The plan with my move into Amazon FBA was first shared here. After hearing about Amazon FBA for over a year I swore I was not going to jump into a new business without an advantage.

This advantage took the form of a website that I had purchased from my eventual partner of BrandBuilders.io (affiliate site creation package is equivalent to what I bought) which was making $100/month that I had grown to make $1,000/month on Amazon Affiliates.

Seeing that many of the products this site was selling could seemingly be easily imported from China and private labelled I decided on a weekend my wife had left me alone to jump in an start a new business!

The basic concept of the model was to turn the 8% affiliate commissions into 48% private labelled product profit margin!

The simple model is to use the traffic from my website to promote the private label brand I import.

The simple 3 step plan was as follows...

3 Benefits of This Model:

1. Product Selection Is Easy – You are now selecting a product you know you can sell because you are already selling a similar product. Product selection can be a large stumbling block and this strategy helps remove that problem.
2. Huge Initial Promotion Not Required – The common strategy is to run at a loss while you continue to promote until you have “bought” sales rankings…this is not required (but can still be effective) with this model since you are already driving sales to your listings. Plus as Amazon turns down the weight they put on sales generated by huge promotions this strategy will become even better!
3. Minimal Risk of Capital to Buy Inventory – Since you can be reasonably confident your site will drive sales your capital is not at substantial risk. Buying the first order everyone has the fear "what if none sell" but since you have a website to drive the sales you can again be more confident you won't be stuck with product that won't move.

If you are new to my website or haven’t seen the previous posts here is a summary of all the locations I have talked about

So going into this business I made several assumptions about how the business was going to perform and shared them publicly on this site when I first started back in September.

Basically I created a model trying to answer the question of if I invested $100k and spent $50k to purchase affiliate site(s) and used the other $50k for working capital what would the return profile look like?

• NOTE – In my case I spent substantially less because I grew the site from a $100/month to $1,000-$1,500 per month site. For the purposes of this post/analysis I will treat the site as if I purchased it for $30k.

Here are the assumptions I had back when I started…

Below is an overview from the time when I decided to start building this business to the point when the deal closed.

This business had a lot of assumptions when I built the plan back in September. Many of these numbers were flat out guesses and I truly didn’t have a clue at how they would turn out.

Original Plan Summary – Invest $100k and generate a return of 191% within the year

So What Were The Actual Results Compared to the Plan?

Above shows a lot of the data for the business including the affiliate site engine driving this business and the substantial traffic increase it is experiencing right now!

There was a substantial failure in the business and that was one affiliate site I purchased died shortly after purchasing it. I have included none of the revenue it generated in this analysis but did include the $12k cost in the upfront capital. 

Where I Sold My Website and FBA Business

I considered a few options to sell my FBA business including EmpireFlippers.com but in the end my decision was to first attempt to sell to my audience directly by announcing the business was for sale here.

In the end there were a few groups that were interested and the conversations progressed over several months including…

1. Private Equity Group
2. Marketing Company
3. Private Investor

The synergy with the private equity group was low while the marketing company had some solid upside opportunities but in the end the most benefit that could be realized by the buyer was for the private investor.

I can say that the entire process took longer than expected (although in hindsight I shouldn’t have been surprised).

Creative Win-Win Deal

The buyer is a highly talented/hard working Sr VP of a fortune 100 company who is looking to apply his considerable focus and skills into a new venture. As part of the terms of the sale I will remain heavily involved/invested in getting him trained up to ensure he succeeds online! He was looking to purchase online businesses and for a very small premium he is getting a business that comes with extensive 1:1 training and me very incentivized to see him succeed all while investing only a portion of the final value of the site up front.

Valuation Bridge

How did we come up with a fair price? We used the baseline for FBA businesses selling in the marketplace and then made adjustments (some negative & some positive) to come to what was believed to be a fair number for all.

The $284 sticker price (tweaked to get to $281k) is only part of the deal terms with many additional terms added in to help protect the buyer and make this deal more of a win-win.

Key Deal Terms:

• Closing Date – May 10, 2016
• Down Payment = $100k (due once transition is complete)
• Earnout = $87.4k (Due Jan 15, 2016 based on the table below)
• Detailed Transition Plan to be Executed (See transition plan below)
• Ownership & Earnings 
• Jon – 1/3rd partner
• Partner – 2/3rd general partner

Earn out Basis:

Detailed Transition Plan:

6 Learning’s from the Sales Process:

1. Lawyers can cost a lot of money – Although not going through a broker I thought I was saving the 15% by making this deal a little complicated the legal fees added up on both the buyer and sellers side. The vast majority of the terms were solved before they even got to the lawyer but it still cost a lot of money to work through the deal.
2. Sales Process Is Complicated – This was my second sale of an asset with a sticker price over six figures and both times it took a lot of time for both the buyer and the seller to be comfortable with one another. Trust is huge and we certainly have it now but it takes time to naturally build it.
3. Find a Win-Win or Don’t Sell – I hate inefficiencies in life and business and unless I was selling in order to make the pie bigger or to create a better win-win I would not sell again. Since much of the effort of selling a website is simply wasted energy working with people who ultimately don't buy, no fault of them it is the process but it is a lot of hard work that doesn't generate real results. Talking with potential buyers to see if they would be a good fit is part of the process and I am thrilled with the people I met as part of the process but it was not pushing the business forward.
4. Data Transparency is Key – For all my spreadsheets calculating every number I had it built into a spreadsheet that goes right back to the raw data dump for every line item for both my affiliate site and FBA account. This level of detail helped to provide confidence with the data.
5. Finding a Good Deal & Working With a “A” Players Is Fun and Pushes Me to Be Better!
6. Accountants Can Help – The way a sale is structured can have significant tax implications. Reviewing the deal with my lawyer helped save a minimum of $14k in taxes by correctly structuring it.

