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In a recent webinar, we asked three of the top aggregators: “Is 2022 the right time to exit your Amazon FBA?”
Each said “Yes, it is the right time to sell your business,” and supported their answer with current market analysis, from recent capital raised to rising interest rates.
However, if you want to get the best return on your eCommerce business – that you have spent thousands of hours growing – you have to look at more than the timing of the market. You have to consider the timing of your business.
Is your eCommerce business ready for the Exit Process?
We launched The Fortia Group to help eCommerce entrepreneurs get the biggest payout for their business by:
- Preparing their business to sell (Exit Ready)
- Presenting their business to the right group of buyers (Competitive auction)
- Running a professional exit process that achieves the best deal (Exit Process)
In this post, we will focus specifically on the exit process: the time from when you sign a letter of intent (LOI) to your final offer. We will walk through exactly what it takes to get the biggest payday for your eCommerce business using our seven step process.
Have you grown a profitable eCommerce business and now want the best payout for it? Find out exactly how much your business is worth by contacting us today for a business consultation.
The 7 Step Exit Process for Amazon FBAs | The Fortia Group
To get the best valuation for your business, both the market must be growing and your business must be prepared to go to market.
However, we advise against starting the exit process (engaging buyers) without knowing what it entails. Entering the process blind allows the buyer to dictate negotiations, which often leads to a lower valuation.
So, let’s take a look at each step of the exit process.
Step 1. Preparation
First step in the exit process is to identify a list of potential buyers. Aggregators are becoming more optimized in the categories they buy, and we do not want to waste any time by presenting your business to uninterested parties.
Then we create:
- An in-depth >50 page confidential information memorandum with financial data, growth opportunities, operational logistics and more.
- A confidential dataroom with high level financial data that can be accessed by interested parties.
- A high quality teaser, a two page document with relevant data like acquisition highlights, net margins, SDE, ratings, growth opportunities and more.
If your business is not exit ready, this step will be delayed, and your final valuation impacted.
Check out this article: 10 Ways to Prepare Your Amazon Business to Exit
Step 2. Marketing, Distribution & LOIs
In this step, we set about generating interest. We circulate the teaser to potential buyers. Those interested, sign an NDA to access the dataroom.
Then we organize introductory calls with the seller and a shortlist of buyers. We have found many FBA sellers have built the business from the ground up and are personally invested in how the business continues.
In these calls, buyers are given the opportunity to share their vision for the brand going forward.
Lastly, we set deadlines for LOIs (letter of intent). We aim to get as many LOIs as possible, as it increases the value of the brand, but it also gives the seller a choice of deal structure.
Step 3. Negotiation & Signing of LOI
We review and compare LOI offers, and make sure the seller understands how the final valuation is reached and all the key acquisition components. Often, there is information that needs to be clarified before the seller can make a final judgment and sign the LOI.
It is important the seller understand the finer details of each offer before making a decision.
Once the preferred buyer is chosen, due diligence begins.
For an in-depth discussion on the Letter of Intent (LOI) check out this webinar.
Step 4. Due Diligence
Due diligence is where a buyer estimates the value of the eCommerce business using seller discretionary earnings (SDE) and a number of key variables. This is a professional negotiation, so it’s important to understand the value of your business before initiating this process.
Due diligence involves a number of different workstreams (financial, legal, supply chain, product etc.,), it can be difficult for a seller to oversee this process while continuing to run the business.
Although the buyers we deal with are ethical in their negotiations, they are trying to negotiate the best outcome for their company. This is where an experienced M&A advisor can be the difference in a six and seven-figure offer.
To see the benefit of an experienced advisor, see section 9 of The Exit Guide for Amazon FBAs [Free Download]
Step 5. Review of Formal Offer
We oversee a commercial review of all the transaction documents and the final offer. We aim to negotiate as much of the payment upfront as we can, as deferred payment only favors the buyer.
At this point, funds are transferred to escrow.
Step 6. Close
In this step, we set a signing order, confirm all documents are executed by both parties, and confirm funds are transferred.
Take a breath –– all your hard work has paid off and you have achieved the exit you deserve.
Our recent client switched from a U.S. broker to our service and received $2.5 million more in the final offer. Check out the case study, here.
Step 7. Post Completion
Business owners are accountable for the transition of operations. In our experience, buyers are eager to get going so the seller’s involvement drops considerably after the first week.
Most deals are structured with some sort of stabilization and earnout period, where a deferred payment is held for three to six months, and some percentage of the final offer is contingent on brand performance (e.g. revenue or SDE).
To get the full payout, it’s important to fully understand the earnout structure in negotiations. If the buyer ties a large percentage of the final offer to unreasonable performance metrics, the seller will lose out.
Considering an exit? Partner with The Fortia Group to ensure your ecommerce business is exit ready, and the exit process achieves the highest payout. Get started with our business consultation.
Thinking of Selling Your eCommerce Business?
When considering a sale of your eCommerce business, it’s important to look at the timing of the market and of your business. Whether the market turns in 2023 or not, currently the market is growing.
That said, is your eCommerce business ready for the Exit Process? Will it handle due diligence – buyers combing through your financial and legal setup, taxes, logistics and more?
The first step to getting the payout you deserve is knowing how much your eCommerce business is worth. Get started today with a no-risk business consultation.