Understanding Your Business Asset Value
Brittanica defines Asset Value as an integral component of a business’ total value. There are a few ways to calculate asset value. One is by computing what those assets are worth to their owners. According to this measurement principle, the economic value of an asset is the maximum price that the company would be willing to pay for it.
In the Amazon marketplace, many merchants have yet to realize that they have been building an asset with their business. Your products and your rank on Amazon are valuable assets already. Regardless of whether you’re looking to sell your Amazon business or not, it’s important that you know the value of your business.
What are the valuable assets of an FBA Business?
Valuing your business can help you target areas that need improvement. There are a lot of considerations to take into account. DigitalExits laid out 6 traits that will add value to your e-commerce store.
Age – The older your business, the more it becomes valuable to a prospective buyer as they can see your track record and growth trends.
Niche – Your niche market and your positioning in that market will affect valuation. For example, selling beauty products is much harder than selling welding gloves. This is because beauty products belong in a hypercompetitive niche.
Concentration of Products – Selling one product that comprises 80% of your sales is a big risk to a buyer. On the contrary, having a diversified portfolio allows you to demand a higher price.
Brand – There’s a certain level of competitive advantage when you have your own branded and manufactured product.
Amazon Best Sellers Rank – A consistently increasing BSR rank proves that you have quality products and exceptional customer service. In short, your BSR tells your buyer that you’re worth the investment.
Suppliers – Trustworthy suppliers that deliver products on time, have good terms and reliable fulfillment of orders add value to a business.
How to Maximize the Value of an FBA Business?
Now, let’s walk you through the 4 key factors to help you make the most of your business asset value through FBA.
Create a separate business
If you’re looking to sell your Amazon FBA Business or specific products in the future, make sure that it has its own company. If all your products are in one account, you might need to set up a separate LLC or Corp so that it’s not tied up with your other businesses. It would also be best to have its own bank account where all the sales go out.
Manage the books properly
In line with the previous note, it’s also essential that all your accounting books are properly organized and managed for that one business you’re planning to sell. The best way to go about this is by hiring a professional accountant or using some accounting solutions such as Xero and Quickbooks. If a potential buyer wants to find out further information about your business – such as individual product cost, inventory, and past and future sales – it would help to have tools like SellerMobile at your disposal.
Reduce buyer risks
Let’s assume you’ve already handled the first two sections above – using reliable tools, hiring a pro, and setting up a separate business. Beyond these basics, you also need to ensure prospective buyers that your FBA business is set to greater heights. Great additions in your business are multiple SKU’s, each of which has multiple suppliers. Prospects would also be impressed if you are targeting multiple keywords and have multiple traffic and sales channels.
Put people and processes in place
A well-trained team is a sure bonus for most buyers. It’s much easier for the buyer to manage the FBA business when it comes with an employee who already knows the ins and outs. It would also make sense to have properly documented SOPs to show prospects how your business operates on a daily/weekly/monthly basis. Often, the more you can show, the higher the confidence a buyer has in your business.
Whether you’re thinking of selling your FBA business or just considering your options, it always pays to understand the asset value of your business. This way you are prepared for any eventuality that may arise in the future.