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Interview with Coran Woodmass about Buying and Selling Amazon FBA eCommerce Businesses

In 2013, Coran started out as an investor buying and selling online businesses. After exiting an e-commerce business he built from scratch, he launched an FBA business, which he planned to build up to sell. Then in mid-2015, Coran got started as a broker and since then he's spoken to 100s of buyers and sellers and has been involved in numerous transactions as a broker and consulting on deals. After noticing a trend towards more Amazon FBA businesses being ready to sell and more buyers looking for FBA businesses to buy, Coran launched The FBA Broker in mid-2016. In 2017, TheFBABroker.com helped Amazon FBA owners sell 174 FBA businesses worth $329 million dollars.

 

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Trevor Fenner:
Hey guys, welcome to the eCommerce Paradise podcast. Today, I have a special guest on the shows, his name is Coran Woodmass. He is the Founder of TheFBABroker.com, a business that helps people sell their Amazon FBA businesses.

Trevor Fenner:
Welcome to the podcast, Coran.

Coran Woodmass:
Hey, Trevor. Thanks for having me.

Trevor Fenner:
All right, man, your story is really interesting, and it's really cool to know that there's people out there helping others sell their businesses, because the process of selling a business can be a really confusing, bewildering kind of a thing when you're first getting into it.

Trevor Fenner:
Can you first start a little bit about your story? And then, we'll get into how you help people with The FBA Broker.

Coran Woodmass:
Sure. I started about five and a half years ago, looking to invest my own capital buying and selling digital assets. We also built and sold an eCommerce business at the same time, then started into ... Kind of fell into Amazon, in the next project that we launched, which was a supplement business.

Coran Woodmass:
At the same time as I was buying and selling, having some wins, having some failures with this project, I had a lot of friends ask me, how do you vet a business for sale? How do you see if it's legit, how do you know if you should invest your capital or not? On the other side, is how do you prepare for sale, then get the best price when you go to sell? That started that part of the brokerage side.

Coran Woodmass:
I started working for another brokerage, and that was great. Then, I saw a trend on the buy side, for demand in this space, in eCommerce specifically with brands selling via Amazon. That's how we started The FBA Broker two years ago. Now, the size of businesses we deal with are much larger than I was purchasing, back when I was investing. It scales very quickly, thanks to the power of Amazon, for the most part, but also, I've met some really interesting investors in this space. And also, solos and brand owners building really substantial businesses now.

Trevor Fenner:
That's amazing. Amazon is very, very powerful. I'm in the middle of reading the book called, The Everything Store, and it's wild how much they've gone through in their decades, now, of being online and reforming their business as they go, and stuff like that. It's amazing how many sellers there are on the marketplace nowadays, like you said. It's not just a small thing anymore, it's huge. Some of these brands are getting huge.

Coran Woodmass:
Yes.

Trevor Fenner:
It's really impressive, actually, about the size of a business you can build, just with Amazon.

Coran Woodmass:
Yeah. Yeah, I have a listing right now we just listed this week, they do $16.5 million, and about $14 million in revenue, from Amazon. Yeah, there's some large deals out there.

Trevor Fenner:
Yeah, I agree. Incredible. Of course, it is the everything store, so you're not limited to selling any on particular niche of product on Amazon. You can, basically, start almost anywhere, I would say. High ticket, low ticket, whatever you want to do. Yeah.

Trevor Fenner:
So, you have a little bit of experience starting and launching and FBA business. Can we start a little bit about that first, before we get into how you help people sell businesses? Maybe, talk about FBA, for the listeners that don't know a whole lot about FBA, the business model, and how it works. Can you just shortly explain that?

Coran Woodmass:
Sure. Amazon is a sales channel, like any other sales channel. It really starts with figuring out ... I just had this conversation at dinner, last night. It really starts with figuring out who your target customer is, what their pain points are, and then figuring out what products solve that problem better than what's out in the marketplace. That's the best place to start whatever you're creating products. Amazon just happens to be one way to reach those customers, and validate that is a solution to a pain point.

Coran Woodmass:
FBA itself stands for Fulfillment By Amazon. Amazon will, effectively, run the whole logistics of your business for you. You just find and source the products, send it into Amazon. They'll do the sales for you, so promote it on their platform, and also handle all the logistics and first layer of customer service. It's a really attractive way to get in, and get started, and prove out that you've got something that's better.

