Amazon is projected to earn over $435.3 billion in 2021 alone. If you’re a successful Amazon FBA business, you know just how much power this platform has to bring home the bacon.
Odds are, if you’re having a good amount of success on Amazon, you might have gotten some emails from firms that want to buy your little operation.
It sounds weird, but it’s actually legit: there are several firms out there that buy up and take over Amazon businesses (with a big payday in it for the sellers, of course).
You might wonder, “Why on earth would I sell my Amazon FBA business?” But as you grow, you might realize how hard it is to run a business at scale. What worked a year ago doesn’t work now that you’re raking in 7 figures (look at you, moneybags).
Sometimes acquisition is a smart way for Amazon sellers to get out of the business, get a nice fat check, and move on with your life. There’s a surprisingly big market for this, which means you can even have Amazon buying firms compete for your business.
Pretty crazy, huh?
But just because someone is interested in buying what you’ve built, it doesn’t mean you have to sell.
In fact, sometimes you’re better off staying in the business and optimizing it yourself, reaping the long-term benefits and profits.
Let’s dive into the nature of Amazon FBA businesses, the pros and cons of selling, and 7 steps you can take right now to boost your Amazon business’s profitability.
How does an Amazon FBA business work?
FBA stands for “Fulfillment By Amazon.” This is an option where you let Amazon store your products in its warehouse (or “fulfillment center”) and fulfill orders as they come in.
If you can swing FBA as an Amazon seller, you get a ton of benefits, like:
- Prime qualification: That’s right. FBA sellers qualify for two-day shipping and the “Amazon Prime” badge, encouraging Prime customers to seek them out first. Since these shoppers are more engaged and likely to buy, you want to attract as many Prime shoppers as possible.
- Improved search rank: Amazon’s algorithm seems to give preference to Amazon FBA products. If you’re struggling to stand out, the Amazon FBA distinction gives you an edge.
- Help with customer service and returns: Hate dealing with finicky customers and returns? Amazon will actually handle both for you when you’re an FBA seller, freeing you up to focus on your business.
Basically, Amazon FBA makes your Amazon business more efficient to run.
Since it handles storage, fulfillment, customer service, and returns, you need fewer employees to run everything. That can improve your costs and keep your business streamlined.
Amazon FBA business fees
Oh, but there’s just one little catch: Amazon charges you fees to do this. You didn’t think they would offer FBA out of the goodness of their heart, did you?
Amazon FBA fees depend on your product size and weight primarily.
Most Amazon businesses pay two FBA fees:
- Amazon Fulfillment Fee: This fee covers Amazon packing and shipping your stuff, as well as offering customer service and returns. They calculate this on a per-unit cost by weight. For example, small products weighing 10 ounces or less cost $3 per unit. If it’s over 21 pounds, it’s over $5 per unit. Understandably, oversized products also incur some pretty high fees, ranging from $21 - $200+ per unit (ouch).
- Monthly Inventory Storage Fee: Amazon also fines you if you store your products at their fulfillment center. They price this fee based on how many cubic feet of space you use in the warehouse. The price also goes up significantly around the holiday shopping season, so keep that in mind. Pricing starts at $0.75 per cubic foot and goes up all the way to $2.40 per cubic foot.
Keep in mind that there are probably other fees you might see as an Amazon FBA business, but these are the most common.
Aside from fees, Amazon FBA businesses also have to deal with getting enough cash to invest and grow the business.
And even if you manage to do that, the sheer size of a business can swallow you whole.
It’s no wonder that so many Amazon businesses are selling to firms like Thrasio.
What is Thrasio?
Founded in 2018, Thrasio is a firm that buys third-party Amazon sellers. With hundreds of employees and offices across the US (and soon, the world), Thrasio is a major player in the Amazon space.
It even claims to be the fastest US-based company to ever get to a whopping $1 billion valuation, so clearly, these folks have grown very quickly.
Thrasio bills itself as being “fast, fair, and reliable,” closing purchases within 45 days (but 7 days is their record!).
