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FBA Seller Interview: How to Prepare for It

Amazon, like everything else, is constantly evolving. Whether you’re a first-time Amazon seller or a seasoned professional, there’s always something new to learn, and definitely new problems to solve. The recent introduction of the Amazon Aggregators has created a brilliant business model that FBA sellers didn’t know would exist about 7-8 years back. Who would’ve thought that you would be able to sell your Amazon business back in the early days?

Being the first point of contact from an e-Commerce Aggregator to an FBA seller, to give you more insights from this side of the coin, I will take you through the entire process of what exactly do aggregators look for, the entire acquisition process, and information you should prepare before your first meeting with an Aggregator.

What Aggregators look for in brands they would like to acquire:
 
  • Stable revenue growth over the past 24 months (Exact revenue figures may vary from 1 aggregator to another; we look for $400k-$5M).
  • Minimum of 15% net income (EBITDA/SDE).
  • High customer satisfaction with a large amount of 4–5-star reviews.
  • Repeat and loyal customers.
  • A high-quality evergreen product that is not just seasonal or a product that went viral.
  • Good Amazon Account Health.
  • Low number of Product SKUs.
  • Good Best Seller Ranking.
The General Acquisition Process
  1. Initial meeting to learn more about each other with small introductions and a Q&A session. (Just to see if the brand matches all the criteria).
  2. Provision of financial records by the seller so that we can conduct a financial analysis to see if the brand has steady growth and is stable.
  3. If the brand ticks all the boxes in our checklist, a business valuation would be presented.
  4. Once negotiations are completed and the offer is accepted, a Letter of Intent (LOI) would be presented to you. A LOI is a non-binding agreement that is used to outline some of the basic, fundamental terms of an agreement. It usually contains the agreed upon purchase price, a general NDA, etc. One of the most important aspects of the LOI is that you will not be able to speak with / negotiate with other aggregators after signing the LOI and during the Due Diligence process.
  5. Once the LOI is signed, it is time for the Due Diligence process where many members from the aggregator team (M&A, Legal, Supply Chain, etc.) will be in constant contact with you to vet all the processes (financial statements, supplier contracts, etc.), understand the current functioning of the business, and to make the handover much smoother.
  6. Depending on the location of your business, an APA or a SPA will be drafted and signed by both parties. (An Asset Purchase Agreement generally takes place when a US based business is being acquired, whereas a Share Purchase Agreement generally takes place when an EU based business is being acquired).
  7. Finally, the money will be wired to you on/before the agreed upon closing date mentioned in the SPA/APA.

Now, both parties involved in the process would love to finish the entire acquisition process as fast possible, and as smoothly as possible. Due to this, we’ve compiled a list of information that aggregators would like to look at before the business valuation, but also for your first conversation as well. They would generally ask you questions about your business, and most of the questions would revolve around the points below. We would be confident enough to say that if all this information is prepped before the initial meeting, you would possibly understand if the aggregator was interested in acquiring your business or not. We say this because each aggregator has their own set of criteria, and this list would help them look over their checklist. Let’s take a look at what you need.

Information to prepare for the first meeting
  • Supply Chain Process
    • Number of SKUs and Number of suppliers
    • Production Location and lead times
    • Storage facility (3PL, with supplier, own warehouse)
    • Current Weeks of Coverage of inventory
    • Past supply chain problems (Could be shipping, manufacturing, etc)
    • Point Person handling the logistics, inventory fulfilment, etc.
    • Does the brand have property EAN codes?
  • Financials
    • Revenue and Profit Margins
  • Ads
    • % Ad Spend of total revenue (TACoS)
    • Organic sales %
    • Customer Acquisition Cost (Amazon vs external)
    • How does your brand keyword search perform? (i.e. what % of traffic comes to your detail page through brand search)
    • Do you carry out Weekly or Flash deals?
    • Point Person handling the PPC, advertising, etc. (Agency?)
  • Product Development
    • Initial Product Development process for existing products
    • Who is involved in the process?
    • Last product that was taken to market? How long was the process and how expensive was it?
  • Competition
    • Direct competitors
    • Differences and Similarities
  • Sales Development
    • If not acquired, what are going to be your next steps to maximize the brand potential?
  • Final questions
    • Why do you want to sell?
    • Type of deal that you are looking for
  • Additional questions
    • Sales rank trend (both for its category and overall BSR)
    • What is the conversion rate of your ASINs? (is it above 10%)

Finally, we come to the various types of deals you could choose from. The following deal structures below are the Models that you can select when you sell your business to BrandHero.

Various Types of Deals

Many e-Commerce/Amazon aggregators generally only offer the Full Cash / Earnout Model as they would like to take complete 100% control over the brand. However, at BrandHero we completely understand how difficult it is to start your own business (your own baby) and that to sell your business can be a tough decision, which is why we offer the chance for you to be involved in the process as well! If you would like to know more about what we can do for you, drop us an email or request to be contacted here:

Rahul Fernandes

Rahul Fernandes

Business Development Associate

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