Coran Woodmass:
What we're seeing now is a lot of sellers and a lot of operators in the space, they find one product, or one ... The best way to do this is to find one niche demographic to go after, and then build a suite of products for that demographic. What are they buying next, what would they buy with it, before, during, and after that purchase? That's what we've seen as the most successful way to use Amazon.

Trevor Fenner:
Yeah, I couldn't agree more. That's very smart, and building a brand, of course, is the most powerful asset you can have at all. I'm sure that multiplies, many times, the value of any Amazon FBA businesses. Right?

Coran Woodmass:
Yes.

Trevor Fenner:
Any branding that an entrepreneur puts into it?

Coran Woodmass:
Yeah, that's ... The caveat to that, though, there's been some courses in the past that talk about branding, that aren't really branding. Just having one product, and putting a brand name on it is not branding. Having that customer experience, that one demographic, multiple products for that demographic, that starts to build a brand. If you can build something outside of Amazon as well, that's even better.

Coran Woodmass:
We've actually seen a shift in the last, say, six months, and my prediction in the next six to 12 months, a more generic type of FBA business that, four years ago, just finding out what product sells, and having a range of random products that aren't related in any way, will actually become unsellable in the near future. Buyers are just getting really smart with what they're looking for, there's a lot of options on the market. It's easy for them to compare your business versus another. That's really the first layer that you want to work on, if you're going to sell.

Trevor Fenner:
That's interesting, yeah. A lot of different things are changing, and I know the marketplaces are changing all the time, as well, as is the technology. That makes a lot of sense.

Trevor Fenner:
For somebody that has an FBA business already, either it's just in Amazon, or it's also on Amazon, their own sales channel, what kind of things do they need to be preparing for, if they are thinking about maybe wrapping up their business to sell?

Coran Woodmass:
Yeah. The first thing is, do you have a real brand? Like we were saying, are your products serving one customer? Are they good products, are they differentiated, different in some way for that demographic? If you've got a tight demographic focus, you have a good brand, and you don't just have one hero product ... That's something that we see quite a lot. If you've got, say, five to 10 products selling quite well, all to one demographic, you've got something sellable. Or, more, but that's the more.

Coran Woodmass:
If you have a random suite of products, no real brand focus, what I would start with is taking some cashflow from that business and doubling down on one of those niches, that one demographic, if you're going to sell. The days of those types of businesses, selling a few ... There's quite a lot that aren't selling. We've been tracking the whole market of sales for two years now, and the biggest category as far as list price, is $100,000 to $500,000. The first six months of this year, it suddenly had a 13% sell through rate, at that price point. This is one of the major reasons why businesses aren't selling. I don't know about you, but if I list my business for sale, I want to get [inaudible 00:07:34] good shot at selling. 13 sell through rate doesn't sound great to me.

Coran Woodmass:
The next thing you want to do is work on your numbers. You really need to understand your numbers. This is one of the things that we, initially when we engage with clients, is actually helping them tidy up their books and actually figure out exactly how profitable they are. Most people estimate profit, they use online tools. Any online tool you use, whether it's Amazon specific ones, QuickBooks, Xero, it's only as good as the information you put in. We often find that there's more work that needs to be done, and net profits are typically a lot less than people estimate. Everyone knows their revenue numbers, because that easy to find. The net profit of the trailing 12 months could be anywhere from 30 to 50 percent less than someone thinks, once we actually get through all the books. We've only seen it be more twice, in hundreds of deals that we've looked at.

Trevor Fenner:
Interesting. Yeah, that's true. Unless they have a professional accountant on hand at all times to manage their books, no matter what entrepreneurship role you're in, in your business, it can be definitely a big pain in the butt to get the books together. It's an important role that entrepreneurs should be taking seriously, is managing their books on a consistent basis.

Coran Woodmass:
Yeah.

Trevor Fenner:
Getting with an accountant as well, especially at a bigger size of a business, right?

Coran Woodmass:
Yeah. That's something you should know along the way. One of the biggest issues we see when we start going through this process with clients is, sometimes too much inventory. Not just too much in stock, but also too many SKUs. If you break down the profit by SKU, or by channel, it may not actually be as profitable as you think, so you may want to kill some of those lines, sell them through, discount them, get rid of them, before you go and sell. Often times, a buyer won't want to buy stock that isn't selling, or a product that just isn't selling well.

