Why I SOLD My Multi-Million Dollar Amazon FBA business

After five years... It's over.

Myles Dunphy
Amazon FBA
November 18, 2021

I sold my Amazon business. I’m done, I’m out of the Amazon FBA game.

After 5 years of pouring blood, sweat, and tears into the FBA game, a lot of stressful and sleepless nights, and some excruciatingly painful moments, I’m quitting.

So in this blog post, I’m going to explain the following:

  1. WHY I decided now is the time to quit; 
  2. HOW was it to actually sell my business; and
  3. WHAT I think is coming next for Amazon sellers.

You might not like what I’m about to tell you... I’m not particularly bullish on Amazon anymore. I’m going to give it to you straight in this video because this is exactly what I would tell you if you were a close friend. I have nothing to gain either way.
So if you’re selling on Amazon and you’ve thought about getting out - read this blog post until the end. I just may convince you that it is the right decision.

1. Why I Quit

So first, when I told my student group that I am planning to sell my Amazon business, the first and most common questions were:

"Why exit now?"

"Is the Amazon FBA opportunity dead for beginners?"

"Will Amazon still have long term sustainability?"

Okay now, is FBA dead?

My short answer is: Yes, it may well already be dead for beginners but it depends who you are and where you are coming from. I’m going to explain in detail later so just keep on reading.

But what if you’re not a beginner and you’re an existing seller like I was? Then, it’s a bit different. I’m going to give you the framework for how I decided it was time to quit as the owner of a successful business on our way to hit 8 figures per year in revenue.

Is your goal to exit or to build passive cashflow?

The value maximizing strategy in the post-Thrasio world is build to exit. I believe it's folly to think of Amazon listings as a stable long-term cash-flowing assets. They may be, as a part of a well-diversified portfolio inside a slick operational machine for whatever companies end up taking them public. That seems like the natural end state. However, these aren't houses or condos... How confident are you that your garlic press listing, if you packed up and walked away from it today, is still going to be producing profitable passive cashflow 5 years from now? 10 years?

Honestly, I am not confident in that at all. An Amazon business is either growing towards an exit or it is slowly dying so you should always be building to exit.

Is now a good time to sell (in the market)?

As I have mentioned a couple of times in the past, if you are the owner of a high quality, large Amazon FBA business, now is a great time to sell. Aggregators want to gobble you up and they want to pay you a lot of money to do so.

Could it get even better? Yes, but I try not to let FOMO dictate my actions. I knew that now was a great time to exit, so I had to consider other factors to help me make the decision.

Is now a good time to sell (in your own business)?

What do your future growth plans like?

In our case, we hit an internal inflection point this year off the back of massive growth during the pandemic. It wasn’t that we couldn’t grow further, but it definitely wasn’t going to be as easy.

We ended up creating a very detailed plan to grow 100% from where we are now, to some pretty mind boggling numbers. Resource wise, to get there we needed to take a step back and change team structure, etc. That would take a while, a lot of work, and a lot of personal mental energy. Was I ready to do that? It turns out I wasn’t.

Could another company do that if they had the resources and energy? Yes. This was a major reason why I wanted to pass the business and brands on to someone else.

If you have used up your major easy growth levers, like we had, then maybe now is a good time to sell.

What are the opportunity costs?

Your course of action always has to be compared to the next best available option. If you’ve watched the last few videos on my youtube channel or read my blog, you know that I’m very bullish on crypto. I try to compare everything against crypto to see the true opportunity cost.

So here’s an interesting exercise… go check the dates of when you invested money into your Amazon business (or anything else), and how much. Take those same dollar values and dates and calculate how much you’d have today if you’d invested that money in Bitcoin or Ethereum instead.

In my case, what if instead of investing all the capital into my business when I was starting it back in 2016, I’d just invested that in Bitcoin and then kicked back by the beach for 5 years?

I can’t lie. The investment was worth more put into my Amazon business than it would have been in Bitcoin by about a factor of 3-4. But... to get that return I also had to pour in thousands of hours of work and like I said, a lot of sleepless nights and stress.

But my Amazon business was, statistically speaking, an outlier. We did really, really well between 2017 and 2021. Would we continue to outperform in 2022-2023 relative to where I think crypto is going? And even if we did, would it be worth the additional stress and work?

Speaking for my personal case only, I didn’t think so.