With 100 brands (and counting) under its wing, Thrasio specializes in acquiring successful Amazon FBA businesses. Usually, these businesses are hitting six- or seven-figures by the time Thrasio finds them, but still.
The big draw for Amazon sellers is that Thrasio works quickly, getting you out of the business pretty quickly.
Since Amazon FBA businesses get super complex the bigger you grow them, a lot of Amazon FBA sellers love the idea of getting one big check and calling it quits.
Thrasio says it pays upwards of $1 million for successful FBA brands, but it depends on the brand, product, and finances. From there, it integrates the Amazon FBA brand into the Thrasio fleet of products.
Pros and cons of selling your Amazon FBA business to Thrasio
So, did a firm like Thrasio send you an email asking to buy your business? Many Amazon sellers take the money and run—and we don’t blame ‘em.
Selling on Amazon is not easy. Particularly after you get your sales to six-figures.
Red tape, logistics, and finicky negotiations make selling your business all the more tantalizing.
But this path won’t be a fit for everyone. There are pros and cons to selling your business to a firm like Thrasio.
Thrasio has a lot of good things going for it, like:
- Big, cash payouts: Thrasio has paid $150 million to sellers so far. Keep in mind that Thrasio tends to go after brands that earn upwards of $750,000 per year. It’s standard to get 2.5 - 4.5X on your business’s earnings. So, if you make $1 million a year, you might get $2.5 million (in cash) from a Thrasio buyout. Not a bad nest egg, eh?
- Speed: Want to be out of your business ASAP? Usually, a business acquisition takes months, but Thrasio’s got their process down to just 45 days. They look at fit, write a letter of intent, create a P&L, and even orchestrate the legal proceedings.
- Incentives: Depending on your deal with Thrasio, they might structure your deal to include an earnout incentive, which means you earn more the better the business performs.
- Seamless transitions: Thrasio employs experienced FBA managers on its team, so you’ll work with experts to handle the exchange. No newbies allowed.
- Legacy: Are you worried that your business is going to flounder after you sell it? That’s a legit fear. But Thrasio boasts that it has plenty of resources to keep the business going, handling larger order volumes and optimizing the business for greater profitability.
Sounds pretty sweet, right?
For many people, it is. But selling to an Amazon FBA firm might not be right in every situation. Selling has downsides like:
- Losing long-term profitability: This is the biggest bummer of selling your Amazon FBA business too soon. Thrasio is buying your business because it’s a good deal for them. That means you’re leaving money on the table by selling. Now, Thrasio has way more resources to make your biz more profitable, but know that you might lose out on long-term profits by handing over the keys to the kingdom.
- Hiring counsel: Thrasio has in-house counsel and finance professionals, but you still need to hire your own. Because they’re purchasing your business, you need an impartial pro to look at all the numbers and agreements before you sign anything. Remember to factor this into the cost of selling your business.
- It’s really fast: While Thrasio says they won’t put you under any pressure, the lightning-fast 45-day closing procedures can be a hurricane of paperwork and complexity.
- Consulting agreements: You might want to be free from your business, but on occasion, Thrasio may ask Amazon sellers to stay on with them on a consulting basis. That just means you’re there to answer questions or help if problems come up, but if you want a clean break from your biz, know that it doesn’t always work out that way.
The alternative? Earn more in your Amazon FBA business
If you’re really jazzed to sell your Amazon FBA business, we aren’t here to stop you. We know how fees, logistics, and working nearly 24/7 are a grind.
But you know what? You don’t have to sell your business to make it insanely profitable.
The alternative to selling to a firm is optimizing the heck out of your business to increase sales.
That’s what an acquisition firm is going to do, anyway! If you’ve still got the fighting spirit, it’s time to optimize your products, supply chain, and marketing strategies to be the top dog on Amazon.
Not sure where to start? After studying these acquisition firms for a while, we broke down 7 essential steps an Amazon FBA biz needs to master to boost profits.
