This week at Flippa, I caught up with Sasha Benz the owner of All My Friends Are Models, an online publication that is currently for sale on Flippa. In the video below Sasha talks about the power of the brand, the business’s success to date and how a publication like this makes money. We also touch on the opportunity for prospective buyers and how they could take this business to the next level.
In the world of e-commerce, one company reigns supreme: Amazon. The world’s largest online retailer is the most popular online marketplace for consumers to find just about everything. However, Amazon’s success isn’t down to only itself, but the many 3rd party sellers who use the marketplace to sell their own products.
Many of these 3rd party sellers use the Amazon FBA (Fulfilment by Amazon) service in order to capitalize on the Amazon customer base and distribution network. Amazon FBA makes it easy to manage an online store on the platform. While setting up an FBA store is a simple way to get into e-commerce, the beginning stages are always the hardest. For that reason, many entrepreneurs are interested in buying an Amazon FBA store.
Setting Up FBA
To set up an FBA store the first step is to create a seller account. Once you have a seller account you can start sourcing products to sell on your store. You can connect with suppliers to buy your product from and get it private labeled with your own brand. Once you have your product manufactured and branded to your liking then you can send it to the Amazon FBA warehouse and Amazon will ship your product to anyone that purchases it from your product page on the Amazon website.
Why You Should Consider Buying an Amazon FBA Store
FBA makes owning and running an e-commerce store easy. However, there are some upfront costs which can be high if you don’t have a good product. This is why many entrepreneurs choose to buy an FBA store instead.
The hardest part of running an FBA business is finding and sourcing a profitable product. Buying an FBA store removes this problem as the seller has already done the groundwork of sourcing an initial product and selling it on Amazon. For someone just starting out with FBA, this is a great way to learn the platform without wasting money on products that turn out to be busts.
Focus on Expanding
With the initial groundwork of sourcing a product, supplier and getting everything into the FBA store already done then you only need to focus on maintaining those established channels. With some steady profits already available then you can focus on expanding the store by enhancing marketing, launching a website, and adding additional products among other things.
Once you’ve decided that you wish to buy an established store then the best place to go would be Flippa.com. Flippa makes buying an FBA store a simple process. You can browse through their collection of FBA stores where you can analyze store niche, profit margins and sale price. Once you’ve identified a store that you wish the purchase, the customer service team at Flippa is available to help with the process and answer any questions.
If you’ve always wanted to get into e-commerce or FBA but were unsure about what you needed then now is the perfect time to buy an FBA store through Flippa.
Revenue, Cost, Profit Claims
Flippa can only verify the numbers claimed and request that all sellers add proof of revenue for all businesses generating a profit.
Websites / Apps:
Read-only access or video walkthrough of revenue analytics, Admob, or eCommerce reports. Always ask for any analytics that may be associated with the account.
Amazon Seller central video walkthrough or read-only access. Make sure to get proof of stock costs and shipping costs from the manufacturer. Look at every line item in the P&L and request for proof.
Flippa verifies ownership of the main asset. However, if the listing has multiple assets we recommend that a full verification is done by the buyers.
Websites / Apps:
You can request read-only access to any analytics on the site or for other proof from the seller to verify ownership of the asset.
Amazon Seller central video walkthrough or read-only access.
Many online businesses will have more than one revenue source, so it is important to fully understand how the business is monetized.
Websites / Apps / FBA:
It is important to identify all the monetization methods an online business uses to make money. This can be done by making sure all revenue and cost amounts are equal to what’s claimed on Flippa. Once you have identified how the business is monetized, make sure you’re capable of performing those same tasks (such as posting affiliate links or stocking inventory), or can easily learn how.
It is important to verify that all revenue can be swapped to a new owner, upon buying an asset. This is to make sure the business is still profitable upon taking ownership. Buyers should look over the terms of any third party accounts that are going to be transferred or created.
Make sure that the revenue account can be transferred or that opening a new account is straightforward and easy. For example, AdSense accounts cannot be transferred, while PayPal accounts can easily be transferred.
For in-app purchases, Advertising services like AdMob or ChartBoost can easily be swapped by placing your own ad IDs into the app. Many sellers can do this for you upon transfer. For in-app purchases, one just needs to take control of the app and change the payment destination.
It is up to the buyer to make sure that the FBA account is transferrable. As a seller, you can make sure the business can be transferred by talking to Seller Central.
Verifying traffic and analytic information is essential to making sure the business is performing as expected.
While Flippa does show Google Analytics stats from the listing itself, we highly recommend getting the full picture by asking for Google Analytics “read-only” access.
We recommend getting “read-only” access from the seller’s developer account to verify installs and revenue.
We recommend getting “read-only” access to the seller central account to verify product sales and revenue.
When a buyer looks at your business for sale, the very first things they look at is the numbers driving the business. While keeping track of your financials is good business practice, during the sale process, it could mean significant differences in the final sale price. Going into details here is always better, for example tracking Sales/COGS by product, advertising (FB vs AdSense vs Other), salaries, VA costs, warehousing costs, and refunds to name a few.
A well kept and organized financial statement tells the buyer that the business has been maintained well and inspires confidence that the business can be carried forward successfully.
Google Analytics data has always been sought after by Buyers as it gives them direct insight into multiple facets of the site’s performance. It is very common for the buyer to request read-only access to this when reviewing the business. Monitor this on a regular basis to ensure that there are no significant outages in the collection of this data.
