Find out what really makes an Amazon business valuable and which metrics to keep in mind when building your business with the intention of selling it one day.

1. The 27 Amazon
FBA Business Metrics
that actually matter
Bryan O’Neil
TheFBAGuys.com

2. How do we know this stuff?
 24 years of combined experience in Online Business Valuations and
Business Brokrage.
 In 2018, launched an Amazon FBA Business Valuation tool
 First-hand data of over 3,400 Amazon businesses
 The largest and most accurate data set that anyone has

3. Overview
 Value vs Valuation – Value is not the same as Valuation & ranges vary wildly
 The Market – Your business’s market influences its valuation directly
 The Business – The majority of valuation metrics are related to the Business
and its health.
 The Product – What you sell is as important as how you sell it
 Sales and Product Performance – You can have the best product in the world,
but you also need to be able to show that it’s the best.

4. Value vs Valuation
 Amazon Businesses have one of the widest deltas of any business valuation
 This gap is especially wide for businesses that are 100% FBA
 Multiples tend to vary from 1.4x – 5.3x annual SDE (Seller’s Discretionary Earnings)
 In a perfect market, turnover and cash flow rule everything
 The reality is different and important metrics are plentiful
 Great businesses often don’t get a good valuation because of secondary factors
 Two components to a business valuation: Market Demand and Business’s Value
 Both need to be factored in to determine a realistic selling price

5. The Market
 1) Your Primary Market
 Some Amazon markets perform better than others
 North America almost always wins.
 2) Amazon Monogamy
 Do you sell exclusively on Amazon or elsewhere as well?
 Businesses that also sell off-Amazon get higher valuations
 3) FBA or FBM
 The market prefers 100% FBA setups due to the simplicity and the lack of “moving
parts”

6. The Business (Part 1 of 3)
 4) Your Workload
 No-one wants to buy themselves a (poorly paid) job
 Businesses with little to no owner involvement hit the highest multiples
 5) Employee Count
 Number of employees plays a role if you’re doing over $250k in revenue
 Too many and too few are both bad. Need to get it just right.
 6) Employee Location
 US buyers prefer employees who are physically in the US, even if working remotely.

7. The Business (Part 2 of 3)
 7) Employee Type
 Remote employees valued much higher than office-based
 Having an office is great for culture, but reduces the buyer pool geographically.
 8) Number of Vendors
 A “good” number won’t increase your valuation, but too many or too few can
reduce it.
 Having only one vendor poses a threat
 Having too many vendors adds additional complexity to day-to-day ops
 9) Vendor Location
 US and China are mostly preferred

8. The Business (Part 3 of 3)
 10) Business Location
 Most buyers are based in the US and strongly prefer US-based businesses
 Liability and due diligence remain the biggest issue with cross-the-border deals
 Being able to get an SBA loan is also a major consideration for acquisitions between
$500k and $2 Million.
 11) Separate Company Accounts
 Co-mingling the financials of several businesses can be detrimental to a valuation
 SBA lenders tend to refuse such deals straight away
 12) Business Age
 The older the business, the easier it is to predict its future success
 Less important beyond 5 years

9. The Product (Part 1 of 4)
 13) Inventory Turnaround
 Low $ amount in inventory (in relation to profit) is attractive to buyers
 Too fast inventory turnaround increases risk
 14) Profit Margin
 A high margin means resilience against the unexpected
 15) Product Diversity
 Relying on a single product for more than 80% of your sales is fatal

10. The Product (Part 2 of 4)
 16) Product Uniqueness
 Unique products increase competitive edge
 It’s also indicative of sustainable margins
 17) Product Design
 Like unique products, a unique design adds a premium to your business
 Private label products suffer as competition can do the same
 18) Patents and Trademarks
 Uniqueness is an asset, but being able to protect it is bankable
 Trademarks are increasingly important as they protect against listing hijacking

11. The Product (Part 3 of 4)
 19) Total Number of SKUs
 Too few SKUs and your business appears risky
 Too many and buyers will perceive it as a lot of overhead
 20) Percentage of New SKUs
 Stability is always good
 The longer your current best-performing products have been in existence, the
better
 This becomes a little less of an issue in case of a large variety of SKUs

12. The Product (Part 4 of 4)
 21) Product Category
 Most attractive categories are evergreen and resilient to trends
(Cookware, baby products, gardening tools, etc.)
 Least attractive categories are those that are highly commoditized or have low
margins.
(Consumer electronics, automotive parts and video games are all bad)
 22) Category Span
 Always focus on brand value
 A good brand is more difficult to build across various categories
 Most buyers want to specialize

13. Performance (Part 1 of 2)
 23) Sales Trend
 A year-over-year increase in sales is a big value-add
 Sales trending downwards can severely damage the business’s valuation
 24) Repeat Orders
 More repeat orders means more predictability
 Higher barrier to entry is also a consideration
 25) Seasonality
 Seasonal businesses boast much lower valuations due to the increased risk and
capital deployment requirements

14. Performance (Part 2 of 2)
 26) Product Review Count
 On Amazon, reviews are everything
 Product portfolios with a lot of reviews always sell for a premium
 The fewer reviews you have, the lower the barrier to entry
 Review quality also plays a role. Bought reviews are easy to identify
 27) Average Review Score
 High review count is only useful if the reviews are positive
 A review score of <3.5 generally means a distressed asset and is valued accordingly

15. Give our Valuation Tool a try:
https://TheFBAGuys.com
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More information:
Bryan O’Neil
Founder & CEO
E-mail: bryan@bryanoneil.com
Web: https://TheFBAGuys.com