Question: You developed this course having gone through the experience of selling your own business. Can you elaborate a little bit on your own personal experience, David?
David: I can remember the very day we decided, right, we are going to try and sell this business. I thought to myself, “Right, we need to put a plan together on what we need to do to prepare it for sale.”
The first thing I learned is that having what I call an Amazon prepared Profit and Loss statement, in the format of all Amazon terminology, and in the same order as the reports is a massive benefit when it comes to communicating with the buyers.
But I didn’t know about it at the time. I ended up going to a broker, and this is when my business wasn’t saleable.
Question: What did you change between 2017 and 2019 to get to that success or what satisfied you in terms of a successful exit for your business?
David: One of the first things was using, this is when I really built out this financial planning tool. And I could see very clearly that some of the products I had in the business had about 25 SKUs or so. Some of the products in the business were just eating up so much cash flow, and yet they weren’t really producing that much net profit. So, I could see clearly which ones needed to be cut out.
The first thing I did was just cut out the deadwood and that freed up quite a bit of cash. Step two was to look at the products that I had that were doing well or that I thought were doing really well.
Some of those were eating up a lot of cash as well, but not generating much profit. So, what I decided to do with those ones was increase the prices. I knew the sales would go down, but the profit margin went up and that had the effect of releasing cash out of the business, and I wasn’t buying as much stock. All of a sudden I had a much leaner, more efficient running machine in terms of business.
Question: You said you initially started out with 25 SKUs. What did you go down to after you went through that process of cutting the ones with the lowest margin and increasing the prices and introducing complimentary products?
David: It was 14 or 15 or something. I cut out at least 10 products. These were products that maybe I hadn’t analyzed enough. I’d become a little bit attached and it was just easy just to keep running.
Question: What else did you learn?
David: The next thing was, we got some advice on how to restructure the business because we were a UK based business. We opened an LLC in Wyoming and moved some of the assets over there. That’s what made it more transferable for the buyer, because that’s another key thing, reducing risk for a potential buyer.
Another thing we decided to do was open a Shopify site because we knew that having a conversation with a buyer and saying, “Oh, you could create a Shopify site,” is one thing, but showing them that you’ve already created one, and you can drive sales to it, is a completely different prospect. Again, that raises the value multiple of your business.
Question: Are there other parts of your business that you simplified and changed?
David: One of the things was going out to the supply chain and really having tough negotiations with the suppliers to drive costs down and also find the best possible shipping rates. So what we’d done is just got lazy and haven’t gone for any reduction, and we hadn’t done a proper negotiation in the first place. We weren’t getting proper quotations on the product shipping.
Another thing that we learned is that we had gone into Germany, France, Spain, and Italy, with a number of our products. That was one of our downfalls in 2017. We had to pull out of pretty much all of those markets, not all of the products, some of them were left in. It was just not profitable and we’d left it on too long. So, we pulled out those markets again, and again that freed up some cash.
Question: Coming from the experience of being an Amazon seller yourself, what are the best parts about being an Amazon seller, and what are the real challenges of being an Amazon seller?
David: This is obviously my personal experience. I think the best parts are just seeing how successful it can be with the amount of effort you actually put in.
Another good part for me is a personal thing. When I was in the corporate world I was working 60, 70 hours a week. It’s pretty tough when you’re traveling and you don’t have much freedom. Since I became an Amazon seller and I’m doing what I want to be doing now. I’ve got the freedom to go to the gym at lunchtime and work my own schedule and do things. That freedom thing, that’s probably the other one.
The last positive one is the Amazon community, which I really miss because of COVID. I miss going to all events in Vegas, and Texas, and Barcelona, and wherever else you can, London. And yeah, I miss that. I really miss that.
Question: How about the biggest challenges?
David: I suppose one of the worst challenges is definitely dealing with Amazon support. It’s like banging your head off a brick wall. Every single one of them thinks, even though you’ve been selling on Amazon for four or five years or more. Every single one of them thinks you are a beginner.
We’ve had our account suspended for the wrong reasons. We’ve had Amazon lose our inventory. One just before Christmas, $180,000 worth of inventory went missing, and we negotiated with them and they said they were going to give us the money, all the money that was missing. And on the last day, this was on the 29th of December they found it and they put it all in the stock and we’d missed the entire Christmas period that was in 2015. I wasn’t very happy about that.
Question: Any last thoughts that you think it’s important to share with the Seller Investigator audience about building a business with the end goal from day one?
David: One, selling your Amazon business is the greatest thing it can ever do for you.
Two, building an Amazon business in terms of sourcing products, marketing products, and selling the products is very different to building an Amazon business with the end game in mind in terms of selling it.
This is the concept that most Amazon sellers won’t understand. I’ve been there and I can tell you that those two approaches are so different. If you do happen to make it with the first method, there’s quite a lot of luck involved in that. But if you use the other method – the method we teach at AFBTS, you don’t need as much luck, it’s more a strategic and measured way of doing things.
We hope you have gained some valuable insights from our Q&A series with David. If you would like to know more about Amazon FBA Build to Sell, click here.
