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Deal Breakdown: The $3.1M Amazon Brand That's Actually Three Businesses in One

Amazon FBA businesses get a bad rap.

"You don't own the customer." "Amazon can shut you down tomorrow." "Chinese sellers will copy you and undercut on price."

All true. And all reasons why these businesses trade at 2.5-3.5x EBITDA while DTC e-commerce trades at 4-6x.

But here's what nobody tells you: the best Amazon businesses aren't dependent on Amazon at all.

They just use Amazon as their distribution channel while they build something far more valuable.

Let me show you a deal that looks like a typical Amazon seller, but is actually a vertically-integrated manufacturing operation with 73% gross margins that every buyer passed on because they couldn't see past the "Amazon risk."

The Deal 11 Buyers Rejected

Business: Premium kitchen & cooking accessories (Amazon FBA + DTC)
Asking Price: $3.1M
TTM Revenue: $4.7M
TTM EBITDA: $1.24M (26% margin)
Multiple: 2.5x EBITDA
Amazon Revenue: $3.8M (81%)
DTC Revenue: $900K (19%)
SKUs: 23 products (core line of 8 drives 94% of sales)
Gross Margin: 73% (yes, really)
Inventory on Hand: $680K
Manufacturing: Owns the factory in Vietnam

Why Every Buyer Passed:

• "Too dependent on Amazon" (81% of revenue)

• "Amazon will kill this business" (fear of suspension)

• "No brand equity" (wrong)

• "Manufacturing risk in Vietnam" (don't understand the model)

• "Competitive moat is weak" (completely missed it)

The seller got tired of tire-kickers and almost took it off the market.

I would have closed in 30 days at full price.

Here's what those 11 buyers completely missed.

The Margin Structure That Shouldn't Exist

73% gross margin on physical products.

In e-commerce, that's borderline impossible. Here's what's normal:

Typical E-commerce Margins:

• Dropshipping: 15-25% gross margin

• Standard e-commerce: 30-45% gross margin

• Premium DTC brands: 50-65% gross margin

• This business: 73% gross margin

How is this possible?

The founder doesn't buy from suppliers. He owns the factory.

Manufacturing Economics:

Product example: Premium chef's knife set

• Retail price: $189

• Amazon fees (15%): $28.35

• Shipping to Amazon: $8.20

• Total COGS (manufacturing): $24.00

• Gross profit: $128.45 (68% margin)

Compare to typical Amazon seller buying from Alibaba:

• Retail price: $189

• Amazon fees (15%): $28.35

• Shipping to Amazon: $8.20

• Supplier cost: $85-95

• Gross profit: $57-67 (30-35% margin)

The difference? $60-70 per unit in margin.

At 47,000 units sold annually across all SKUs, that's $2.8M - $3.3M in extra margin versus buying from suppliers.

You're buying a manufacturing operation disguised as an Amazon business.

The Amazon "Dependency" That's Actually an Advantage

Everyone sees 81% of revenue from Amazon and runs away.

Nobody asks: "Why is Amazon the right channel for this business?"

Amazon vs DTC Economics:

Amazon:

• Customer acquisition cost: $0 (Amazon drives traffic)

• Time to sale: Instant (buy button)

• Trust barrier: Low (Amazon's reputation)

• Logistics: Handled (FBA)

• Returns: Handled (Amazon)

• Customer service: Handled (Amazon)

DTC:

• Customer acquisition cost: $45-85 (Facebook/Google ads)

• Time to sale: 3-7 days (consideration period)

• Trust barrier: High (unknown brand)

• Logistics: Your problem

• Returns: Your problem

• Customer service: Your problem

For kitchen accessories, Amazon is the better channel.

Why? Because customers don't want a "relationship" with their knife brand. They want a good knife, delivered fast, at a fair price.

Amazon provides that better than any DTC site can.

The Real Amazon Risk Analysis:

Everyone fears Amazon will:

1. Suspend your account (destroy business overnight)

2. Copy your products (Amazon Basics)

3. Change fees (compress margins)

4. Promote competitors (kill your rankings)

Let's look at actual data:

Account Health:

• Order defect rate: 0.3% (Amazon threshold: 1%)

• Cancellation rate: 0.4% (threshold: 2.5%)

• Late shipment: 0.1% (threshold: 4%)

• Policy violations: 0 in 4 years

This account is bulletproof. Amazon loves sellers like this.

