“​​Success isn’t about the end result, it’s about what you learn along the way.” – Vera Wang

You might not realize it, but your Amazon FBA business could be one of the most valuable investment opportunities out there.

In 2021, the average sales price for Amazon FBA brands was $1,246,759.04, based on a 40X multiple—an impressive 231% increase compared to 2020, when the average business sold for $538,741.62 at a 28.5X multiple.

This increase in valuation is largely driven by brand aggregators—well-funded institutional buyers who are rapidly acquiring Amazon FBA businesses to grow their portfolios. These buyers are often willing to compete fiercely for high-quality businesses, sometimes bidding more than the asking price to close the deal.

However, many Amazon FBA sellers don’t realize that selling their business is a real option. As entrepreneurs focused on building and scaling your brand, it’s easy to overlook the idea of an exit strategy. Without one, you’re left with limited choices: sell for less than you’d hoped, or simply shut the business down.

But what if you could exit with a six or even seven-figure payout?

With the right preparation, you can position your FBA business for the best possible sale price. In this guide, we’ll walk you through how valuations work, starting with the valuation formula, so you can get your business in top shape for when the time comes to sell.

Understanding the Basic Valuation Formula

The fundamental formula for valuing an Amazon FBA business is:

Valuation = 12-Month Average Net Profit x Monthly Multiple

In this calculation, the average monthly net profit is multiplied by a monthly multiple to determine the starting listing price. Some brokers use EBITDA, an annual profit figure, instead of monthly averages, which often results in lower multiples (typically between x2 and x5). Although both annual and monthly values are valid approaches, the monthly method provides a more detailed view of a business’s financial performance, especially when assessing recent trends.

Using a 12-month average accounts for any seasonal patterns and fluctuations in the business, making it ideal for first-time sellers, as it offers potential buyers a comprehensive look at the business’s performance over the year.

While calculating monthly net profit is fairly straightforward, determining the monthly multiple is more complex, as it depends on various factors beyond profit alone. Two FBA businesses making the same $10,000/month could have vastly different valuations based on these variables.

Factors that influence the monthly multiple include:

• Quality of product reviews and ratings

• The brand’s age and longevity on Amazon

• Sales across multiple channels (traffic diversity)

• Number of SKUs

For a quick estimate of your business’s worth, you can try using a free valuation tool, though it will give you only a ballpark figure.

Now, let’s explore how these factors contribute to the monthly multiple and, in turn, the overall valuation.

The Impact of Reviews and Product Ratings

Strong product reviews and ratings provide critical proof of a brand's market fit and demand, significantly impacting its monthly multiple. Customer feedback and ratings are among the first things potential buyers examine to gauge a brand’s reputation.

When listing businesses, we prioritize brands with solid reputations. For instance, FBA businesses on our marketplace generally feature a minimum of 100 product reviews and a 4.0 average star rating on their primary SKU. Buyers are more inclined to trust a business that resonates well with its audience.

Achievements like an Amazon’s Choice badge or a high Best Sellers Rank signal strong product demand and can further enhance the appeal of your brand.

If you're new to FBA, consider establishing a steady system for collecting reviews. Programs like Amazon Vine can help generate unbiased reviews, and Amazon's Seller Message Service allows you to actively reach out for feedback.

How Business Age Influences Valuation

The age of an FBA business affects its monthly multiple not simply because older businesses fetch higher prices, but due to the advantages that time brings to sellers.

Though exceptions exist—such as seven-figure FBA brands listed just over a year old—most sellers consider listing their business only after around two years of operation.

Older businesses generally command higher valuations for two main reasons:

1. Brand Establishment: Time allows a seller to build a recognizable brand. Gathering reviews, boosting SEO rankings, and increasing brand awareness within a niche are gradual processes that strengthen a brand’s value.

   

2. Operational Efficiency: With age, sellers often streamline their operations, making the business more self-sufficient. Sellers who can delegate effectively free up time to focus on scaling, which makes the business more attractive to buyers.

   

To boost efficiency, consider hiring virtual assistants for customer service or other tasks. If budget allows, outsource areas like PPC advertising or graphic design to specialists, allowing you to focus on growing your business.

The Power of Multichannel Selling

Expanding your sales channels beyond Amazon broadens your brand’s reach and reduces dependence on Amazon alone.

An omnichannel strategy allows you to connect with customers who might prefer other shopping platforms, thereby attracting demographics that your Amazon storefront might not capture. A multichannel presence also serves as a safeguard, helping to minimize the impact if your Amazon Seller Central account faces a suspension or if key SKUs are unexpectedly removed.

The Impact of SKU Count on Valuation

Your SKU count influences the valuation multiple by affecting both the workload required to manage each listing and the revenue generated per SKU.

For solopreneurs, handling too many SKUs can become overwhelming. A manageable range of three to eight SKUs is ideal for a one-person FBA operation. However, larger, seven-figure businesses often attract brand aggregators with dedicated teams, making it easier to handle more SKUs.

If only a few SKUs are responsible for the majority of your revenue, it may signal inefficiencies in inventory and management. Performing regular SKU audits can help you identify underperforming products to delist, keeping your catalog lean and efficient.

Where to Sell Your FBA Business

You generally have two main paths to sell your business: going through a private sale or working with a broker.

While DIY marketplaces are another option, we don’t recommend them. They lack buyer and seller protection if the deal falls through, and you’ll be handling all the transaction details yourself.

Private deals have similar challenges. First-time sellers may struggle with negotiating effectively or determining the true value of their business, leaving room for experienced buyers to influence negotiations in their favor—often leading to less favorable terms for the seller. Many sellers also fall prey to “fear of missing out” (FOMO), accepting the first offer due to anxiety about finding another buyer, even if it’s lower than their target price.

Working with a broker can offer peace of mind, as they’ll assist in marketing your business and negotiating for the price you want. Curated brokers vet buyers for financial capability, sparing you lowball offers and ensuring you receive serious, qualified bids, ultimately helping you secure the best possible deal.

When Is the Right Time to Sell?

A common mistake sellers make is attempting to time the market like a stock trade.

Instead, the best strategy is to sell when your business is performing at its peak. An FBA brand with streamlined operations and a solid track record of positive reviews will be highly attractive to buyers.

If your business still has untapped growth areas, don’t worry. Many sellers lack the time or capital to scale further, and these areas offer great potential for a new buyer to leverage. For buyers, these represent clear paths for growth and added value.

Selling your business when it’s in prime condition could result in the biggest financial gain you’ve ever received in a single transaction.

If you’re considering an exit, register on our marketplace to start shaping your exit strategy. Even if you don’t plan to sell right away, preparing now will set you up to sell when you’re ready.

Final Thoughts: Understanding Your FBA Business’s Market Value

Knowing the market value of your FBA business is essential, whether you’re planning to sell, attract investors, or strategize for growth.

By understanding the factors that contribute to your valuation—such as revenue, profit margins, customer loyalty, and scalability—you gain a clearer picture of your business's true worth and areas where you can enhance its appeal.

Curious about maximizing your FBA business’s value or preparing for a profitable exit?

Book a Call with us today!

Let’s explore the steps to elevate your business's market potential!