Ep 327: Best Amazon Business To Acquire, What They Look Like & How To Scale Them with Jon Elder

How do you know what sort of Amazon business you should buy that looks good and is gonna be a great investment? Hi, I'm Jaryd Krause. I'm the host of the Buying Online Businesses podcast, and today I'm speaking with John Elder. He is an Amazon veteran. He first started selling on the platform in 2014, sold over $10 million worth of products, and sold all five of his private label brands in 2019 for $5 million.

Now he works as a strategic consultant at Black Label Advisor. He also runs the fastest-growing Amazon seller-focused newsletter in the world called Amazon Insiders. And he has one passion: seeing Amazon native brands crush it on Amazon.

Now, in this podcast episode, you'll see that John is a fountain of value in the Amazon space. We go through and look at what good Amazon businesses to buy versus not-so-good Amazon businesses to buy, and what they look like.

We talk about products and innovative products, and how important it is to have some level of innovation. We talk about the risks of inventory management, what good inventory management looks like, and what bad inventory management looks like. Then we talk about how we scale these businesses.

So we talk a little bit about due diligence and what we're looking to acquire. Then we talk about the scaling once we have purchased it, looking at how we get great reviews. How do we use the tools Amazon already has to get an insane amount of views fast?

When do we turn on ads? What does that look like with Amazon PPC? And then what are the risks with Amazon businesses to be aware of and avoid, and how to stay compliant, because there's so much moving with Amazon? We also talk about root first, the social media platform for Amazon.

There's so much value in this pod around what type of Amazon businesses you should be buying, what you should be looking out for, and how to scale them from an eight-figure seller and somebody who's worked with some of the best brands on Amazon.

Now, of course, we talk about buying businesses. If you haven't got my digital framework, make sure you get that. It takes the guesswork out of buying businesses. It's saved people millions of dollars and made people millions of dollars. It's free. You can get it at buyingonlinebusiness.com for free resources. Now, let's chat with John.

John, welcome to the pod. Thanks for your time.

Thanks for having me on, Jaryd.

Yeah, excited for this one. So I know that you're going to talk a little about scaling Amazon businesses and exiting and stuff, but just curiously, have you ever bought a business yourself before?

So I've never purchased a business; I've bootstrapped from the ground up. And then, I sold in 2019. And it was kind of that classic Amazon story of just scaling the hard way. So a lot of people kind of like skipped that whole process and they purchased a business. For me, I had a baby on the way.

We were just starting our lives. I was married, still currently married. Things were tight. And so to buy a business, like with that SBA loan or something, was like, I wouldn't even think about that. So I had my nine-to-five job, and my background is construction management.

And so I'm working full time, and I'm building this up on the side, and it just scaled from there. And it was the gold rush of the Amazon world in 2014, was people were like, oh yeah, if you sold on Amazon and no one knew about it yet. Different world back then than it is now, but I scaled five brands over time, did over 10 million on Amazon, and then exited in 2019.

Cool, did you exit all of those five brands in 2019?

Yeah, so it was an asset sale. It was all five brands under one exit. That's actually what helped boost the multiple. Whenever you're looking at selling a brand, especially in the e-commerce world, they want less risk. And so I was able to bundle it. And it's interesting because each of the brands had no relation to the others.

I had one in an office space. I had another one in sporting goods. So all the brands were completely disconnected, but what was beautiful about it was that all the SKUs kind of holistically provided a big safety net for the buyer. So he came in, he's like, okay, this is great.

You've built up all these brands, you've invested in the marketing, you've invested in the creatives, and really, he was going to take it and go into stage two of growth. So that's kind of the back story on it.

Yeah, congrats. I do mind me asking, it's up to you if you want to share about like the exit price for the top five total. Cool. Congratulations. Awesome. And so was it a private buyer, or was it a group, just a hair under five million?

Yeah, so the Amazon space has really morphed into a different ecosystem now. So originally…

A lot bigger now, like there's a lot more money involved. Like when I remember 2012 to 2017, even 2018, it's mom and dad's getting into selling products and making a better money. now it's- yeah. Oh yeah. mean, the barrier entry after that 2018 period just got insanely hard.

Yeah, well, it got popular. All t, he gurus started producing courses like this is the best thing ever, and then you know, things get saturated, and you can look at the revenue in Amazon, it's just ridiculous. They just passed Walmart.

It's not saturated, it's just whenever you have a high number of new players enter the market, you are going to have the bar raised. So that's, you know, that affects everything, right? That affects how aggressive you're going to be with advertising, that affects your creatives, your A-plus content on your listing, and it affects how aggressively you're going to launch new products.

The pressure has increased every single year. And I've expected an industry like that. It's a lot of interest. I think in 2024, we'll have over a million new sellers. So the interest is there.

