David Storey is the founder of Amazon FBA Build to Sell (AFBTS), a unique coaching and specialist advice program designed for Amazon sellers who want to build their business with a mindset to sell the business in the future. In this second post, David elaborates on why financial planning is so important to your business’ success.
Question: What does the program entail?
David: I have a bespoke financial forecasting tool and planning tool, which I built myself over four and a half years. I give it away as part of the training program, where you can essentially model out your business over a period of two, three years, however long it’s going to take. It will help you determine how many products you’ll need, what level of launching and type of products, how often you need to launch them.
Because it’s got an accurate cashflow analyzer in there, you can see how much cash you’re going to need to pump in. And it essentially determines all the actions in your business that you’re going to need to do to reach this selling target. Now that is completely different to just starting a business and seeing how it goes financially.
Question: So, is the financial planning the foundation for this discussion?
David: One of the most important things to generate the highest multiplier and make your business highly valuable and what buyers look to see is consistent growth. And without a proper way of financially modelling that out, it’s very difficult to see out in the future when’s the best time to sell it. If you leave it too late and you go over your growth curve, your business has plateaued and the multipliers are going down. But if you do it too early, and there’re lots of actions that you could have put in place, then you’re essentially underselling yourself and your buyer will be happy to do those things that you should have done and turn on that value. But, I suppose to answer your question, after the financial planning (t would be working out) ???. I suppose, at that point, you’ve already worked out what sort of products you’re going to have in your business as part of the financial planner. Because that’s the most important thing to get the product selection right.
To build the financial model you will need to know detailed information about the products. You must contact suppliers to find this out. Once you have selected your products, how much money are you going to need to start the business? You’ve also got to have an idea of your launching strategy and set aside a budget for this in the financial model. The next is to get going really, and you’ve obviously got to test. Not every business is going to be successful from the outset. You might do the best planning. I planned out one business and pulled out six months later because it wasn’t producing the profits I thought it would.
Question: What else is involved in maximizing the value of a business?
David: There are lots of other aspects as well, if you start with the end in mind, to maximize the value of the business. Mainly what I call walking in the shoes of the buyer. So, once you understand what a buyer wants to see from their perspective in an Amazon business, it will change the way you structure the business. It’ll change the way you build it, a seller central account, your products. Financial, you’ll get that on board, but sooner, like proper accountant, many sellers don’t even have accountants. It’s crazy. There are many, many other areas where you can add real value to the business in terms of its multiplier if you know what to do. So, if you know all these things from the outset, including financial planning, then you can really build a successful business.
I was in the planning departments around huge manufacturing firms years ago, so, I’ve got a lot of experience in planning. And one of the fundamental objectives of the course is to put together a professional, strategic exit plan, which of course includes the financial planning. I’ve included in there a method of doing this, but it’s not an all complex, really time-consuming, high-level professional as possible plan because that’s just too much, especially if you’re an Amazon seller.
I’ve stripped back many of the elements to it so it takes the least amount of time, but it’s got the core philosophy of planning. And it would allow them quickly to create a plan to serve the purpose in the business. And there’s a lot of that philosophy throughout the training program that I put in.
Another part of the program talks about putting a documentation system in place. They can be very complex, but I’ve just given them the most basic form just to get that those documents together.
Question: What are the essential documents?
David: The essential documents are the ones that you will need to prepare yourself for the best possible sale process. So, when you go into due diligence with the buyer. Obviously, there’s the financial side, getting your finances in order first. But when you want to do due diligence with a buyer, they’re going to want to see certain documents. And if you can prove that you’ve got them available quickly like that, they’re accurate, and they’ve got a numbering system on it. You’re going to look very professional. If you’re stumbling around which document you want that has errors on it, it’s not professional and you’re not going to give as much confidence in you or your business.
The buyer will always want to prove the numbers in terms of the end costs of the products, which is very important for developing the actual profitability of the business.
That means you need to have your invoices from your suppliers, from your shipping agents, the documents that you get when you come through customs, which you should be getting from the shipping agent anyway, that have charges on. You also want your purchase orders. You also want legal documents, such as supplier contracts, trademarks, any IP related documents that you have, are very important because they are actual assets.
In Part III, David will talk a little bit more about his personal experience as an Amazon FBA owner and how that led to the development of this business. If you would like to know more about Amazon FBA Build to Sell, click here.