Other measures such as keeping track of conversion rates, success rates on email campaigns, Domain Authority ratings, and in-cart upsells, adds to the impression of a well-organized business, likely leading to better offers to buy your business.
Accounts and Bank Details
Review all your accounts (social media accounts included) to ensure that all of them are set up with your companies email address and bank details. All too often they may be set up with personal email and payment details, which may complicate the transfer process to the New Buyer and delay the transfer process. Addressing this before the sale process will give you enough time to deal with any issues before they come up.
Support timeframe, where the Buyer can have the Seller available to answer any questions related to running the business. These timeframes typically range from 1 week to 3 months of support (the latter typically for six-figure businesses). To minimize your time commitment in supporting the seller, try to get as much documented upfront before the sale.
Step back from the day to day work you do and start documenting all the processes you follow. This may include, how to add new articles or products onto the site, FAQ’s, how to manage marketing activities, affiliate management, and even how to track and manage Inventory. If you have staff that helps with the business document what they look for to make roles and responsibilities clear.
Make a list of all the important persons related to the business, VA’s, content writers, suppliers, shipping agents, account managers for any of your plugins, and influencers you may have used. This will help the buyer to self-serve most questions when they have a list of names and contact information for these key people.
Depending on the nature of your business, only some of the above may apply or there may be more. This is just a guide to help you think through the thing to expect when you are selling your business.
Keep in mind that the Buyer may not have the same skill set as you and having everything documented up front will widen the appeal of your business.
When is the Right Time to Sell?
Once you have all your ducks in a row, it’s time to start thinking about when you’re going to sell your business.
Before you give yourself an exact date on when you plan on selling your business, it’s extremely important to double down on your operations to try and grow the business as much as possible. A strong 3-month growth trend right before you sell your business creates a positive image that the business is going in the right direction. This is very attractive to potential buyers.
If you’re unable to spend extra time on your business, it is very important to at least maintain current operations and keep the revenue and traffic stable. Too often, sellers will plan to sell their business a few months out and then lose interest in growing the business, so the business starts to decline. When it comes time for them to sell, they realize that their valuations are much lower, compared to the ones they received several months earlier.
Finding the right time to sell your online business can be tricky, and some may have more time than others. Instances like focusing on your health, or selling the business before the introduction of a new family member, may require you to sell when it’s not convenient. While this isn’t ideal (from a valuation perspective), it is always important to sell at the time that is most appropriate for you.
Is There Anyone That Will Help Me Prepare My Business for Sale?
Yes there is. If you have a business generating over $1,000 in monthly profit, it may be worth your while to reach out to a broker. Most online business brokers will provide monthly plans for you to reach your targets and help you maximize your final valuation and sales price.
If this is something that may interest you, we have over a dozen partnered brokerages that specialize in helping online business owners sell their business.
You can read about how to value your business here.
An app reskin is taking an app and making an identical copy of the source code to make it look different from the original. The source code of both apps remains 100% identical, with the change only being in that of the logo and designs.
For example, if you owned the source code to the popular app Angry Birds, you could create a reskin copy called Crazy Cats, where you launched kittens out of a slingshot to hurt mice. While the game would look differently, the source code would remain completely the same, with the only change being to the graphics of the game.
The reason we require all mobile app sellers to clarify if they are selling a reskinned app is to let buyers know if there might be another app that is near identical to theirs.
It’s important to note that buying a reskinned app isn’t necessarily bad. There are many reskinned apps on the marketplace that do very well. That being said, if you buy a reskinned app, there is nothing stopping the owner of the source code from turning around and making 20 apps that are nearly identical to yours.
Looking to Buy a Reskinned App?
Now that you know what an app reskin is, as well as the potential pitfalls, it’s important to understand what you can do to mitigate any risk on your part.
The first thing is to check to make sure the seller has the right to sell the source code. If the source code was licensed, there is a good chance that they do not have the right to sell the source code. If you’re unsure if the seller is allowed to be selling an app, and they cannot provide you with proof, please report the seller and we will investigate the issue further.
As mentioned earlier, one of the big drawbacks of a reskinned app is there can be a near identical copy of your app out there on the marketplace. This can create a competitive nightmare for you in the future, as the seller may also be selling different versions of your reskinned app. To combat this, you may want to discuss with the seller to gauge the impact of the reskinned app competition. Things to look out for include: The number of reskinned apps, and how that may impact your app’s future performance and revenue. One suggestion is to utilize certain contracts, such as a non-compete, to limit the level of competition from the seller.
So, Are Reskinned Apps Safe to Buy?
The simple answer is yes. As long as you are aware of the potential pitfalls of a reskinned app, these operate the same way (and are not any less safe) than a non-reskinned app. Reskinned apps require a lot more due diligence for the buyer, but they can also be found for a fraction of the price compared to a uniquely coded, non-reskinned app. If you don’t have much money to spend, reskinned apps can provide a great introduction into the apps marketplace.
Regardless of if an app is reskinned or not, it is always recommended to perform your due diligence and research on if an app is right for you. Buying an app is an investment. Apps can provide tremendous revenue and can be a great source of alternative income.
For a more detailed guide on app due diligence, look out for our Apps Due Diligence Guide, which is coming soon to the Flippa blog.