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If you’re thinking about starting an FBA business, you can either start from scratch or buy an existing one. Deciding between the two can involve a good deal of brainstorming. If you have the skills and intention to fight it out and grow a successful online brand, you should give it a try.
Alternatively, you could buy a growing FBA business, scale it to new heights using your skills and capital, and sell it for a decent profit. It all depends on your short and long term goals, how much capital you have and your personality as an entrepreneur.
Related: 3 Things to Consider Before Owning an Amazon FBA Business
When you should start an FBA business
You have startup funds:
If you have decent capital built up or access to attractive financing, starting an FBA business is a great option. While surveys of FBA sellers showed that, on average, it takes $3,836 to get an FBA business off the ground, the actual cost of getting started could even reach five figures, depending on the product or of the business model of your particular FBA business.
Starting a new FBA business involves costs such as inventory, PPC advertising, social media marketing, legal requirements, branding, packaging, Amazon fees, and more.
You’re in it for the long haul:
An FBA business is like any other business: it requires huge commitments of time and energy, and it can quickly take over your life. If you have decided to jump into the e-commerce jungle and are ready to face its challenges, then this is the right choice for you.
However, time and money aren’t the only things you’ll need to make your business work. FBA experience also plays a role.
Do you want to build and sell a successful business:
Wanting to sell a successful FBA business can be one of the best reasons to start one. Starting your FBA journey with an eventual sale in mind will streamline your operations and have solid SOPs in place to ensure a smooth transfer to the new owner.
This will ensure that your business is the pick of the bunch when you decide to sell. And partners like ScaleBrand can help you speed up the time to get to that stage by helping you optimize your operations, build your brand strength, and prepare airtight financial records.
Related: 5 Ways to Grow Your Fulfilled by Amazon Business
When you should buy an FBA business
Don’t envy the hustle and bustle:
If you are one of those people who can intuitively smell a successful business and have the resources to grow it by leaps and bounds, you should definitely choose to buy an FBA business instead of starting one from scratch.
While buying a well-run FBA business ensures that you don’t have to go through the bumpy ride of growing a brand, building a strong portfolio of reviews, and getting through the initial growth phase, it still comes with its specific needs, such as positioning it for a sale.
Your goal with an acquired FBA business should be to make it “exit ready” for eventual sale. “In short, a business is ‘exit ready’ if it ticks all the boxes for the attributes that buyers want. There are dozens of boxes to check to be better prepared,” said Emmett Kilduff, CEO of The Fortia Group . Attributes present in a less-than-optimal state, such as outdated inventory, poor SEO, and low brand recall, need to be checked and corrected to position the business for a profitable sale.
If you can’t identify the attributes that need fixing, full-service Amazon marketing agencies like Urtasker can help you optimize every aspect of your newly acquired business.
You don’t have your whole life to invest in the business:
Buying an FBA business, scaling it to the next level, and then flipping it for a big profit on what you originally paid is a strategy that appeals to many business owners, and it can take up to a year or two.
As you grow your newly purchased FBA business, you will likely face several challenges, one of which will be inventory management. Inventooly can make your life easier by handling inventory forecasting and supply chain management out of the box, so you can focus on the things that matter most.
Related: Want to Sell Your Amazon FBA Business? Here are 5 lessons from someone who has overseen $100 million in FBA purchases
Which one suits you?
When juggling the “startup or buy” decision, take stock of your skill set, risk appetite, and business goals.
If you are experienced in e-commerce and have the experience to grow and scale online business, buying an existing business is the right choice for you. On the other hand, if you can face the challenges of the growth phase, overcome the first year of almost zero profits and enjoy working on a new project, you should start your own business.
Your appetite for risk plays an important role in how you approach any decision in life. If you are risk averse, starting a business from scratch may seem like a better option, given the relatively lower capital risk involved. If not, the higher risk/reward combination of buying a business will work best for you.
Ultimately, what you want to do with your business can decide which route you take. You may feel comfortable investing several years to build and grow an FBA business and reap the significant benefits once you become more successful. Alternatively, you might be more inclined to start a new business as a short-term project and sell it for a profit after a year or two.
Choosing whether to start or buy an FBA business should come down to what you know and what you’re willing to learn. You should judge your experience and risk appetite when juggling these two decisions. There is no correct answer.
Whatever you decide, growing an FBA business and keeping it successful takes a lot of effort, both in terms of time and money. Getting through the FBA challenges will be difficult at times, but the rewards at the end of the journey just might make up for it.