My experience acquiring an Amazon FBA business – Empire Flippers & Flippa

1 year ago, I bought an Amazon FBA business.

And I want to tell you all about my experience.

What went right.

What went wrong.

I also have stuff to warn you about, so you don’t have to make the same mistakes I did.

Sound good?

Let’s have some good ol’ fashioned M&A fun 🙂

So, you want to buy an Amazon biz.

The idea of skipping the product selection, sourcing, and listing building is too much to pass up. Spend money to make money. Use your Amazon skills to improve the P&L of the business. Recoup your investment. Sounds good in theory.

But where to start?

Google!

And pretty quickly, 2 websites emerge:

Empire Flippers and Flippa.

The 2 rivals of the “buy an Amazon business” business.

The best way to describe this relationship is like “Starbucks vs. your local coffee place”.

Empire Flippers (Starbucks) is the household name in the space; the market leader. It’s a “safe” experience. A known entity. Empire Flippers pre-vets their Amazon businesses, ensuring their numbers are as advertised. There are guarantees in place. And, you get assigned a designated rep (like a friendly Starbucks barista) to walk you through the experience. But, you’re going to pay a premium for these Amazon businesses because of the “on-rails”, reliable experience that EF provides.

Flippa, on the other hand…

…Flippa is your local, crazy, indie coffee shop.

You’re taking your chances here. You really don’t know WHAT you’re going to get (could be great coffee, could be awful), and there’s no one holding your hand through the process.

Because we fancy ourselves Amazon experts (I’ve been helping 3rd party sellers for 7 years), we went with Flippa. Our rationale was simple:

Because you have to do your own due diligence, Flippa presents a better arbitrage opportunity (i.e. the cost of the business vs. the new value we can create once we own the business). Empire Flippers was providing a great experience, but also charge a premium to do that. The business multiples are much higher on Empire Flippers.

For this reason:

I can’t recommend Flippa for first-time Amazon biz buyers. There’s too much that can go wrong. If you’re new to the game, Empire Flippers is better. There’s more potential for reward on Flippa, but also more risk.

I’ve got experience in the field, and I still got things wrong (more on that in a second).

So, we went with Flippa.

Here’s my understanding of the process (in 10 steps).

Disclaimer: I’m not saying this is a perfectly optimized process. It’s just my experience.

1. View business listings on your platform of choice. Note: the listings have a price for the business (which is a multiple of monthly profit), plus another price for the inventory. Both are negotiable.

2. Ask to schedule a call with the seller. Ask why they’re selling. Ask about future plans. Major hurdles. If the seller doesn’t have a good reason for selling, pass. Get clear on whether you’re buying their whole LLC or S-corp (along with all that that entails) or simply an asset in the form of an Amazon Seller Central account, inventory, and maybe a Shopify website/social media accounts. I recommend an asset purchase agreement (APA).

3. For us, we also requested Seller Central view-only access to validate the revenue numbers, account health, case logs, IPI score, payouts, revenue, ad performance, etc. Or, you could consider connecting their account to a 3rd party software tool that you trust to help verify their numbers. Especially relevant on Flippa.

4. Ask for landed COGS so you’re able to create a P&L. Speak to the supplier if you’d like.

5. Ask for GS1 certificate; ask for USPTO trademark documents.

6. Ask about any pending lawsuits, debts, insurance, other liabilities, etc.

7. Verify the existence of inventory with their P&L directly (I didn’t do this in my round, but I wish I did).

8. Verify warehousing/3PL fees and any 3PL contracts that are in place (again, I didn’t do this one and they ended up being higher than anticipated, which ate into the margins).

9. Create a P&L on your end. Model a best, middle, and worst case. Charlie Munger says the greatest deals should make sense without much calculation. It should be an obvious home run.

10. Create the deal paperwork (Flippa has templates you can buy). Bring a lawyer in, preferably. The online platforms then allow you to send a formal offer. In Flippa’s case, they use escrow.com for payments. You can break payments into milestones, with money can be released as both parties agree certain assets have been transferred.

And most importantly:

You need a clear way to increase monthly EBITDA that the seller hasn’t done yet. Or doesn’t know how to do. Either an operational efficiency (to make the business more profitable) or a topline growth strategy (e.g. proprietary Amazon ads strategy). If both, even better.

I hope this was a helpful look at what buying an Amazon business looks like.

And if you’re selling on Amazon and want a clear path to growth (totally done-for-you), you can book a call with my team here: