Selling on AmazonTips & Tricks

How to Use Low Cost Acquisitions to Scale Your Amazon Business

 

Guide Contents:

  1. No One Really Focuses on Growth Through Acquisitions
  2. Hack Your Way into Owning a Business
  3. Browse Businesses That Are For Sale
  4. Plug In Your Skill Set and Grow Exponentially
  5. Reducing Cost of Goods Sold
  6. Where to Buy Amazon FBA Businesses
  7. How Long Does it Take to Acquire a Business?
  8. You Don’t Need a Lot of Money

– Have you ever considered leveraging low cost acquisitions of struggling brands for growing your Amazon business? We often think of acquisitions from an exit strategy standpoint, but it’s also one of the most effective scaling strategies you can implement as well. Stick with me for the next five minutes as I interview Shakil Prasla, who over the past six years has been successfully using acquisitions to scale his company instead of having to launch new Amazon products entirely from scratch. Not only is his process extremely lucrative, it’s also a lot simpler than you might be expecting. Hey Shakil, thanks again for being here. And if you could take a moment to share a little bit about you and why this is a topic that others should listen to you about.

– Hey, Jason, thanks so much for having me. So I’ve been buying eCommerce businesses for about six years now. I’ve completed 15 acquisitions. Most of them have gone very well. And I really think the best money you could be putting and investing into is an online business. Within even Amazon field, it’s a great business to be buying something today. Everyone focuses right now… If you have an Amazon business, everyone’s trying to grow. They’re trying to grow through marketing, whether they’re using Amazon Ads to lower their ACOS. Or they’re using Facebook Ads to drive even cold traffic, putting them in a funnel. But no one really focuses on growing through acquisitions.

No One Really Focuses on Growth Through Acquisitions

You know, let’s say you’re in the pet industry, all right? You’re getting good reviews, you’re getting good sales, but you’re still not able to breakthrough in a certain niche. Whether it’s dog food or whether it’s cat supplements. What if you found an opportunity to buy your competitor? Or you see a listing that comes for sale? You buy that business, you now add it back to your current business, and now you’ve grown your business that was making, let’s say, $100 000 in net profit. Now it’s doing $150 000 in net profit. Without changing anything else, you’ve now increased the value of your business. Because the higher the profit of business gets, the more valuable your business gets. And I’m talking on a multiplier basis. You’ve probably now increased the multiplier of your business from 3x net profit, to probably a 3.5x net profit. So that’s a great way to increase sort of the inner price value of your business. You know, and let’s say you’ve tried Amazon and you’ve failed, all right?

Hack Your Way into Owning a Business

I think over half of businesses fail in the first five years. That’s a lot of businesses that do fail. Here’s an opportunity for you to sort of hack your way into buying a business or owning a business, right? You’ve tried Amazon, maybe it didn’t work out, now you get to acquire a business. It’s sort of a business in a box, it comes with strategies, it comes with strategies that have failed, it comes with the supplier relationships, it comes with marketing. You take what your skillset brings and you increase, or you… You know, you help grow the business even further. Let’s say that you’re really good at branding, or you’re a really good photographer, or you’re a copywriter.

Browse Businesses That Are For Sale

Look at businesses that are coming for sale. You know, sign up with different brokers listings. And look at Amazon businesses that are coming for sale that are profitable but probably aren’t doing a good job in writing good content. They’re probably not doing a good job in keyword research, or their pictures aren’t that great, or their reviews are super small. If you’re good in that opportunity, and I’m talking about you’re a good photographer, you’re a good copywriter, you’re good at looking up keywords to bring on, you’re good at optimizing, you have maybe a review club or a fan club.

Plug In Your Skill Set and Grow Exponentially

Whatever your skill set is, if you can plug that into a Amazon business that you’re looking to buy, you could exponentially grow that Amazon business. And as it grows, the value of the business grows too.

To give you one specific example, when I bought my Amazon business last year, all I did was one thing. The COGS on that product itself, the old seller was airing everything in. His packaging was not good, in fact they were getting oversized fees. And the seller was pretty strapped on cashflow, so he was only ordering maybe 200 to 500 items each time. What I did was I repackaged the item so it became… And I’ll tell you, it was a fitness belt. I repackaged it to where instead of it being 50 inches long, we spinned it around and put it into a box. So now it when from oversize to whatever the small, regular size FBA fees.