Are there timing or other constraints?

Maybe this doesn’t affect all sellers, but our business is highly Christmas-seasonal. This means that the risk varies a lot throughout the year - rising to just before Q4, and then after a mad selling season, it drops back down again.

We really had to consider this because it’s not practical to try and sell the business just before Q4, both from an operational handover perspective and also because the buyer is taking on a lot of the year’s risk but doesn’t have much control. 

And on the other side, selling just before Q4 meant that we have to do all the prep work ourselves, but would basically not get paid for any of that work. 

So for us, we really wanted to sell between January - July.

Do you enjoy what you’re doing and does it still have purpose?

My goal when I started in the Amazon game was to make money. I wanted financial freedom and I wanted that money to solve my own personal problems and the problems of those around me. 

I already achieved financial freedom a while ago and you know what, having money and free time doesn’t magically make your problems go away. It doesn’t make you happy. All it does is give you the potential to  create a space where you can actually do the work to solve those problems. It sounds cringey to say it but after a certain point, the thing that’s making you money might actually be the thing that’s holding you back from creating that space and doing the work to solve those problems. 

That’s what my attachment to my Amazon business was, in the end. It was becoming the obstacle more than the solution. Of course, I’m writing this with the benefit of hindsight. Only after I breathed the fresh air on the other side, where I am now, did I realize this was a huge personal reason for me to quit. 

So that’s the framework you can use to decide why, or why not, to quit and sell your Amazon business. 

For me, it seemed clear that we should exit.

2. How was it to actually sell my business

I'll tell you what it was like for me personally. It was an emotional roller coaster. 

I’m going to make a more detailed video on the actual mechanics of the process. So if you want to know the steps and process, short term and long term setting up a business for exit, when to start looking, and how to maximize the dollar amount you make on exit. Make sure to subscribe on my Youtube Channel and turn on the notification bell so you don't miss this it when it comes out. 

But for now, I’ll go over the 2 things I wish I knew before going through this process, and what I would do differently.

1. Do a thorough audit of the business and its risks beforehand

Any buyer is going to do thorough due diligence of your business. They pretty much want to know the following: 

  • How risky is it?
  • How can I grow it?
  • How easily can I plug it in?
  • Am I getting what I’m paying for?

The valuation of your business and the smoothness of the deal will be dependent on them being able to tick these boxes. You really don’t want to get caught on the back foot by something not turning out to be the way it first appeared on paper, as any issue is generally only going to reduce, rather than increase, the value of your business. 

The deal is all about trust and honest communication. If you misrepresent something, that’s going to tarnish the trust. You’re probably not going to deliberately misrepresent anything but you also probably never looked at your business with the same level of detail that the buyer’s diligence team will do.

Specifically, keep your accounting books super clean. Know your numbers and costs and make sure that they are accurate. Have all the required certifications and approvals to sell your products and be 100% compliant with your importing process. I normally pride myself on my attention to detail, but I will be honest that we stumbled here.

2. Act as if you don’t want to sell, and it isn’t going to happen, until it does.

Act this way up until closing which is the day that the money lands in your bank account. 

Should you use a broker or do it independently? I did it independently and I probably saved about half a million dollars. I think it was worth it. However, I can see the pros and cons with each method. If someone had told me the above two lessons, it would have saved me a lot of energy for sure. So I hope they’re valuable for you. 

Again, subscribe to get notified when I release the next video where I’ll run through the process of selling a FBA business in a lot more detail.

How does it feel now?

The blunt truth is that very few Amazon sellers are closely attached to the products they sell. Most Amazon sellers are attached to the money they make, and specifically the idea of the freedom that the money will give.

And I’m happy to say that the freedom feels great. Real freedom, life-changing and not contingent on the continual performance of the business.

It honestly feels liberating to be on the other side.

3. What comes next for Amazon sellers

I think the Amazon FBA business model is already dead for a lot of people and it’s dying for a lot of others in the next few years. 

Before anything else, why am I even telling you this and why should you trust me? Everyone else is saying that it’s a wonderful business model and passive income stream.

The blunt truth is that most people saying this are selling courses and it will directly affect their livelihood if they tell you what I’m about to say. 

I have literally nothing to gain so what you read in this blog and on watch on my channel will be exactly what I would tell you if you were my best friend. Anyway, it’s never wise to blindly listen to someone’s words. Instead, pay attention to their actions. Where are they investing their own time, attention and money?