1 - Set goals
Sure, “goal-setting” sounds like some motivational, woo-woo advice, but you’ve got to set goals for your Amazon business.
Did you know that people who write down their goals are 700% more likely to achieve them?
You’ve got to do the same if you want your business to reach Thrasio-level optimization. And that means choosing KPIs, or key performance indicators, for your Amazon biz.
KPIs make it easy to see how your business is performing.
It’s like checking your car’s oil: the right level of KPIs means you’re on your way to Profitability City.
But what KPIs matter most for an Amazon FBA business? Well, it depends on your goal.
If you want to reach $1 million in annual revenue by 2023, what KPIs should you hit to get there? For many Amazon pros, that means targeting metrics like:
- Shipping fees
- Return rates
- Customer ratings
- Conversion rates
- Advertising spend
- Buy Box wins
Because eCommerce moves so quickly, we recommend tracking your KPIs on a weekly, monthly, and quarterly basis.
Instead of wasting time and money on what isn’t working, KPIs keep you laser-focused on achieving your goals. If the numbers aren’t looking good, that’s your first sign that you need to make a change—fast.
2 - Sell in-demand products
“What?” you might think, “This sounds like an obvious one.” And you’re right.
Problem is, so many Amazon FBA businesses are still trying to scratch out a living by selling really difficult products. (And they usually don’t realize that’s a problem.)
If you want to make major bank on your products—and you should—you need to make some changes in your biz, like:
- Targeting consistent products: Thrasio commonly buys up Amazon businesses in the housewares, toys, games, and medical devices categories. That’s because these products aren’t fads; people will probably still buy spatulas in ten years. Stuff like fashion and tech change too much to bring in consistent revenue. It’s okay to sell fewer sexy-sounding products if it means you’re earning consistent money.
- Trademarking products: Here’s another thing about Thrasio—they buy Amazon businesses with patented goods. That’s because, if someone on the Amazon marketplace tries to copy you, you can go after them for infringement. This adds a much-needed layer of defensibility to the Amazon marketplace, helping you stay profitable.
- Carefully adding new products: If you have a hero SKU, you’re relying too much on just one product for your revenue. If demand suddenly drops, you’re in trouble. Add new products to your store, but carefully. Look at items in different categories, and ideally with less competition. Check your metrics and test the product before you go all-in.
- Switching it up: There’s nothing wrong with introducing new colors, sizes, variations, or bundles to your product mix. You can even try testing different variations against each other to see which your customers prefer.
3 - Market your Amazon FBA business like crazy
Don’t join the faceless crowd of nameless FBA sellers. It’s time to stand out, and that means creating a brand and marketing like there’s no tomorrow.
Sure, there’s nothing wrong with going the paid ad route with Amazon Sponsored Products.
Yes, you can pump tons of money into Amazon Ads, but the amount of competition there can easily wipe out your budget.
Go for less-competitive and higher-ROI activities like:
- Optimizing for organic search: Amazon SEO is a long-haul strategy, but the rewards are so good that you’d be crazy not to try it. Amazon SEO is a big world, but it comes down to keyword targeting, list optimization, image changes, and repricing strategies.
- Partnering with influencers: You don’t need a separate eCommerce website to partner with influencers. When you need to stand out from the competition and drive more traffic to your Amazon listings, influencers get you across the finish line, often with an 11X lift in ROI. With a partner like Trend, it’s easy to locate experienced content creators to boost your Amazon brand.
4 - Get buddy-buddy with suppliers
Are you treating your suppliers like faceless machines instead of human beings? If so, you’re losing out on a lot of perks.
China accounts for 20% of all global manufacturing, so chances are good that you’re working with a supplier in China.
With your supplier across the globe, it can feel really difficult to strike up a relationship with them. But, boy, when you do, sparks fly.
Strong supplier relationships can help you:
- Score sweet discounts.
- Get more favorable terms, like 60-day payment windows instead of 30-day payment windows.
- Improve product quality in the long-term.