Trevor Fenner:
That makes a lot of sense. I'm actually looking at your page now, on the website TheFBABroker.com. You have a page called, Can You Sell Your Business, there's a link at the top of the website. If you guys are interested in selling your business, you can go to TheFBABroker.com, that's Coran's website, and a quick link at the top.

Trevor Fenner:
There's a lot of really cool information here. You actually work with a few different types of sellers. There're resellers, which could be drop shippers.

Coran Woodmass:
No, we don't work with resellers.

Trevor Fenner:
You don't work with resellers? Okay. You're just talking about the type of businesses there are, and then which ones you want to work with. I understand, okay. That makes sense.

Trevor Fenner:
If you are just drop shipping on Amazon, then you probably need to come up with your own product before you are going to think about selling your Amazon business, and that's for obvious reasons, right? You don't have any brand equity there, you don't have any marketplace domination, no brand in the marketplace of your own, obviously. It makes a lot of sense.

Coran Woodmass:
Drop shipping is an interesting one, with Amazon. Sometimes, you can have exclusive rights to drop ship on Amazon.

Trevor Fenner:
Yeah.

Coran Woodmass:
What we're talking about with resellers is a subsection called retail arbitrage, or online arbitrage, where you go and find something in a store that's on sale, then you put in on Amazon and go sell it. There's a lot of people making really good money doing this, this arbitrage play, but it's not consistent, and there's not a consistent supply, which is the reason buyers aren't really interested in that type of a business.

Trevor Fenner:
Yeah, of course. Yeah, that makes a lot of sense. It's a great way to get started, if you're just getting started as an entrepreneur selling online, but, of course, you should probably think about growing out of that as an entrepreneur, and creating your own product line, or just creating your own eCommerce, or one of the two, either way you want to go with that.

Trevor Fenner:
The two people you do work with are private labels and proprietary products, it sounds like to me. Does that sound right?

Coran Woodmass:
Correct.

Trevor Fenner:
Yeah, I got it.

Coran Woodmass:
That's right.

Trevor Fenner:
Obviously, the age of the business matters a lot. The longer the business has been around, the more sustainable it is, generally, it's proven itself over time. What are you guys looking at, as far as the multiples go? Every 12 months you get, maybe, a 24X multiple? Is that, generally, how you guys do it?

Coran Woodmass:
Yeah. What we work off, is ... What more traditional look at is 12 months of trailing revenue and trailing net profit, then they'll multiple that 12 months. Typically, an average Amazon based business could sell anywhere from two to three times your annual net profit. There're reasons for it to sell a lot lets, or not to sell at all, and there're reasons for it to sell a lot higher.

Coran Woodmass:
The larger the business, if you're in seven, eight figure revenue range, with good profit, you're probably in a three to five multiplier of net profit.

Trevor Fenner:
Sure, makes sense. What are some of those things that might diminish the value of a business? I can imagine, maybe, the volatility of inventory, some of the same things that might make it not a good business in the first place. The same reasons retail arbitrage isn't a good business, inventory is volatile, maybe certain things like that. What are some other reasons why someone's business would be worth less?

Coran Woodmass:
Sure. Just give me two seconds. Sorry, we might need to pause this.

Trevor Fenner:
Oh, no worries.

Coran Woodmass:
I'll just pull this up, it'll make it easier. I did a presentation over the weekend.

Trevor Fenner:
Oh, sweet.

Coran Woodmass:
With five [key elements 00:12:41]. I just want to pull this up, because it'll actually help a lot.

Trevor Fenner:
Yeah, I'll edit that out, that's fine.

Coran Woodmass:
Okay. The five key elements we see as being necessary if you want to sell your brand, and then also will increase the multiple.

Coran Woodmass:
Number one is brand synergy, that's what I was talking about before. Your brand needs to serve a specific target market, specific demographic. You can have multiple brands that serve specific demographics, but they really need to be a product suite, not just one product, in most cases.

Coran Woodmass:
The next thing you want his healthy net margin. Out of the 370 odd million in transaction we tracked publicly last year, the average net margin of a business that actually sold, not that was listed, but actually sold was 30% net margin. You really want your net margin to be as high as possible. 30% is really the mark that you're hitting for. We'll see businesses in growth mode, operating at around 18 to 25 percent, typically.

