How much is your Amazon store worth?
To calculate your Amazon business valuation, you’ll just need to take your net income and multiply it by the sourcing methods multiple, then by 1.5, and don’t forget to add 300,000 times… Just kidding.
While the calculations can get pretty complex, there are simpler ways to quickly estimate your valuation.
Whether you’re looking to sell your Amazon store, buy another one, or are just curious how much your hard work is worth, this guide will help.
Let’s walk through, step by step, what makes up your Amazon business valuation.
And don’t worry—if you’d rather skip the details, we’ve got a quick and easy Amazon seller valuation calculator you can use. You can jump to it here.
How to Calculate Your Amazon Store’s Value
Let’s first start with what goes into calculating your Amazon business valuation. That’s why we’re all here, right?
While it may initially seem complicated, valuing your Amazon store becomes more straightforward when broken into simple steps.
Let’s walk through a few of the key inputs that will go into the formula for valuing your Amazon business:
- Net income: This is the profit your store makes after expenses, and it serves as the foundation for your Amazon business’s valuation. Not surprisingly, buyers are more interested in stable and growing net incomes.
- Sourcing methods: The type of sourcing you use—whether private label, wholesale, or dropshipping— will affect how a buyer views your Amazon business’s risk and scalability.
- Private Label: This often receives the highest multiple due to greater control over your brand, margins, and scalability.
- Wholesale: This is considered stable, and brings a moderate multiple based on its reliance on established brands.
- Dropshipping: Usually assigned a lower multiple due to its higher risk and dependency on third-party suppliers.
- Growth Trend: How has your business grown over time? Positive growth trends (e.g., consistent year-over-year revenue increases) will lead to a higher multiple, while negative trends may reduce the valuation. This is why it’s often recommended to sell when you’re on the up, not the other way around.
- Business Age: An older, well-established business tends to receive a higher multiple because of its stability and proven track record (3+ years). Younger businesses typically have a lower multiple.
- Owner Involvement (Owner Time): How much time do you spend managing the business? Amazon sellers are looking for an auto-pilot business. If your business requires little owner involvement, it will be more attractive to buyers, leading to a higher multiple.
- Sales Channels: How many different channels are generating revenue? The more diversified, the less risk for potential buyers, which will increase your store’s valuation.
- Trademarks: If your brand holds trademarks or other intellectual property, this will add significant value to your store.
Amazon Valuation Formula Breakdown
Once you’ve gathered these numbers, the next step is to apply a multiple to your net income, adjusted based on the factors above. Here’s how it works:
- Net Income: Begin with your net income—this is your annual profit after deducting all operating expenses, cost of goods sold, and owner salary.
- Adjust the Multiple: Based on factors like your sourcing method, growth trend, business age, and owner involvement, you’ll adjust the multiple applied to your net income. This multiple typically ranges between 2x and 4x or more.
If we use a simple example, let’s say your net income is $100,000, and your business has a strong growth trend and is primarily private label. You might apply a multiple of 3x, resulting in a valuation of $300,000.
Use Our Free Amazon Business Valuation Calculator
As promised, we won’t leave you to do all of the calculations on your own.
To give you a good starting point for what your Amazon business is worth, you can use our free Amazon business valuation calculator here:
It’s important to note that this calculator is for estimation purposes only. The calculations are quite complex, with many external factors influencing your final store valuation.
To get a more in-depth & specific valuation for your Amazon business, you can get in touch with our experienced Amazon accountants or ask your CPA to help.
What Other Factors Can Sway Your Amazon Valuation?
Aside from a few obvious factors like net profit and trademarks, there are lesser-known factors not included in our Amazon valuation calculator that can have a big impact on your final valuation.
Here are a few other things to consider:
Seller reputation
Your reputation as an Amazon seller matters a lot to potential buyers.
It’s much harder to fix a damaged reputation than to continue building on a strong, well-respected one.
Luckily, Amazon offers tools to help you manage and assess your reputation.
Ideally, you’ll want to maintain at least 95% positive feedback, high product reviews, and a clean record with Amazon—meaning no violations or suspensions.
Brand strength
Is your Amazon store selling the same generic products as hundreds of other stores, or do you offer something unique that stands out?
Branding plays a big role in Amazon valuations because it gives buyers and investors confidence that your business has the potential for higher profitability.
Consider how loyal your customers are—do they return to buy your products regularly? Loyal customers are exactly what buyers and investors look for when assessing the value of a business.
Inventory
Some experts say buyers don’t care if you have enough stock when they take over.
We disagree.
Most buyers will want a buffer of inventory to ensure the business keeps running smoothly during the transition.
Having stock on hand reassures them that the store can continue serving customers without any hiccups.
Plus, things like inventory turnover and product variety are key indicators of a store’s value. More products mean more revenue opportunities and a high turnover rate shows that the business is well-managed and in demand.
Marketing strategies
Investors and buyers will always want to take a close look at your marketing strategies to see if your business is worth the investment.
Are you getting most of your traffic through organic search, or do you rely heavily on paid ads?
Most buyers prefer businesses that get a lot of organic traffic because it keeps costs down while boosting revenue.
If you’re using pay-per-click (PPC) campaigns, how much revenue are you generating for each dollar spent on ads? For example, a business with a 5:1 return on ad spend (ROAS) is more valuable than one with a 3:1 ratio.
And don’t forget your social media presence—how many followers do you have, and are you active on the key platforms?
Legal and financial documentation
No one wants to invest in or buy a business without seeing up-to-date, accurate financial records, especially those showing profits and losses.
Tax returns, balance sheets, and any regulatory certificates that prove your store is compliant with laws and regulations are just as important.
You might still be able to sell your Amazon store without these documents, but you can’t expect to get top dollar without them.
Future growth potential
Last but not least, trends in the market, a growing customer base, and the ability to expand can all make your Amazon business more valuable.
Investors are always thinking ahead.
If they don’t see your business making money over the next ten years, they’ll likely move on to other opportunities.
Need More Help With Your Amazon Valuation?
As you can see, determining an Amazon business valuation isn’t straightforward. There are countless details that influence how much you can expect to get when it’s time to hand over your store and move on to new opportunities.
The good news is that whether you’re ready to sell tomorrow or 10 years from now, there are plenty of things we can do to boost your Amazon store’s valuation today.
Here at MuseMinded, that’s what we do! We help Amazon sellers like you fine-tune and improve margins, so you can not only put more money in your pocket each month but also make your business more appealing to future buyers.
Curious how we can help increase the profitability and valuation of your Amazon store? We’re just a Zoom call away!
You can schedule your first introductory call with our team using the calendar below.
In the meantime, check out our Benchmark Guide to see how your Amazon store stacks up against the competition.
Until next time!