But also, that means that between everyone using AI tools and flooding from different countries, the competition is fierce. But if you stay disciplined and you are focused on a product that changes lives and improves lives, and it's not just a copycat, that is going to do well still.

Cool. I love that. Let's talk about that because people listening are like, they're looking at acquiring Amazon businesses or e-commerce businesses. What sort of products, if you were to purchase an Amazon business scale, what sort of product or niche would you be going for and why?

Okay, one aspect is probably insurance. So like you need to be aware of like how risky that product is. And then when you're looking at potential products that purchase or brands, you need to be evaluating how much innovation has gone into this product line. Is this just a kind of lackluster copycat product?

Like they change the color of it, or do they innovate? And so that was the secret of my success was innovating products, instead of just saying, you know, that's good enough. Unique designs backed by design patents, for example, where you're protected legally, blocking out other people in the space, and unique features that uniquely help the end user.

As a brand owner, you need to be thinking outside the box pretty much 24/7. You'd also be thinking multiple steps ahead. And if the owner of that e-commerce brand wasn't doing that, and those are questions, I help people do this all the time.

I take them through like a hundred fewer questions of what to look for and what type of questions to ask the e-commerce owner. But that is the key: what level have you innovated this product line, and has it changed the space?

Have you disrupted the category on Amazon? But if you're just, if you're like search result number 15 and you're bringing in some revenue, that's not going to be attractive to you as a buyer because you're just going to keep drowning. Know, when you're looking at potential products, really mimic what the aggregators have done.

A lot of them have failed, especially if you look at Thrasio. They failed because of bad operations. They did not fail at targeting high-quality products. Like, if you look at a lot of the big boys and look at what products they purchased, these are legit brands.

They failed at inventory management. They failed at expanding aggressively enough. I actually consulted a couple, and I was like, you are not managing your inventory correctly. And it's pretty interesting to see their response of kind like, yeah, it's no big deal. When in reality, inventory management is priority number one. Yeah. Absolutely. Absolutely.

I love that. So we're talking about like brands that top five sort of selling for that particular product, but they've been innovated, and if I was a purchaser to go away and see, there further room for innovation as well moving forwards with the particular supply they're already using, right?

That is a question you should be asking the owner of the e-commerce brand. So you need to be asking, okay, question one is what is your pipeline of new product ideas? And you should expect to see a 12-month plan.

What are you planning to do over the next year? And I think that's fair to ask that question because you want to come in and purchase a business. So we had that. And so that's all laid out. And so you should have a pretty good answer for that. Okay, this quarter, this is what we're launching.

Maybe it's a color variation, but you should have a good answer for that. And then you should also ask the question about innovation. What product tweaks have you made? And you have to get a little granular here, especially in Amazon.

You need to ask the question: Where is your product in terms of being similar to everyone else? And so they will need to answer, our product has these unique features that no one else has.

And is it protected by a design patent? Is it not? Sometimes that's okay. Sometimes it's speed to market. But within 12 months, you probably will have copycats. as a potential buyer, you want to know what have you done to set yourself at the top of the pack and really think five steps ahead? And if they can't answer that, that's a red flag. that's a good question to ask a potential seller of a business.

Yeah. Even when you say like, What are you launching next? Is it a different color variant? Like what feature have you got that if it's not patented that everybody is going to patent, and what do you do next to add a different feature or a better feature to stay ahead of the competitors? Doing a good analysis is critical when buying one of these.

Absolutely. And if they have any pushback that if they get defensive, it is a telltale sign that they haven't done those things. Yeah. Yeah. When I went on my exit, I was expecting to get those questions, and there was a game plan to showcase. Okay, this is our five-year plan.

This is our one-year plan. If the seller cannot answer those questions, that means that there's probably other stuff in their business that is a problem as well, with which I have no foresight.

Yeah. It's definitely when I lose respect for somebody as a seller or a buyer, it's not just based on the relationship, but based on how they've handled the relationship, which means how they handle the business as well.

Right. I want to bring up inventory management, like how you said it is so key, where there are some of the ways that businesses, Amazon businesses, and econ brands are failing with inventory management to be aware of when looking at purchasing one of these businesses.

The issue is that when you run out of stock on Amazon, you're going to get hit hard with your best seller rank. So you're going to get dinged every single time you run out of stock. Always tell sellers, when you're launching new products, the first one or two times, that's okay. You're bringing in maybe a thousand units, 500 units.

You're kind of testing the market. You're kind of seeing how many you're gonna fly off the shelf with influencer marketing. So there's a lot of like, let's call them X factors. Once you're established and once you've cracked 100 reviews, that should never happen again.

That is something that you should be asking and asking questions like, How are you staying in stock? Are they using AI software like So Stocked? Are they being super strict on stocking up? They have a, I call it a drip feed shipment plan, or do they have 3PLs across America where they have small batch inventory where they can send in 500 units overnight.