Coran Woodmass:
The next is product uniqueness and diversification. The product itself needs to be different, and a little bit harder to source. If a buyer can just look at the product and then go source it on Ali Baba, with no alterations, that's not really defensible. Also, the diversification of the product line is important. You don't want that one hero product. We see a lot of Amazon-based businesses with one hero product, making the bulk of the revenue. That's not as attractive to a buyer.

Coran Woodmass:
The next is the size of the business. The bigger the business is, everything else being equal, the higher the multiple will become. What we're looking for right now, or when we start thinking about selling, you really want to be, at minimum, at $1 million in revenue, and growing. That's really the basic level for a brand to matter. It means that you've got some cut through on the market. Anything below that, maybe the market's not big enough, maybe it's a hobby, maybe it's a cycle and it's going away, that's what we've seen.

Coran Woodmass:
Then, the last thing year over year growth trends. A buyer will always want to see what's the trend of the business year over year, not just month over month. Typically, with that growth trend, we see an ideal time to sell a brand that's selling via Amazon is typically three to four years.

Coran Woodmass:
A lot of people ask me, how do you build up a brand and sell it in 18 months? Well, we have actually done this in the past, but it's not a guaranteed way to do it, and it's not the best way to get the best return for the time and effort you've put in, and the risk as an entrepreneur. Typically, that first year you're just figuring out what's working. The second year, you're doubling down on growing what's working, ideally funneling more products to that demographic. The third and fourth year, you're still growing, optimizing, and then optimizing your net margin for sale, is what you want to be doing in that last six to 12 months before you go sell, is really optimize the net profit of the business.

Trevor Fenner:
That makes a lot of sense. Down here, you mention diversification of the business, so different products, niches, traffic sources, you mentioned that already. Also, what was interesting to me was traffic sources outside of the Amazon ecosystem. Do you see this a lot with sellers, where they've actually established traffic sources outside of Amazon going to their products listings? Is that a new trend that you're noticing?

Coran Woodmass:
Yeah. Traffic sources themselves don't matter, what matters is revenue. The revenue only really bolsters and adds to a multiple if it's over 30% of the revenue.

Trevor Fenner:
Oh, okay.

Coran Woodmass:
[inaudible 00:16:31] some sales, but their revenue is 99% Amazon, that's not diversified. I was just talking to some guys with a massive brand over the weekend at a conference, and they were saying they've just got Shopify sales to [inaudible 00:16:45] percent of their revenue, and they're real eager to hit that mark, which is actually really tough to do. That's why it's worth more, because Amazon, in some categories, can just be put products on, get them starting to rank, and the sales will just multiply from there, so it's hard to compete outside. It also depends on what products you're selling, because sometimes getting cold traffic to be excited about teaspoons could be really touch, whereas there's a ton of people searching on Amazon for something like teaspoons, right?

Trevor Fenner:
Mm-hmm (affirmative). Yeah, it makes sense. Obviously, something like teaspoons is probably also pretty competitive. It's really important to have a product that's not completely overran with competition in the marketplace. Do you find it easier to make business sales, or investors are looking for businesses with, generally speaking, lower competitive niches? Niches that are maybe a little bit more unique, that kind of a thing?

Coran Woodmass:
It depends. It depends on the history of the business. If you're predominantly selling on Amazon, and you're in a high competitive category, and you've only been in that top spot, or that first page for, say, three months, that's going to be a little bit more scary than if you've been there for four years.

Coran Woodmass:
We've actually sold some brands that were in some really competitive niches, but they've maintained their rankings for three, four, five years, solid. They've got such a foothold in their categories that they just don't see the competition sticking around.

Coran Woodmass:
A good measuring stick for this, if you're thinking about selling is, in the last 12 months, ask yourself, have you seen new competitors come into the marketplace and actually stay on the first page? You'll often see new entrants come in with a low price, trying to outrank everyone. In some categories, that'll fade away, and they won't stay. But, if your competitors are coming in over the last year, and they've managed to stay, that could indicate a more competitive niche, and that could be a problem when you go to sell.

Coran Woodmass:
What you really want to focus on is, how do you directly reach a customer? Even if that's not a massive portion of your revenue, you want to figure out how to access your customer. If Amazon wasn't there, how would you sell to those customers, how would you reach them?