Amazon Basics Competition:

Amazon launched "Amazon Basics Knife Set" in 2019. This business grew 32% that year.

Why? Different customer. Amazon Basics targets budget buyers ($40 price point). This brand targets quality buyers ($150-250 price point).

They don't compete.

Fee History:

Amazon fees have been stable at 15% for this category since 2018. No changes. No compression.

The Amazon "Risk" is Overblown.

This seller has operated successfully for 4 years. Account health is pristine. No issues.

But the fear depresses valuations. That's your opportunity.

The DTC Business Nobody Valued

$900K in DTC revenue is 19% of total revenue.

Every buyer dismissed this. "Not enough to matter."

Wrong.

DTC Economics:

$900K revenue at 68% gross margin (lower than Amazon due to ad spend):

• Gross profit: $612K

• Marketing spend: $180K (20% of DTC revenue)

• Fulfillment: $90K (10% of DTC revenue)

• Contribution margin: $342K (38%)

But here's what matters:

The DTC channel owns the customer data.

• 47,000 email subscribers (31% open rate)

• 12,400 repeat customers (bought 2+ times)

• Average order value: $156

• Repeat purchase rate: 38% within 24 months

• Customer LTV: $287

This is your moat.

When you buy this business, you're not just buying Amazon sales. You're buying 47,000 customers who trust the brand enough to buy direct.

The DTC Growth Opportunity:

Current DTC marketing: $180K annually (basically on autopilot)

What if you actually tried?

12-Month DTC Expansion Plan:

• Increase ad spend to $450K annually (2.5x)

• Implement proper email marketing (currently sending 1 email/month)

• Add SMS marketing (zero current presence)

• Launch TikTok Shop (organically first, then paid)

• Expand to Walmart.com and Target.com

Conservative projection:

DTC revenue: $900K → $2.1M (133% growth)
Marketing spend: $180K → $450K
Gross profit increase: $816K
Contribution margin increase: $366K

You just added $1.5M in enterprise value (at 4x DTC revenue) by spending an extra $270K on marketing.

The Manufacturing Moat Everyone Missed

The founder owns the factory in Vietnam.

50 employees. 22,000 sq ft facility. Manufacturing kitchen products for 6 years.

Every buyer saw this as a liability:

• "Managing overseas manufacturing is hard"

• "Labor issues"

• "Quality control problems"

• "Political risk"

I see it as the entire moat.

Why Manufacturing Ownership Changes Everything:

Barrier to Entry:

To compete with this business, you need to:

1. Find a factory in Vietnam (6-12 months)

2. Build relationship and trust (12-18 months)

3. Dial in quality to match this brand (6-12 months)

4. Achieve comparable costs (12-18 months of volume)

Total: 3-5 years to replicate

Or you could spend $3.1M and buy 6 years of relationships, systems, and optimization.

Competitive Advantage on Amazon:

Competitor wants to launch similar products:

• Their COGS: $85 (buying from Alibaba)

• Their retail price: $189 (matching market)

• Their margin: $67 (35%)

This business:

• COGS: $24 (own factory)

• Retail price: $189

• Margin: $128 (68%)

You can out-advertise, out-promote, and out-price any competitor and still make more money.

That's a moat.

The White-Label Opportunity:

The factory has 40% excess capacity.

Current: Making products for this brand only
Opportunity: White-label manufacturing for other brands

Conservative Model:

Use 20% of excess capacity for white-label work
Production: $400K annually in manufacturing fees
Margin: 35% (lower than owned brand, but pure incremental)
Added EBITDA: $140K

At 3x EBITDA, you just added $420K in value by using space that's currently sitting empty.

5: The Product Line That Prints Money

23 SKUs. 8 hero products drive 94% of revenue.

Top 5 Products (79% of Revenue):

1. 8-Piece Knife Set - $189, 14,200 units/year, 71% margin

2. Cast Iron Skillet Set - $156, 8,900 units/year, 75% margin

3. Cutting Board (Walnut) - $89, 11,400 units/year, 78% margin

4. Utensil Set (15pc) - $67, 9,200 units/year, 74% margin

5. Kitchen Shears - $34, 18,600 units/year, 69% margin

These aren't commodity products getting competed to zero. These are well-designed, high-quality products with hundreds of 5-star reviews.