If you’re able, it’s always best to physically go to your manufacturer (wherever they are in the world), stroll the factory floor, and get a little facetime. This shows the supplier that you’re in it for the long haul and often gives you access to sweet perks, improving profitability and quality for years to come.
5 - Hire legal and financial help
Are you still trying to DIY everything in your business? That’s cute when you’re earning four figures a month, but at the six-figure level, you need serious professional help.
Unless you’re a CPA or lawyer yourself, this means hiring legal and financial experts. You can keep these folks on a monthly retainer to ensure everything runs smoothly.
We know this sounds like a big expense, but it’s much cheaper than getting the math wrong, paying taxes incorrectly, or unknowingly violating someone else’s copyright.
If you decide to sell your Amazon FBA business down the line, you’ll still need lawyers and accountants on your side. Why not hire them now to take your biz to the next level?
6 - Sell outside of Amazon
Okay, here’s the thing: although Amazon accounts for 45% of the eCommerce market in the US, it’s not the only place where people shop.
In fact, firms like Thrasio have repeatedly said they’re looking into non-Amazon sales platforms for their Amazon products.
Why? It comes down to several factors that affect the longevity of your biz on Amazon:
- Data: Amazon restricts your access to customer data, which means you never really get a complete idea of who your customer is. With such minimal data, it’s tough making data-driven decisions about your products, features, and listings.
- Lead nurturing: Want to send shoppers a followup email? Too bad! Amazon is the gatekeeper of customer info, preventing you from nurturing people via email marketing.
- Algorithm changes: You’re doing great on Amazon today, but you’re still a slave to the platform. If it changes anything on the back-end, your Amazon-only business could cave in overnight. That’s way too much risk in the long term.
If you haven’t already, make a strategic plan to sell on other platforms like:
There’s nothing wrong with staying on Amazon, but a little diversification never hurt anybody.
7 - Prioritize review management
90% of all shoppers check reviews before they buy anything online.
And guess what? 63% of shoppers start their product research journey on Amazon.
If you aren’t managing your Amazon FBA reviews right now, take it off the back-burner and put it at the top of your to-do list.
You need to have great reviews, and lots of them. That’s the best way to both stand out from other sellers on Amazon and to convince shoppers you’re the best solution.
It seems that 10,000+ reviews is the magic number for securing a Top 3 placement on the product results page. If you want long-term success as an Amazon FBA seller, you’ve got to get to that level.
That means collecting a crazy amount of positive reviews, which is no easy feat. This won’t happen overnight, but you can boost reviews by:
- Replying to every single review: You shouldn’t reply only to negative reviews. You need to respond to every single customer review on Amazon. This shows you’re attentive to feedback and helps to build a positive relationship with shoppers. Thank customers for their positive feedback and use a checklist to handle negative reviews with grace.
- Making things right: If you’re getting a lot of negative feedback, it’s a sign that something’s wrong. Instead of burying your head in the sand, use this as an opportunity to fix your business. Does the product break? Were there shipping problems? Did you take too long to reply to a customer’s question? Fix the problem for each individual customer, but also address problems on a large-scale basis. It’s not a fluke if 50 customers complain about the same thing!
- Reporting irrelevant comments: Sometimes you’ll get a troll on your Amazon page; it happens. If the comment violates Amazon’s terms of service, report it! If your complaint is legit, it’ll be taken off of your record. Nice, right?
Your Amazon FBA biz is getting so huge that it’s hard to handle. If you want to offload to an acquisition firm like Thrasio to start fresh, go for it! There are a lot of benefits to selling your Amazon business.
But if you’re not quite sold on selling and have plenty of fight left in you, it’s time to optimize the heck out of your Amazon FBA business. Follow our 7 hacks to set the market ablaze with a sleek, sexy business that rakes in the dough.
Oh, and you don’t have to do all of this alone, either. Trend helps Amazon eCommerce businesses boost sales through the power of influencer marketing and content creators. Curious how it works? Create your free account now.