Small group workshops to help you learn, optimize, and grow.
.svg){kind=logo}
.jpg)
There may come a point after you’ve spent money, time, and effort building your Amazon business when you decide it’s probably time to hang up the boots and sell it off.
This could be for any number of reasons, maybe you just want to move onto something new, or the business has gotten to a point where it needs a serious injection of cash to scale properly and you can’t do it on your own.
To start the sales process, you first need to find out what your business is worth and what type of buyer you want to sell to. Once you’ve got that figured out, you have to sit down with the counterparty and get down to the brass tacks of the actual sale, but it doesn’t happen all at once, but rather in stages.
One of the final stages, acting as a bridge of sorts between the informal discussions with potential buyers and actually signing on the business away, is the letter of intent (LOI).
The Letter of Intent or LOI is a non-binding letter that lays down the broad outline of the deal, putting the main terms all in one place so that all parties concerned can move into the formal part of the sale in agreement and on the same page.
This LOI stage usually takes between 30-60 days and involves the main terms being negotiated, with drafts getting sent back and forth until you can arrive at a formula everyone is happy with.
The first draft is typically prepared by the buyer’s team, after which the seller can accept it or send back another draft with wanted corrections.
Terms that will typically be part of the LOI include:
For obvious reasons, this is the main stat, the top number underlying everything else. This is determined as a multiple of your seller’s discretionary earnings (SDE), usually landing between 2-4x. Keep in mind that the LOI is non-binding, and the price can change as the negotiations progress, particularly during the due diligence phase when things may come to light that put downward pressure on what the buyer may want to pay for it. It is less common for the price to rise from the asking price following due diligence, but it has been known to happen.
Once you’ve determined how much the deal will be worth, you have to agree on how it will be paid. Will it be an all-in-one payment? Will it be staggered with deferred payments over time? Will there be contingency payments or earn-outs down the line based on hitting pre-agreed performance targets? Deadlines for each payment should be outlined at this stage, as well as details on how each installment is calculated. Clarity here will avoid problems down the line.
Due diligence is one of the most important parts of any takeover process, and a buyer will have a clear checklist of things they will need to see before agreeing to sign a check. Everything is likely to be requested - people parting with a lot of money will not want to leave any stones unturned - so be sure to make a note of all documents that will be requested to you have them ready to show later on.
The buyer will want to make sure that they have a period of time - usually 1-2 months - during which time they can work on the potential deal without having to worry about another competitor stepping in on their purchase, so exclusivity terms will need to be outlined in the LOI. On your end as the seller, you will also need to make sure that if the deal falls through and no purchase is made, the buyer is legally barred from disclosing any sensitive information about your business.
Not everything is covered under the LOI, even as a framework, so you need to sort out what wrinkles still need ironing out during later negotiations.
In addition to just being a necessary step in the process, it lays down the groundwork that prevents either party from getting blindsided at a later stage of the sale. While the LOI comes before the due diligence process, there are certain things you will need to provide the buyer before the LOI can be drafted, these can include:
Once the LOI is agreed on and signed, you will move on to the due diligence phase, during which time the buyer will look through every corner of the business and run through the checklist outlined in the LOI to make sure there are no nasty surprises and everything is on the level.
As due diligence is being carried out, the buyer and seller will be negotiating the precise and final terms of the deal, ironing out any issues that arose during previous stages, and looking towards drafting a binding agreement. This will usually take around 90 days.
If all checks out during due diligence, then you move onto the closing phase when everything gets signed - typically over 5 days - the payment gets made (or at least the first part of the payment) and the business gets a new owner.
Threecolts is a comprehensive suite of advanced ecommerce software solutions. We're designed to empower retail vendors and marketplace sellers on Amazon, Walmart, and beyond. Our tools optimize every aspect of ecommerce operations to ensure maximum profitability.
For sellers aiming to earn through reselling, Tactical Arbitrage helps you find hidden deals 5X faster. ScoutIQ provides instant insights for scoring in stores. DataSpark helps you get your next bestseller on Walmart Marketplace across over 14 million products in its database.
If you want to sell globally without storing, shipping, or risking money on inventory, SellerRunning simplifies cross-border dropshipping. We let you manage and expand your ecommerce business across multiple Amazon marketplaces seamlessly.
Managing products across leading ecommerce channels has never been easier either. ExportYourStore ensures hassle-free cross-listing and product syncing. Meanwhile, Hemi integrates over 100 ecommerce platforms, handling everything from inventory to logistics.
For efficient financial operations, FeedbackWhiz Profits offers a robust ecommerce accounting solution. We give you total control over your finances. You can track earnings and spending and visualize financial data without much effort.
You can also enhance your customer service with ChannelReply. Centralize marketplace communications through order data alongside support tickets from major marketplaces. Meanwhile, Onsite Support combines AI tools and custom-built help centers to amp up your support capacity. With these two, you can ensure that your customer service team can do more with less work.
Simplify Amazon operations with InventoryLab. It's an all-in-one solution that enhances everything from sourcing to logistics to accounting. We make inventory management and business workflows as streamlined as possible, so you won’t have to think about it.
Protect your profits with our advanced recovery solutions. DimeTyd Amazon helps 1P vendors recover lost revenues from overbilling and inventory discrepancies. DimeTyd Walmart simplifies the process of disputing unacknowledged shipments and organizing deductions. DimeTyd Sellers offers comprehensive monitoring and dispute resolution for Amazon FBA.
Automate your pricing strategies with SmartRepricer. We'll help you stay competitive by adjusting prices automatically based on custom rules. You can make sure that you always win the Buy Box with just a few clicks.
Finally, safeguard your online reputation with our reviews and alerts solutions. FeedbackWhiz Emails lets you handle Amazon review requests with personalized feedback campaigns. CR Feedback offers cost-effective feedback gathering for eBay and Amazon review requests. FeedbackWhiz Alerts keeps you informed with timely notifications on reviews, threats to your listings, and other important events.
