remain appealing to buyers.
Age of Business:
- Businesses older than three years tend to have higher value, while those less than a year may attract lower offers.
The Process of Selling an Amazon Business
Selling an Amazon FBA business is generally straightforward but can become complex depending on the business’s size. The typical steps include:
- Seller decides to sell their Amazon business.
- Business valuation is conducted.
- A prospectus is created, detailing business performance.
- Potential buyers are identified.
- Price and terms of the sale are negotiated.
- Funds and assets are transferred.
- The new owner receives training to ensure a seamless transition.
Actions to Consider Following the Acquisition of an Amazon Seller Account
Once you’ve successfully purchased an Amazon seller account, there are several important updates and actions you need to take to ensure a smooth transition:
Update Payment Methods:
Make sure to update the payment method associated with the account. This involves providing the correct credit card information that Amazon will use to charge seller fees.
Change Login Credentials:
Secure your new account by updating the login information. Obtain the current credentials from the previous owner and change them to something only you know.
Revise Credit Card Information:
Update the credit card details to ensure Amazon can charge the correct account for fees moving forward.
Provide Bank Account Details:
Enter your bank account information so that Amazon can deposit your earnings into the correct account.
Update Tax Information:
As the new account owner, you’ll need to update the tax information, including your EIN or SSN, to complete the ownership transfer.
Modify Account Name and Email Address:
Change the account name and email address associated with the account to reflect your information. This is crucial since Amazon will send all future communications to this email address.
Final Thoughts
Purchasing an Amazon FBA business can be an exciting opportunity, but it requires careful consideration and due diligence. Each business comes with its own set of challenges and rewards, and understanding these nuances is key to making a sound investment.
Before moving forward, it’s important to evaluate your risk tolerance and ensure that your goals align with the realities of managing an Amazon FBA business. While the profit potential is considerable, the challenges can also be significant. If you have any questions or need further assistance with selling on Amazon, don’t hesitate to reach out to us at E-Cosmics. We offer comprehensive Amazon FBA services to help you succeed.