Trevor Fenner:
Makes sense. As far as people that buy these businesses go, you mention on your website there's a couple different types. Obviously, individuals, entrepreneurs, and then there're bigger companies, private equity firms. Maybe, big fund managers, hedge fund manager, those kinds of things. How do those sales differ from each other? Are you going to be dealing with different types of departments of people when you sell to one as opposed to the other? How does that differ?

Coran Woodmass:
Yeah, we're tracking ... A really good example of this is price point. We're tracking 217 businesses for sale right now, worldwide, over about 63 brokers. The bulk of the market, about 60%, is under half a million dollars. We'll talk about that first, and then we'll go into the next sections.

Coran Woodmass:
In the $100,000 to $500,000 category, you're almost always dealing with an individual buyer. Someone saves up some cash, maybe they've sold an offline business, a restaurant or something. We had a guy do that, actually. He sold his restaurant, bought an FBA business. For the most part, you're dealing with an individual. This could be all the capital they have available, as well, so they may have a daytime job. They're an executive, high paid executive or something, they've got a few hundred thousand to invest. The type of mindset that these people have is, I Have one shot to release this capital, and it needs to work. Most of them have never sold on Amazon before, they have very little experience selling online, so they're a very nervous buyer, for the most part.

Coran Woodmass:
The flip side of that is, that's the bulk of the market. There's over 100 deals right now that they could actually choose from. Typically, by the time they'll see your deal, they've seen 20 or 30 deals, and they now get a sense, even a very novice buyer will get a sense of what makes a good brand versus a bad brand. That end of the market has a 13% sell through rate for a reason. The good businesses, the good brands at that level, with good margins, sell fast. Everything else just settles, and takes forever to sell, or doesn't sell. We actually saw ... Two months ago, we saw more delisted businesses than listed businesses across the board. That's the one to five.

Coran Woodmass:
The $500,000 to $1 million range, has still, predominantly, private investors. Again, there's less of them, because they're putting in their own capital, right? Unless you're business can qualify for something like MSBA loan in the US, that can help the buyer buy a larger business. That's really a dead zone right now. It needs to be a really outstanding business, fast growing business, to be sold at that range, otherwise no one will buy it.

Coran Woodmass:
In the $1 to $5 million range, this used to be a bit of a black hole, because it's too small for a private equity firm to look at, and too large for private investors on their own to buy. What we're seeing right now is the SBA program is really good in the US, for helping clear deals at that size, so individual investors can actually buy a deal there. If your business doesn't qualify for an SBA loan, there's still a ton of cash buyers out there, that are actively looking. There's a wide group.

Coran Woodmass:
One group, there's quite a few, that have raised capital specifically to go buy brands, and Amazon-based brands. Some have raised five, 10, 50, 100 million dollars to go do this. We've got about 50 of these groups we're working with. The second type is smaller subsets of funds that are starting to look at this space. I've got one guy I'm working with, this is a great example, his parent fund is a $100 billion fund. [inaudible 00:22:41] I'm managing is a modest [inaudible 00:22:44] fund, with 100 spend. That's the type of buyer you're looking at there.

Coran Woodmass:
Then, there's also strategic buyers. There's less strategic buyers, but there are some strategic buyers that are looking for, say, fitness brands, or they're looking for something specific to add to their portfolio, and either add on to a platform business, or a larger brand that they could roll that into, or they're looking to diversify. In that $1 to $5 million range, that's where they're coming in. We're also seeing family offices come through, looking to acquire. Now, these guys typically hold longer term, and they're looking for businesses that have the longevity aspect, that could still be there in five, 10, 20 years time, and build that brand out.

Coran Woodmass:
Then, above $5 million, it's almost exclusively private equity, strategic buyers. It's too big for SBA, over $5 million, so they have to have their own capital sources, their own debt facilities. It's private equity groups strategically raise capital for this, and strategic buyers. Larger brands looking to acquire, and grow via acquisition.

Trevor Fenner:
Yeah, that's very fascinating how this all works. It's good to know that even if you have a business that's $50,000, $100,000, or whatever, that you can still sell that. And, even if you have a business that's in the $5 million or more level, there are buyers for those types of businesses. Whatever level your business is at, if it's sustainable, if it's got a nice broad series of products, that are making good sales consistently, and it's got a long enough lifespan, it's potential that it's saleable.

