When you’ve spent time with a blog like me, you repeat themes. It is inevitable and sometimes logical. Interestingly in this case not so long ago. Six months ago, I answered the question by doing a first calculation with what our Amazon business could be worth.
Important Nuances About Selling an Amazon Business
Six months ago, based on the numbers we had at the time, I came up with an estimated value of 140,000. Here are some nuances and additional information to the first post.
- A business is worth as much as the buyer is willing to pay. It’s always a different situation if they want to buy from you or if you want to sell. The first scenario obviously puts you in a better situation.
- A private label business with its own products is worth more than a resale business. Our own products are already charging more now than six months ago, but we are still at a very low level.
Adapted calculation of the sale value of our Amazon account at the end of 2022
Today we are going to look ahead assuming that we are going to be able to achieve the goal of reaching 1 million euros in sales on Amazon. This could be achieved with more aggressive pricing reaching a lower margin of say 20%. The profit we could get, also subtracting the increased business costs, would be 100k. Six months ago I applied a 2-3 multiplier. Knowing what I know today, I would lower it to 1.5-2.5.
Company value (pessimistic scenario)
In a pessimistic scenario, I would apply the lower multiplier. The Amazon business could be worth 150k. In this case, the buyer would only value what the account generates in a year. We would also be in an active search scenario for a buyer. If you think about it, this sale price would be a bargain because in less than 2 years a buyer could have recovered the investment. For that price, finding an Amazon account with those measurements, I would be interested in buying, but I think that’s a realistic number for a business based on reselling and selling third-party products like ours.
Business value (optimistic scenario)
In a scenario as the name suggests, the multiplier could possibly be higher. In this case, we would have a buyer contacting us with an interest in buying the business. Here the multiplier could be 2.5 and in an optimal case even 3. If we apply 2.5 we would be talking about 250k. If you ask me, that doesn’t drive me crazy either. This is too low a figure for a company that generates 100,000 profits per year. In our case, the profits will increase since we continue to invest and our own products will have an increasingly important weight.
In summary: an Amazon account must have a very high turnover to reach relevant figures. It can also be seen as an opportunity to act as a buyer. Today, I am not adding the potential sale value to the equity. I will add it at some point. We’ll see.