Selling an Amazon business is a complicated process that takes a lot of thought and careful preparation beforehand in order to get it right. There are a lot of things that can go wrong before, during, and even after such a transaction that the only way to really make it go smoothly is to hire an internet broker who knows how to sell an Amazon business.
However, a common mistake that a lot of people make once they hire an internet broker is thinking that they can sit back and let the broker do all the work. While a great e-commerce broker can undoubtedly make the process much easier for you, you should still be proactive during the selling process because no one knows more about your business. What’s more, you should be the most motivated person when it comes to wanting the business sold off!
Here are five crucial mistakes that many Amazon business owners make when it comes to selling their business, and how to avoid them:
1. Getting an Incorrect Valuation
We get it: you don’t want to tack on a valuation on your business that’s too small and accidentally leave money on the table. To avoid this, you might go the opposite route and try to overprice your business. After all, it’s easier to negotiate down rather than up, right?
Well, no. If you advertise your business with an inflated price tag, it’s almost a sure way to scare off potential buyers and even if you do try to re-market it with a significant price cut, the damage has already been done and any possible serious and credible buyer will no longer be interested in purchasing your business.
It’s not a bad thing to be passionate about your business and want the highest possible price for it, but you need to put a realistic price that’s grounded by calculable factors such as average sales, available stock, and market performance. However, if you are able to attract a strategic buyer, you might be able to sell your business above the valuation price.
2. Selling after a Market Dip
Considering how volatile the e-commerce market is, there are periods when an Amazon business can seem like it’s on a downward trend due to poor sales or lack of market interest. During these times, inexperienced business owners can panic and sell their business for fear of losing even more of their capital due to decreasing business value.
However, selling during a market dip only tells possible buyers that your business is a risky, one that cannot be trusted to be stable during market upheavals. It will negatively affect their decision to purchase it or not.
The best thing to do is to ride out a market decline and wait until it climbs back up again before you continue with a sale. In the meantime, you should try to figure out what caused the downward trend and what safeguards you can advise potential clients against it in the future.
3. Having Little to No Confidentially During the Selling Process
The moment that word gets out that your business is going up for sale, there can be a “ripple effect” of negative consequences. Employees may start leaving due to the fear of losing their jobs, vendors may stop supplying raw materials, and your customers may start migrating to your competitors. Some employees might even start selling sensitive information about your business in order to secure a job at a competitor firm!
Maintaining confidentiality before and during your selling process is critical, but this does not mean keeping your employees completely in the dark. There are proper ways to ensure confidentiality to ensure that there are no leaks of sensitive information.
4. Failing to Pre-Vet Buyers Yourself
You might think that pre-vetting buyers too early might leave you with limited options when it comes time for the final sale, but more often than not, it’s actually more advantageous for you to pre-qualify buyers early. Going through this process allows you to filter out the serious buyers who are more likely to actually purchase your business. What’s more, you can ask them to sign pre-qualification documents such as NDAs covering sensitive background information about your company so you can deal without the fear of information leaks.
5. Failing to Create an Exit Plan
Another critical mistake that many business owners make is thinking that once the buyer has signed on the dotted line, they can walk away from the deal clean and free. While this is technically true, not having an exit plan when you leave the business can mean that you still lose out on money.
An exit plan is a great way to help both you and your potential buyer get the most out of a business sale. Having a good exit plan in place means that the process of auditing, transferring, and scaling your business to the new owner goes off as smoothly as possible. When you create an exit plan, you are able to see which terms of the sales deal are best for you! You might want to sell the Amazon business completely, or perhaps you might want to keep a small equity share; either way, an exit plan can help you see all your options clearly.