Posted: December 5, 2019
Submitted by: https://thefbaguys.com/
27 Metrics that Influence the Value of an Amazon FBA Business
Putting a price tag on a business can be tricky, especially an Amazon based one. The main influencing factor is of course the profit (or in most cases SDE), but there are many other metrics to look out for.
Ideally the value should be solely based on the cash flow but in reality, a business that is highly seasonal and operates outside the US, will not see great multiples because there are fewer buyers competing for that same property.
Amazon businesses usually sell for around 1.4 – 5.3x annual SDE (seller discretionary income).
The valuation consists of both the business’s value and the market demand. You’ll need to look at both to get a realistic selling price for the business.
For example, relying only on one product for the majority of your sales (more than 80%) will decrease the valuation. This is due to the added risk to the business. Should anything happen to this particular product, Amazon cloning your product or competitors reducing your rating with grey hat tactics, it will unfortunately be fatal to the whole business.
This infographic lists 27 metrics that influence the valuation from both sides.