Reducing Cost of Goods Sold

We started using sea freight, and then I started ordering in much larger bulk sizes. What that did right there was I was able to decrease my COGS by about 35%, okay? So if you’re buying, you know simple math, a million dollars worth of COGS a year, now your COGS have gone down to $650 000, that $350 000 in savings goes into your pocket. And if you multiply that by a 4x multiple, you have increased the value of your business by over $1.5 million just by doing that one thing. And that’s just one opportunity on buying inventory. There’s many ways to really add more value to a business. I would say sellers are probably not able to implement those opportunities, it’s because they’re the bottleneck. They don’t have that skill set, they don’t know about opportunity. Sometimes we as running the business will get burnt out, you know we’re doing everything from marketing, to designing, to customer service. We sometimes get burnt out, there’s an opportunity in front of us, we just let it go. Use that, capitalize that sort of failed or the mistake by the seller, use that opportunity to grow the business. And you know, these are very lucrative ROIs.

– Yeah, I just actually… Sorry to interrupt for a second. Just really, you’ve given me

– Yeah. – tons of ideas there, too, because it’s so true. You know, we’ve taught so many people this business model and the reality is, you look at reasons for failure and a lot of reasons are just… You know, whether you want the energy behind it, whatever you wanna call that, sometimes it just fades for people. Whether, you know… Like right now, for example, you’ve got people that their children are forced to be home from them. So before they might have had more time to do that. It’s not really their passion, they don’t really have a good why, they’re not really into it that much but they’ve done a pretty good job of building this business.

And there’s these opportunities where they’re sitting there, like, I know I should do this, but they’re just not. So, what you’re bringing up… And those are all things that I know with my time, you know I’ve been online full-time 15 years now. I’ve gone through cycles on my businesses in each one of those things where you know that there’s something you should be doing, but whatever it is in the life of that specific business, you’re just not doing it. And what a great example you had, you know? Whether it be you just look for those little opportunities, like product packaging size. Oftentimes it’s like, ah I don’t wanna go through and have to figure out a new product package, I’ll just keep it how it is. But right away, I mean, you’re saving… You know, by all the things that you’ve done, 35% you said?

Where to Buy Amazon FBA Businesses

– Yep. – Like that, that’s huge. Right there, that can make the difference. Because now you can invest that much more in sponsored ads. You can invest much more in everything else, so that’s awesome. Do you have any recommendations of any brokered sites people should check out? Even your one top favorite or a couple of them?

– Yeah, I could give you a few. If you’re looking specifically for an FBA business, thefbabroker.com is a very good broker. Quietlightbrokerage.com is another good one. And then websiteclosers.com, who probably has the most volume of deals coming in. That’s another great place to look for deals.

How Long Does it Take to Acquire a Business?

– That’s awesome, cool. So, when it comes to doing this kind of thing, how long is the process when… You know, if you’re looking at buying a company, how long does it usually take people? If there is an average number for this. By the time you identify an opportunity where you could actually have the business for yourself?

– Yeah, typically it takes about a week to go from finding a deal, or at least identifying a deal, to placing it in a letter of intent phase, LOI. And then that’s when due diligence starts, and those are usually 30 days long. And this is where you investigate what you placed your LOI on. So this is where you play a detective and see, okay, is that what the financials are showing? Is that what the operations are showing? Is that what I read in prospectus? You know, once identifying it to closing takes about 40 days to close the deal. Unless there is SVA involved, which takes even longer for financing.

You Don’t Need a Lot of Money

– Okay, is there a minimum amount someone should be willing to invest before looking at this type of option?

– Yeah, I think that’s… That answer, people get afraid of. You don’t have to have a lot of money to be buying businesses. There are a lot of ways to buy a business without putting much money down. One of the most popular ways is SVA financing, and that’s available only to U.S. citizens. But you only have to put down 10% to buy a business. So if you’re buying $100 000 business, you only have to put down $10 000. And I could talk more about that and there’s a lot of aspects to it, but that’s one of the best ways to buy a business is putting down 10%, and you’re buying that’s worth $100 000 should be making you $33 000 a year. I mean, you know, you make your money back in three, four months.

There’s seller financing, you could ask the seller to finance the deal for you. You could do a performance earn-out where you show the seller that, hey, I’m an expert in these missed opportunities that you haven’t been focusing on, let’s do some type of earn-out where you get the upside while I grow the business. You could buy some of those businesses for nothing down as long as you’re able to sell yourself and show those opportunities. You could do whole-backs. Put, you know, $30 000 now, $70 000 in next year. And you get that $70 000 from the company cashflows, right? And so, you know, those three or four ways are great ways to buy a business without putting much money down.

– Thank you, Shakil, that was such great information. If you’re interested in starting your own business so you can finally achieve both financial and lifestyle freedom, check out our free training series at amazingsellingmachine.com. Or by clicking the link in our description. This free training series shows you step-by-step how to build your own successful business even if you’ve never sold a thing in your life. If you haven’t already done so, please make sure to follow us and like this video. Also, if you’re interested in learning more about how to use acquisitions for growing your business, check our shakilprasla.com. Have a great day!

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