Review Analysis:

Average rating across hero products: 4.6 stars
Total reviews: 8,400+
Competitor average: 4.1 stars

Common review themes:

• "Quality is significantly better than cheaper options"

• "These feel professional grade"

• "Bought as a gift, they loved it so much I bought for myself"

• "Third purchase, giving as wedding gifts"

This is brand equity.

Product Expansion Opportunity:

The founder hasn't launched a new product in 18 months. Why?

He's tired. Running the business solo. Burned out.

But the factory can make anything kitchen-related. And customers keep asking for more.

Most Requested Products (from reviews + DTC customer emails):

1. Professional chef's knife (single, premium) - 247 requests

2. Knife sharpener - 189 requests

3. Apron set - 156 requests

4. Measuring cups/spoons - 134 requests

Product Launch Model:

Launch professional chef's knife at $129:

• Manufacturing cost: $18

• Projected sales: 4,200 units in year one (conservative, based on email list size)

• Revenue: $542K

• Gross profit: $466K (86% margin)

• Amazon fees + advertising: $135K

• Net contribution: $331K

Launch 2 products per year for 3 years = $1.9M added revenue, $950K added EBITDA

At 3.5x, you just added $3.3M in enterprise value by making products customers are literally asking for.

The Brand Nobody Recognized

Every buyer said: "There's no brand here. It's just an Amazon seller."

Let me show you the data:

Brand Metrics:

• Brand search volume on Amazon: 18,400/month (people searching the brand name)

• DTC website: 94,000 annual visitors (34% direct traffic)

• Instagram: 28,000 followers (organic, 4.8% engagement rate)

• Email list: 47,000 subscribers (31% open rate)

• Repeat purchase rate: 38%

For context:

Most Amazon sellers have:

• Brand search: <500/month

• DTC website: <10K visitors/year

• Instagram: <5K followers

• Email list: <10K subscribers

• Repeat purchase rate: 15-20%

This brand is 5-10x stronger than typical Amazon sellers.

The Trust Indicators:

• 8,400+ reviews averaging 4.6 stars

• Featured in 3 cooking magazines

• 247 user-generated Instagram posts with brand hashtag

• Amazon's Choice badge on 5 of 8 hero products

• "Highly rated" badge on all products

The Brand Valuation:

Conservative replacement cost to build equivalent brand:

• Product development: $180K

• Review acquisition: $120K (8,400 reviews takes 3-4 years)

• Content creation: $90K

• Influencer partnerships: $140K

• Time to market: 3-4 years

You're buying $530K in brand assets (minimum) plus 3-4 years of market positioning.

The Brand Expansion:

Current: Kitchen products only
Opportunity: "The [Brand] Kitchen" lifestyle brand

Add complementary categories:

• Kitchen textiles (towels, aprons, oven mitts)

• Small appliances (using white-label partners)

• Cookbooks (digital + print)

• Cooking classes (online)

Each category: $300-800K annual revenue potential
Combined: $1.2M - $3.2M added revenue over 36 months

The Operator Profile (Who Shouldn't Touch This)

This deal is NOT for:

• First-time buyers (too many moving parts)

• People who hate operations (inventory management is critical)

• Anyone afraid of international manufacturing

• Buyers looking for passive income (first 12 months is hands-on)

This deal IS perfect for:

• Experienced e-commerce operators

• People with supply chain/manufacturing background

• Operators who understand Amazon (not afraid of the platform)

• Buyers who can see the DTC expansion opportunity

Critical Skills Required:

1. Inventory forecasting (stock-outs kill Amazon businesses)

2. Amazon platform expertise (PPC, SEO, compliance)

3. Basic supply chain management (factory relationships)

4. Marketing fundamentals (to grow DTC channel)

The Time Commitment:

Months 1-3: 40-50 hours/week (learning the business, meeting factory team)
Months 4-12: 25-30 hours/week (systems in place, but active growth)
Months 13+: 15-20 hours/week (hire operations manager, focus on strategy)

This isn't passive. But the returns make it worth it.