Trevor Fenner:
The next question I had for you is, what do you usually see, as far as buyers go, for their reason for selling? Is it usually because they have other ventures they want to get into, or is it because some kind of personal reason? Maybe partnership breakup, or something like that. What do you see as the usual reason that these people are selling their businesses?

Coran Woodmass:
Partnership breakups, not so common. Typically, one partner will buy the other out, or they'll do some internal deal. I've been consulting on valuations for those type of breakups recently, which is interesting.

Coran Woodmass:
The most common reason for selling is, at the lower levels, under $1 million, it's really just transitioning out. Typically, they'll have more than one business they're working on, or they'll have another project they want to get into. They had some success with this, but maybe it's not something they really care a lot about. It's profitable, it's going in the right direction, but now they want to go do something else.

Coran Woodmass:
In the $1 to $5 million range, our minimum list price here at The FBA Broker is now $1 million. That's really where we focus. The $1 to $5 million, typically there's a couple of reasons to sell. One would be, that you're at a valuation level that could actually, significantly change your lifestyle, so that's one reason to sell. Another reason, again, is other projects, other things that you want to go work on.

Coran Woodmass:
Then, at the higher levels, $5, $10 million plus, an even at the $1 million plus, the business itself represents a large portion of someone's net worth. They're wanting to take some risk off the table. There is risk with Amazon, of course. The bigger you get, the more liability you have personally, for loans the things for inventory. Often times, it'll get to a point where it's uncomfortable for that entrepreneur to grow. Whenever they are the founder themselves, are limiting growth, that's the time to either look at selling, or look at growth capital partners to come in, and help you grow. There's that tipping point where it makes sense to go outside. Some founders just figure it out, and they keep going to the Moon. It's a personal decision.

Coran Woodmass:
That's the most common that we see.

Trevor Fenner:
Yeah, makes a lot of sense. When you go to evaluate a business, does having a team that's managing the business, versus not having a team that's managing the business, does that make a big difference in the valuation? Or, do you not ever even see businesses that don't have teams, but maybe bigger teams versus smaller teams? Does that make a difference to the valuation?

Coran Woodmass:
It depends on the business. I used to say a blanket statement, that it's better to have a team. Nine out of 10 times, it is better to have a team, or at least have procedures that you can hand off to.

Coran Woodmass:
We've seen some more strategic type buyers come in ... Well, strategic financial buyers that have their own teams. They're just looking to absorb brands. But, it's always good to go out with some operational team involved. That $10 million deal we're working on right now, if that was just the founder, that would be almost impossible to sell, because you'd just be working too much. He has a team, and he runs, mostly, the strategic level of that, whereas there're operational teams that run everything. The bigger the business gets, the more operationally hands-off you want it to be, to appeal to that buyer, and that opens up the buyer pool. It gives us more options, more buyers, which equals more offers, and potentially a better sale price, and also deal structure when you go to sell.

Trevor Fenner:
Yeah, makes a lot of sense. I always recommend having at least one VA, if not a few. It really depends. I know with FBA in particular, Amazon handles a lot of the stuff. They handle the selling, they handle the shipping, and stuff like that, the fulfillment. That can take a lot off your table, as far as being a business owner, entrepreneur. You still have to manage some of the customer service, and stuff like that.

Trevor Fenner:
Obviously, from the entrepreneurial standpoint, you have to manage the procurement of the merchandise from China, and the movement of the merchandise from China to the United States, and to Amazon and all that. Having a team to at least manage that stuff can make it more turnkey, for the investor of course, right?

Coran Woodmass:
Yeah, correct.

Trevor Fenner:
Yeah, that's awesome. As far as, from the investor side goes, if there're any investors listening on this podcast, which there may as well be. There's as lot of people that you were saying, that work high paying jobs, and they are interested in buying a business. An FBA business seems very, very lucrative, because Amazon is definitely the giant elephant in the living room when it comes to eCommerce these days. As far as from their perspective, what does it look like when they go and buy a business? What should they be looking out for? What is the ideal situation they want to get themselves into, as far as buying a business from you, or through you?

Coran Woodmass:
Yeah, it depends. We don't deal with a lot of individual investors anymore. If you are looking to get into the space, I'd do your homework on an inventory based business. If you've not run an inventory based business before, you'd want to brush up on those skills, and maybe partner with someone that does have that financial background.