Hijackers Almost Killed the Deal BUT… an Idea was Born:

During the sales process we started to get our first hijackers on our listings which…

1. Increased the perceived risk of the business and could lower the sales price
2. Stole sales again decreasing the sales price of the business
3. Could damage the brand hurting the sales price of the business

The result of these hijackers was my wife checking our listings at every hour of the day to help fight them off since rapid aggressive responses are key!

Due to this problem I parterned with some awesome people to put together a tool that helps people monitor their listings and help their sleep deprived wife get some sleep J

See the solution to monitor your listings and the full story here…

Try ListingEagle & Defend Your Listings!

7 Tips to Setup Your FBA Business Now to Sell Later

1. Make Sure All Data is Transparent - Don’t mix up multiple businesses or tracking codes. Data that is easy to check results in a better sales price.
2. Setup a Business You Are Going to Sell On Its Own – For businesses you are thinking you are going to sell for a reasonable price tag it is best for it to be its own entity. For me I made the mistake of not doing this and as a result will forgo any small business capital gains tax breaks (Canadian specific tax credit).
3. Build a Brand – Having a branded website for your private label brand will help increase your multiple by presenting yourself as a more established business.
4. Get Diversified Traffic – I achieved this through my affiliate sites but however you do this it is important to not have any single point of failure in order to earn a premium multiple.
5. Run Lean but Don’t Stop Running – If you are preparing to sell your business make sure to keep costs down but don’t stop pushing your business forward. The sales process can take a long time and it is vitally important that you continue to push your business forward during that time.
6. Diversify Suppliers - Similar to above it is never a good idea to have a business that can fail with any single point of failure. If a business doesn't have a backup for its main supplier(s) it can hurt the sales price.
7. Position Product in a Growth Niche – Positioning your product offering in a growth niche can provide a lot of interesting upside for a buyer. If you are looking to sell for a premium a dying market is not going to demand a premium.

How Much Is My FBA Business Worth?

FEInternational.com has a great post talking about selling an FBA business and from the image below shows that generally expect an FBA business to sell for 2.0X – 3.0X annual earnings (24X-36X monthly)

Source - http://feinternational.com/blog/how-to-sell-an-amazon-fba-business/

DigitalExits.com did a great summary analysing 15 deals in 2015 and found the multiple to be closer to 1.83X or 22X monthly earnings.

Source - http://www.digitalexits.com/amazon-fba-business-worth-want-sell/

EmpireFlippers have multiple FBA businesses for sale in their marketplace and have them priced from 22X-25X compared to 25X-30X for the websites for sale on their marketplace.

4 Places to Sell or Buy FBA Businesses

1. EmpireFlippers.com
2. DigitalExits
3. FEInternational
4. WebsiteClosers

I haven’t had much experience with these but certainly don’t recommend Flippa and can say that if I was going to list with a broker I would have listed with EmpireFlippers.com

Should You Use a Broker or Sell Your FBA Business Privately?

Reason to Use a Broker – The biggest benefit of a broker is the access to buyers who would be out of reach otherwise. The other large benefit of using a broker is their help in guiding you through the process with structured deal terms and some security to ensure you don’t get ripped off.

Hidden Cost of Using a Broker - Inflexibility to come up with a unique deal structure – If me and the eventual buyer had connected through a broker we would have struggled and been discouraged from coming up with this creative deal structure.

Reason to Sell Privately – Ability to structure a unique win-win deal was the main reason I liked the private sale model. In addition I was able to save the ~15% brokerage fees.

Hidden Cost of Selling Privately – Lawyers! Although they were necessary and did add value they certainly aren’t cheap!

Final Thoughts on Using or Not Using a Broker:

• If you have a straightforward deal and don’t have access to potential buyers than definitely list with a brokerage.
• If you have access to potential buyers and are looking to structure a unique deal than listing privately definitely makes sense.

Using a Broker Update (May 21) - Differing Opinion From Justin/Joe...

1. Yes, you avoid the broker fees selling yourself, but I think it's a bad idea for MOST people. (You're fine, Spencer's fine, etc. I'm talking about your average site owner) They don't know the ways they could be screwed over and aren't likely to get a great deal. In many cases, they sell for less. Avoiding the brokerage fee is only worthwhile if you're getting the same value, of course! (Jon Comment - I don't disagree here, getting experts to help is definitely worth it)

2. You mentioned not being able to get a "unique deal structure" is a hidden cost to brokers, but that's just not true. That's exactly what brokers DO! 🙂 We do earn-outs and deal structuring all day long as part of our value add. You COULD argue that a broker is more likely to offer complicated deal structures as their goal is to ultimately get the deal DONE, not to necessarily get the best price. (I think that's a better point, heh) (Jon Comment - I can't imagine how we would have gotten to this unique deal going through a broker...however I have not had enough experience with buying/selling sites to truly understand the unique deals brokers are able to structure so I believe it is possible to get some to truly unique deal structures with the HELP of a broker). 

Learn more about unique deal structures with this podcast episode​

Obviously this is a great success! I am thrilled with the growth of the business, the sale of the business and the next steps for me in this space!

Effort + New Problems = Opportunities

For the past 9 months in addition to building my other projects I have been putting a lot of effort into the FBA business and where effort flows opportunities follow.

The combination of effort and new problems has presented new opportunities which I am progressing with and excited about…