The Deal Structure (How I'd Buy This)

Seller wants $3.1M. He's exhausted. Ready to move on.

But he's also proud of what he built. Wants to see it succeed.

My Offer:

Structure A: Asset Purchase with Factory Transition

• $2.85M total (8% discount for complexity of factory transition)

• $950K cash at close (33%)

• $1.9M seller note at 5% over 5 years ($35,900/month)

• Seller stays on 6 months part-time ($10K/month consulting) to transition factory relationships

Monthly Economics:

• EBITDA: $103,333

• Seller note: $35,900

• Seller consulting: $10,000

• Your net: $57,433/month = $689K annually

Your $950K pays back in 16.6 months from cash flow alone.

Structure B: Earn-out with Upside

• $2.6M guaranteed (16% discount)

• $500K earnout over 24 months if EBITDA grows 25%+

• $750K cash at close

• $1.85M seller note at 4.5% over 4 years

This protects you (if there are hidden issues) and motivates seller (if you grow it, he makes more).

Structure C: Keep Seller as Partner

• $2.9M total purchase

• $900K cash at close

• $1.5M seller note

• Seller keeps 10% equity (factory expertise + relationships)

• You run operations, he manages factory relationship

This keeps his expertise and relationships while you handle growth.

Financing Strategy:

SBA loan is possible here (tangible assets: inventory + factory equipment).

Ideal structure:

• $750K your capital

• $900K SBA loan (7.5%, 10-year term)

• $1.45M seller financing

Monthly debt service: $47K
Monthly EBITDA: $103K
Cash flow after debt: $56K/month = $672K annually

The 24-Month Value Creation Roadmap

Here's how you turn $3.1M into $8M+ in 24 months:

Months 1-6: Stabilize & Optimize

• Transition factory relationships (weekly calls with Vietnam team)

• Optimize Amazon PPC (currently running on autopilot, lots of waste)

• Implement inventory management software (reduce stock-outs by 80%)

• Increase prices 8-12% on hero products (margin expansion, minimal volume loss)

• Launch first new product (chef's knife customers are requesting)

Target: Revenue $5.1M, EBITDA $1.42M (28% margin)

Months 7-12: Expand DTC & New Products

• 2.5x DTC marketing spend ($180K → $450K)

• Implement proper email marketing (2-3x per week vs monthly)

• Launch SMS marketing

• Add 2 new products

• Start TikTok Shop (organic content first)

• Expand Amazon advertising (scale what works)

Target: Revenue $6.2M, EBITDA $1.82M (29% margin)

Months 13-18: Channel Expansion

• Launch on Walmart.com

• Launch on Target.com

• Add white-label manufacturing (use excess factory capacity)

• Launch wholesale program (Williams Sonoma, Sur La Table, etc.)

• Continue new product cadence (1 per quarter)

Target: Revenue $7.8M, EBITDA $2.34M (30% margin)

Months 19-24: Exit Prep

• Hire operations manager (prove business isn't operator-dependent)

• Document all systems and SOPs

• Lock in 12-month factory contracts (show stability)

• Get financials audit-ready

• Push to $9M revenue run rate

Target: Revenue $9M, EBITDA $2.7M (30% margin)

Exit Multiple: 2.8-3.2x EBITDA (market rate for this size, but higher end due to growth + manufacturing moat + multi-channel)

Exit Valuation: $7.56M - $8.64M

Your Return:

• Purchase price: $3.1M

• Cash invested: $750-950K

• Exit proceeds: $7.56-8.64M

• Distributions during ownership: $1.2M+

• Total: $5.66M - $7.74M gain on $750-950K invested

That's 596-1,032% return over 24 months.

The Risk Analysis (What Kills This)

Risk 1: Amazon Account Suspension (15% Probability)

Someone files false IP claim, Amazon suspends account, revenue stops.

Mitigation:

• Account health is pristine (0.3% defect rate vs 1% threshold)

• All products have registered trademarks

• Keep 90 days cash reserve for emergencies

• DTC provides revenue backup (19% of total)

Risk 2: Vietnam Manufacturing Issues (30% Probability)

Quality problems, labor strikes, factory closes, political instability.