Coran Woodmass:
Selling online via Amazon isn't a set and forget thing. We get a lot of people come through, expecting this to be a hands-off type deal, and it's just not the case. Typically, the winning strategy coming in buying brands, product brands is the come in with more capital ready to expand. That's always the play, the bigger brands we see, they're constantly launching new products, expanding their product line, reinvesting in better products, getting better margins by buying more products. You want to come in with enough capital behind you to actually do that.

Coran Woodmass:
That said, if you can do that, if you're coming in with more capital than you need for that deal, you can actually get a pretty decent return. The return you're looking at is not just cash on cash return of buying the business, it's also the compounded return of inventory. We still have our supplement business, we're no longer growing it, because I've signed so many NDAs, non-competes with all our clients, that I can actually grow that business anymore, which is funny. We looked at selling it, and it was in a pretty good position to sell about a year and a half ago. I ran some numbers, and it was higher than, it's in slight decline now. At the time, it was putting 40% net into my pocket, just on what I'd invested in inventory.

Coran Woodmass:
I looked at my other available options and thought, actually, I can't get that anywhere else, right now. Why would I sell this? Now, it's in decline and I can't sell it, but I'm still getting 35% net, in my pocket, with very little work on that one. That's not what you want to do when you're going to buy it, but as a concept, an inventory based business can be a really great investment vehicle for you. As long as you keep the thing running right, it can kick off some nice levels of cash. That's the ideal scenario, when looking at buying one of these brands.

Trevor Fenner:
Sure. Yeah, I agree. Passive income is great. Passive income is never 100% passive, but the more passive that you can have it, the better, of course. The higher the margin, the better as well.

Coran Woodmass:
Absolutely.

Trevor Fenner:
If someone wants to sell their business through your platform, what kinds of things should they get ready before they contact you to do so?

Coran Woodmass:
Sure. Typically, we start to talk around the seven-figure plus revenue range. We'll work with someone, typically, six to 24 months before selling. If you have a business with longevity, and you're planning ahead, that's the time to start reaching out, unless you have all those five things in order right now. That's the real beginning of that.

Coran Woodmass:
One resource that's actually really helpful is something we put out each month called The FBA Business Price Guide. You can get that FBABusinessPriceGuide.com. If you click the Market Watch Monday when you sign up for that, you'll actually get a Monday email from us, which explains everything that's sold, everything that's newly listed. At the bottom of that email, we actually link to everything. Regardless of who lists [inaudible 00:32:47] listing each week, you can go and have a look. If you're thinking about planning for a sale, this is probably the best resource. If you're thinking about buying, definitely the best resource in the marketplace, that's free to get all of that information in one spot.

Coran Woodmass:
In those emails, you can always reach out to us, me or my team, and ask about valuations, and get a sense of where your business is compared to what's selling. The biggest thing that we've seen is the marketplace is changing so fast. It changes monthly. Often, when we're planning for a sale, we need to keep in touch and see what the market's doing at that point in time, and then plan accordingly.

Trevor Fenner:
It's all good knowledge. You guys, if you want to sell your business, definitely go check that out. The link again is FBABusinessPriceGuide.com. You can also see Coran's website here, at TheFBABroker.com.

Trevor Fenner:
Coran, thanks so much for being on the podcast. Yeah, I look forward to hearing more about your success, helping businesses sell online.

Coran Woodmass:
Perfect. Thanks, Trevor.

Trevor Fenner:
Well done. Take care.

 

If you own an Amazon FBA business and want to get a valuation for it, consider first listening to this entire podcast to get the best tips on how to prepare your business for sale, as well as reading this blog post: https://thefbabroker.com/how-to-sell-..., then you can get a valuation at their website here: https://thefbabroker.com/fba-scorecard. For more information, visit https://thefbabroker.com.

 

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Trevor Fenner

Hey there! I'm Trevor, the Founder of eCommerce Paradise. I have been an Entrepreneur since a young kid and I've been selling things online with eCommerce since 2005, and I've been doing High-Ticket Drop Shipping since 2010. I'm an internet marketer, YouTuber, podcaster, digital nomad, and world traveler. I have lots of hobbies including spending time with my girlfriend, Skateboarding, Surfing, Scuba Diving, Photography, Tattoos, Animals. I'm currently based in Bali, Indonesia.




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