There are 3 big things I’d be very wary about in the near future if I were still an Amazon FBA seller.

1. Inflation and increasing cost pressures

Amazon is forecasting to not make a profit in Q4 on their physical products business due to rising labor & material costs. How likely is it that they pass on some of these costs as additional fees to 3rd party sellers? 

This is big picture macro stuff but my personal belief is that we aren’t reverting back to lean, efficient global supply chains any time soon. Get used to increasing cost inputs and increasing shipping complexity.

Overall, it's equally painful for the seller’s brain and their income statement. Look to shorten your supply chain if you can, and produce as close as possible to where you are selling.

2. Slowing growth

Pre-covid was the best time to be a seller because you already had a foot in the door before the madness started. Then, when the massive boost in sales came, you just had to be smart & nimble enough to take advantage of it. That’s how we tripled our business in 1 year; we were in the right place at the right time, we had pretty good processes in place, and then we were able to move quickly to leverage our good luck into even better results. 

However, mean reversion is a real thing. Nothing is exponential forever; growth curves are S curves. What first accelerates will later decelerate. 

Don’t get me wrong, e-commerce will surely continue to grow, but not as fast as it just did over the past year. And in a post-covid world, everyone and their dog, and their fund manager, is aware of the opportunity. It’s not like it was in 2014, 2017 or even the start of 2020. 

3.Consolidation of the industry

The industry is consolidating quickly and this will result in an eventual crowding out of individuals by aggregators and big companies.  

Massive capital can only flow into the space via the aggregators, it started trickling down into the space just a year or two ago and now it is more like a fire hydrant on full blast. 

On the other side, talent is migrating up, attracted to the fire hydrant of money. For example, current sellers exiting their business & becoming involved as partners or employees at the aggregators. 

The confluence (talent + capital) is where most of the value will accrue to. That will be the standout, top tier aggregators, and those who own equity in them. On the edges of that confluence will be successful serial entrepreneurs, and less successful aggregators. The less successful aggregators will get bought by the better ones, and their assets will converge into the centre as well.  

The serial entrepreneurs are the ones who know the Amazon space intimately. They know how to build and re-build a brand from scratch. They’re the lone wolves, the professional assassins, laser targeting the remaining value hideouts, diving in, building brands up quickly and then selling them up the chain to the aggregator at the right time. Rinse and repeat. Or, they’re the ones building the new services or products to serve the eco-system, e.g. software, or agencies. There will always be a place for the serial entrepreneur, and the person who can learn to become one. If that is you - you will thrive in this new world. 

And lastly, far on the outside, stuck at the bottom is the newbie. You really don’t want to be the newbie stuck at the bottom with little capital and little talent in the space that’s coming in the next few years. Surviving out here is going to be like finding water in the desert. Difficult. 

So the FBA business model, at this point, is complex - and getting more complex. The reason why it was SO good to be an Amazon seller in the early days were because: 

  1. It was super simple to get started; and
  2. Barely anyone knew that selling on Amazon was a thing; so there were very few sellers.

Neither of these are true today. You either need a lot of talent and or a lot of capital to get deep into the game to figure the rules out, become proficient, and then later on excel. 

Talent is specialized knowledge, and this doesn’t just take time to develop. It takes REPS. Lots of reps. Doing something over and over, evaluating your mistakes, and doing it better next time. The problem is that it takes a long time to launch a new product. And that’s one rep. Your time between repetitions might be 6 months. And you’re now competing against the huge jacked guy in the gym who's doing hundreds  of reps per day and is simultaneously mainlining venture capital steroids directly into his bloodstream 24/7. And the gym is starting to fill up with jacked dudes on steroids and they’re taking all the exercise machines and eventually you’ve got nowhere left to sit or stand to even do another rep. 

I know the analogy is a bit extreme but that’s more or less how it will play out. There’s lots of money to be made in this environment, the only issue is - who is going to be making it. Existing advantages will continue to concentrate & compound. 

So if you’re trying to imagine what your Amazon business is going to look like in 2-3 years, ask yourself this: "What is your advantage?" 

I want to leave you with that question. In the next blog post, I’ll be going into more detail on the actual business sale process and tips to help you optimize your exit value, if you do choose to exit.