Mitigation:

• Factory has operated successfully 6 years

• Owner has deep relationships (lived in Vietnam 2 years)

• Keep 6 months inventory on hand (vs current 4 months)

• Have backup manufacturer identified (insurance, not primary)

Risk 3: Competition Intensifies (40% Probability)

Chinese sellers flood market with cheaper versions, pricing pressure.

Mitigation:

• Your COGS is $24 vs their $85 (you can always undercut)

• Brand strength (8,400 reviews, 4.6 stars) creates preference

• Move upmarket (premium positioning) as low-end gets commoditized

• Focus on DTC where brand matters more

Risk 4: Inventory Management Failure (35% Probability)

You forecast wrong. Either stock out (lose sales) or overstock (tie up cash).

Mitigation:

• Hire experienced inventory planner month 1 ($65K/year)

• Use software (InventoryLab or SoStocked) for forecasting

• Start conservative (better to stock out once than have $400K dead inventory)

Risk 5: DTC Expansion Doesn't Work (45% Probability)

You spend $270K on additional DTC marketing, don't get ROI, waste money.

Mitigation:

• Test incrementally ($50K/quarter, not $270K upfront)

• Track metrics obsessively (CAC, LTV, payback period)

• Kill what doesn't work fast

• Scale only what's proven

The Verdict: Why This Is the Smartest "Amazon Risk" You'll Ever Take

Here's the truth about buying businesses:

Everyone wants the safe bet. The perfect deal. No risks.

Those deals don't exist at good prices.

The best deals have perceived risk that scares away most buyers.

This deal has "Amazon dependency risk" that everyone fears.

But when you actually analyze it:

• Account health: Pristine

• Category: Stable

• Manufacturing: Owned (massive moat)

• Brand: Real (47K emails, 18K brand searches/month)

• Margins: 73% gross (can withstand competition)

• DTC: Growing, provides diversification

The "risk" is priced in. The opportunity is not.

The Three Questions:

1. What's the downside?

Worst case: Amazon stays flat, DTC grows slowly to $1.2M.

Total revenue: $5M, EBITDA: $1.4M

You're still making $672K annually after debt service on $750-950K invested. That's a 71-90% annual return in the bad scenario.

2. What's the upside?

Best case: Execute plan fully, hit $9M revenue, $2.7M EBITDA, exit at 3.2x = $8.64M.

Your return: $7.74M on $950K = 815% in 24 months.

3. What's realistic?

Realistic: You execute 70% of plan. $7.5M revenue, $2.1M EBITDA, exit at 3x = $6.3M.

Your return: $4.15M on $750-950K = 437-553% in 24 months.

Risk-adjusted, this is one of the best deals I've seen.

Stop Overpaying for "Safe" Deals

Here's what nobody tells you:

The safest-looking deals are usually the worst investments.

Why? Because everyone sees them as "safe," so they get bid up to stupid prices.

You end up paying 6x EBITDA for a SaaS company growing 15% annually. Sure, it's "safe." But your returns are capped.

The real money is in perceived risk that isn't real risk.

Amazon dependency? Sounds scary. Until you analyze the account health, the moat, the margins.

Then you realize the risk is overblown. And the discount is real.

That's what we find at The Continental.

We source deals where the market is mispricing the risk:

• Amazon businesses that actually own manufacturing (moats everyone misses)

• Service businesses that look founder-dependent but aren't (systems nobody sees)

• Content businesses that look like blogs but are media companies

• E-commerce brands with declining revenue but improving margins

What You Get:

• 2-3 deeply analyzed deals per month in your criteria

• Full risk assessment (not just opportunity, but what could go wrong)

• Direct seller access (no broker markup)

• Support through diligence and closing

We specialize in one thing: Finding asymmetric opportunities where perceived risk creates value.

Not risky deals. Not reckless bets.

Just mispriced opportunities where you get paid to take intelligent risk.

The kind of deals that make you wealthy.

Want to see what we can find?

Upgrade to The Continental or schedule a call with our team to discuss your acquisition criteria. ( Click On Work With US Located at the top of the page)

While everyone else chases "safe" deals at premium prices, we'll show you the intelligent risks that actually build wealth.

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