Future-Proofing Your Amazon Business for Sale
Estimated reading time: 5 minutes.
Like all business owners, Amazon marketplace merchants may one day weigh up the prospect of selling their business. And what will prospective buyers want to see? Accurate accounts demonstrating a healthy business.
Even if you’re not considering this anytime soon, it’s sensible to behave as if this will be your goal one day. If you do this from the beginning, not only will your business operations be organized and transparent for you, but it will be much easier to go into the sales process prepared for success. And what does success look like? Well, a great price and suitable buyer, of course.
Online business broker and owner of Quiet Light Brokerage, Mark Daoust, shares tips to make the process much more streamlined:
- Have clean books.
- Hire an accountant.
- Use accrual-based accounting.
- Reflect on your spending.
- Avoid significant one-time investments.
Have Clean Books
Buyers want to see clean, concise books that accurately reflect business efficiencies and inefficiencies. Not being able to provide financial records that give an accurate, detailed picture of your business’s financial health may mean a lower offer, or may even cost you the sale.
Here are three ways to ensure your books truly reflect your business:
- Accounting software such as A2X: Having this in place will make it quicker and easier to reconcile sales data. This is particularly important when using Amazon – sellers will know from experience that Amazon reporting often leaves off the detail needed to properly reconcile accounts, and can make it almost impossible to reconcile sales month to month. A2X software resolves these bookkeeping issues, making it simple to post Amazon sales and fees and to reconcile accounts, with the right level of detail.
- Track expenses by line item: Short term pain will be a long-term gain. On a financial report a ‘miscellaneous’ category that includes a mixture of expenses doesn’t give a buyer accurate insights into your business. Breaking down expenses will assist to give an accurate reflection of your books.
- Use an ecommerce accounting system: Like QuickBooks or Xero, and use their methods of tagging or categorizing expenses. This is especially important if sellers use shared resources for different brands. Tagging items makes it easier to separate expenses for each brand, giving the potential buyer a more accurate insight into the particular business that’s for sale.
Hire an Accountant
Mark acknowledges that while this will be an additional cost, hiring an accountant to oversee your finances and help guide your decision-making is “an expense well worth taking on.”
“An accountant will give you insights into your business that you wouldn’t get otherwise.”
Accounting software systems such as A2X also help by providing automatically reconciled accrual data for Amazon transactions – helping to save time, improve accuracy and reduce the potential for costly tax errors.
A2X helps balance the books and meet tax obligations by providing accurate details regarding sales tax, returns, and shipping costs. A2X also summarizes Amazon’s complex fees in a way that makes sense for monthly financial reporting.
With the help of A2X, an accountant could give you accurate advice and tailored services to give you the best outcome for your business.
Use Accrual-Basis Accounting
While it can seem simpler to use cash accounting, having accrual-basis accounting can actually boost the value of your business.
Accrual accounting shows more accurately how your profit flows, giving a more in-depth insight into the numbers. While Amazon’s complex data can make this time consuming to achieve manually, the right software automation will give you the detail you need with a few clicks of the mouse.
For example, A2X seamlessly imports information from Amazon and posts to Xero or QuickBooks Online, organizing your books automatically via the accrual method. Everything is done for you at the touch of a button.
Reflect on Spending
If you’re considering selling your Amazon business within the next six to twelve months, now’s the time to reduce or stop spending on expenses that don’t affect top line revenue.
By doing this in advance – at least six months out from selling – you can significantly increase the valuation of your business.
Mark recommends looking at expenses that may not be purely discretionary, including:
- Experimental advertising: Mark spends up to $3,000 each month trying new ways to advertise. He describes it as “mining for gold” – sometimes it pays off and there’s a return, other times it doesn’t. It’s worth doing if you intend to continuing growing the business.
“For every dollar that I save by cutting back on this, I’ll add $2 to $4 in value to my business.”
- Business intelligence tools: These can give you insight over longer terms. But you’ll want to keep any applications that assist with the day-to-day running of your business, like accounting software.
Avoid Significant One-Time Business Investments
Investments like website overhauls, major upgrades, investment in new product-lines or new apps are all important for the future growth of your business.
However, it is best to avoid these often costly exercises if you are considering selling your business within the next twelve months – you won’t reap the value from them, the new owner will.
“If you save some of the money that you may have spent on investments and other expenses, you’ll get more out of your business at the end of the day.”
Prepare to Sell (or Not!) with A2X
Buyers want to see books they can trust. They need to know your breakdowns for everything from cash flow to profit margins, COGS, sales tax history and obligations, returns, fees taken, fulfilment costs and more.
If you have in-depth understanding and knowledge of your business operations from the inside out backed up by transparent records, you are far more likely to sell, and sell at a good price.
All those breakdowns you need? You would have to figure those out manually without A2X. Even if you are not looking to sell yet, just reconciling your ecommerce accounts manually is both time-consuming and error-prone anyway.
Get rid of all that stress and head-ache and automate your accounting. Try A2X for your free trial today.
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