14 Questions to Ask Before Selling Your Business
Once you’ve built a steady, successful Amazon FBA business, you may begin to wonder if it’s time to sell. Before you make a decision about the future of your company, there are several questions you should ask yourself, your potential buyer, and anyone else involved in your company before selling your business.
The idea of selling may feel a little daunting, but it doesn’t have to be. All it takes is performing due diligence on the state of your company and understanding its value. Here are a few key questions to ask before selling your FBA business to determine if it’s the right timing for you.
Why do you want to sell?
Understanding why you want to sell your business is always an important first step. A prospective buyer will be interested in your reason for selling, as will your employees and anyone else professionally or personally invested in your online business.
For some, the “why” pertains to a change of lifestyle or new business opportunity. For others, it may be due to burnout and a desire to cash in on profits from years of hard work. Determining your why will make it easier to answer all the questions that follow.
Are you in a position to sell?
Before deciding to sell, you’ll have to establish whether your online business is profitable enough to receive a promising buyout. Most buyers have a minimum revenue threshold that they require when evaluating a company.
In addition, a prospective buyer wants to see a consistency in revenue in recent years and a promising product line that will be relevant for years to come. They want to acquire companies that don’t come with a high risk of lost profits in the future. Substantial and steady financial growth puts you in a good position to sell.
Do you have a loyal customer base?
Businesses with repeat customers, positive reviews, and a high level of engagement are promising for buyers as they project future growth. When looking at monthly revenue and audience reports, assess if there’s been a steady increase over the course of your business. Though trendy, of-the-moment items can cause sales to spike, once the buzz has died down, the audience usually goes along with it.
Are your products sustainable in a changing and growing market?
Evaluating your customer base also ties into the types of products you sell. Products that are core to the lives of the everyday consumer make your business of greater value than the flash-in-the-pan items. Trendy products often don’t have the sustainability to weather a fast-paced market. A growing FBA business relies on providing necessities for everyday users.
Some of the top-selling categories on Amazon include health and personal care, tools and home improvement, and home and kitchen products. Items that fall under these categories are ones consumers of all demographics require at varying stages over the course of a lifetime. These types of products continually keep people active in the buying cycle.
Have you built a reputable brand?
In addition to a consistently loyal customer base, a reputable brand that demonstrates a high level of new customer acquisition is just as valuable when selling a business. Amazon FBA business owners that are passionate and provide excellent customer service are enticing to potential buyers. It typically means they’ve built a strong brand with a positive online reputation that acquires new customers on a consistent basis.
Identifying factors that indicate an established, reputable brand include a large, engaged social media audience, high-quality products, excellent customer service, and overall trustworthiness. Consumers want businesses that are reliable and align with their core values and needs. The ability to deliver in these ways helps build successful businesses.
Do you have organized financial records and reporting on hand?
One of the biggest questions to ask before selling your business is: do you have your financial data organized and readily available? Are your statements and monthly reporting ready to be shared with a potential buyer?
Typically, buyers will want to see at least the past three years of financial records, tax documents, and other reports that show the value of your company and the history of its financial success. Whenever you begin thinking about selling your Amazon FBA business, work with a tax advisor to ensure these documents are accurate and ready to go.
Any red flags or unclear areas will delay or derail your selling efforts. You’ll want these corrected as soon as possible for the sake of your business in general, and to improve your chances of selling.
Are you ready to perform due diligence in preparation of a sale?
The time it takes to put together the documentation and information necessary for a business sale is time-consuming, especially if this has been previously delegated to another person or party. Performing due diligence takes time away from operating your business, which means you may want to call on a specialized professional to get your documents in line.
It’s not only important to gather the proper documents but also to take time to review them thoroughly. This will allow you to anticipate any potential concerns a buyer may have and be prepared to answer their questions for you.
Are there any areas for improvement prior to selling?
To have the best chance of receiving a payout you deem worthy of your business, it’s best to ensure it’s in its best possible shape. Identify areas where your efforts may be improved. This includes updating product descriptions, inventory, and marketing campaigns.
Polishing up your e-commerce store will help drive more sales and increase overall visibility. Both actions that will make your business more alluring in the eyes of a buyer. Additionally, if your revenue numbers have been steady but don’t yet meet the criteria of buyers you’re interested in, take time to improve your history of sales to prevent being rejected.
Asking yourself these and other similar questions will bring awareness to what you need to sell and if it’s the right time for you. It will motivate you to prioritize business exit planning, which will prove effective when positioning your company for a successful sale.
Questions to Ask Potential Buyers
In addition to the questions you ask yourself, prepare questions when researching buyers. Outlining questions to ask when selling your business will help narrow down your choices.
Finding the right buyer fit will make you feel more confident and assured about selling your business and receiving a payout that feels fair and adequate for you. Here are a few, key questions to take into consideration:
How quick is the payout?
Besides the personal attachment that comes with owning and operating a business, the money factor is the next biggest concern. Seek out a strategic buyer that has an efficient evaluation process and provides clear expectations of when you’ll receive a payout. At Forum, we offer sellers a chance to cash out years of profits in one day.
How long does it take to close the deal?
In the same vein as the payout timeline, work with experienced companies that know what it takes to close a deal quickly. Once it’s been determined your Amazon FBA business fits the Forum business model, you can typically expect an initial offer within 48 hours and a closed deal within 30 days, once offer terms are agreed upon by both parties.
What other advantages do I have as a business owner to sell?
When consulting with a potential qualified buyer, consider other advantages they offer. Guidance on your next business venture, experience working in your specific niche, and other specialized areas will differentiate between presented options and help you narrow down your choices.
What kind of experience do you have with Amazon FBA businesses?
Working with a company with specific Amazon FBA business experience will make the sale process easier and smoother. They’ll know what you’ll need to prepare for sale, and you’ll know they have expertise in the valuation of your kind of business. Look for a history of success with similar transactions and acquisitions when evaluating potential buyers.
Questions to Ask Others Involved in Your Business
There are likely other people that have a stake in your business, whether personally or professionally. There are questions to ask when selling your business in terms of strategic communication and a seamless transfer. Being prepared with straightforward messaging in a way that feels respectful and transparent will guide the transition in a productive and positive way.
How should communication be handled?
Once you’ve decided to sell your business, it’s best to be as transparent as possible with your management team for the best way to communicate what comes next. This is for your employees, as well as your customers, to make everyone aware of the business sale timeline and if, or how, it affects their involvement with your business.
What documents do I need to prepare for sale?
Financial statements are the starting point of the type of paperwork you’ll want to have ready in preparation for sale. You’ll also need to gather tax documents and conduct a business valuation assessment. Talk with your tax advisor and/or attorney about proper steps to take.
Additionally, depending on the size of your business, you may also need an appraiser to assess the value of your owned land, building, and/or equipment and machinery used. Make sure to make a “selling a business checklist” including all of the contacts you need to reach out to when getting documents ready for sale.
Bottom Line of Selling Your Business
Making the transition from owning and operating a successful business to selling it requires a lot of questions and planning before diving in headfirst.However, the process doesn’t have to feel daunting.
By being clear about your goals and the position of your business, it’ll allow you to negotiate terms with buyers that you feel comfortable with and ensure you meet the criteria they’re looking for. Knowing the right questions to ask before selling your business will help you feel confident and well-prepared when it comes time to sell.