You need to be asking those questions because Amazon has deemed you even harder now. So you will get punished, and you could go from top seller to like number 7 overnight.

Because if you keep going out of stock, Amazon's gonna view that as you're not an authority anymore. So that's important. A lot of people are like, Oh man, you know where there's expenses.

Yeah, yeah, I would agree with you. Yeah, it sucks, but at the same time, you need to be thinking what, you need to do whatever you have to do to stay number one. And so if that means some new expenses, I mean, that's gonna typically translate to higher volume in sales, but you just have to suck it up.

Yeah.

You have to have multiple 3PLs holding your inventory, and possibly look at AWD. AWD is Amazon's warehousing option. They have been a disaster the last two years. So I always tell potential, be careful. If you're looking at buying a business or if you're listening and you're a seller, be careful how tempted you are to go down that road because once you're in Amazon's system, there's no accountability. With a 3PL, it's a little different. They want to win your business. They're going to be a little quicker to say, hey, we messed up.

Yeah, Amazon's got a monopoly though. Like there's so many other people selling that product as well. Like it's highly competitive.

Yeah, no, there was a story on Twitter recently where Amazon just liked your account. We're locking up all your funds and they this is a pretty well known American business and just brutal to see stories like that because they're following the rules and sometimes as a black hat seller who came after them and it's an inauthentic claim and then their business is wiped out and sometimes that can take up to 60 days, sometimes 90 days.

So, imagine your cash flow going to zero for 90 days. It's like super painful, especially for a big brand that's been on top for that long, and then you've got a black hat seller coming in and just like, it's such a toxic thing to have happen.

I will say this, it's not the norm. So if you're listening, it's not common. Social media will make you think it's common, but if you think it's kind of a numbers game, there are millions of sellers. When you see those stories, sometimes the story that goes viral, they're not true.

So I've seen this as well, where they were doing some stuff that was not compliant. So you have to be careful getting scared by some of that stuff. Sometimes I would say it's like less than 1 % of the time it's a unicorn event where you get suspended and there's a random glitch in the system, and then Amazon will hopefully apologize and be like, okay, we went after the wrong person.

That happens as well, but it's not normal to get suspended if you are following all the rules, and there are a lot of rules. So if you're following all the rules, I say this confidently, 99 % of the time you'll be safe, but some people get hit 1% of the time, and it's no fault of their own. It's sad. I've seen it happen.

Yeah, absolutely. And so, like you said, there are so many rules, so many regulations, so many things to do. You've got to keep your product updated, forefront of mind, keep it relevant, keep it in the top few bestselling products.

And then you've also got to have the inventory management outside of those things. What are some of the other sorts of levers you can pull to grow an Amazon business? When do you start looking into Amazon PPC and or like maybe getting good quality reviews?

Genuine reviews.

So there is, I'm gonna just give you a kind of a foot view of the strategies. I go through this on consulting calls all the time, but day one, let's say you have five colors. You have five colors for a product. Day one, you're gonna sign up for Vine.

And day one, you have five independent listings. You're not under a parent listing, so these are all broken up child variations, their unique listings. You are gonna sign up for Vine. Vine is Amazon's Terms of Service-compliant review.

It's a money printer for them, but you're going to get 30 reviews per listing. Once all those reviews come in, then you're merging all those child variations under your parent, and then now you're over 100 reviews, which is beautiful. You're to do that overnight.

Yeah, that's amazing.

So that's kind of, I actually wrote that on my newsletter for Amazon Insiders probably like two weeks ago and it's a hack that either a lot of people don't know about or they're scared to use.

It is a hack that Amazon is probably going to remove that loophole probably later this year. I don't want to say it's cheating, it's basically like you've exploited something that Amazon like totally allows right now.

Well, it's a lot of luck. It's not cheating if it's allowed.

Yeah, exactly. Yeah, but Amazon views it. They view that as something they don't like when their system is exploited like that. So they probably will fix it. So I'm telling people, everyone, right now, go and do this method because it works. Yeah. I have a lot of clients who do it as well. And it's, it's a fantastic way to go about it. But once you crack into reviews, sorry, let me rewind a little bit.

So day one, a lot of gurus are going to be like, I can't believe you said this. At zero reviews, you are turning on PPC, and I'll tell you why. So, reason number one, you are bringing traffic to a beautiful listing.

You are not, know, none of my clients, none of what I recommend, you're not selling garbage. You are going to let your media creatives sell at zero reviews. Now, would I buy a product with zero reviews? No, but a lot of people do.

And so those are potential reviews for your brand from day one. So you're going to turn PPC on, and it's a very modest budget. Like, think like $25 per day. Okay. Max. You're going to start low, and then someday that's going to be thousands per day.

So it's just you scale up from there. I'll be going to turn on auto and all your custom campaigns from day one. And then while that's happening, your Vine reviews are coming in. You'll probably crack like 200 reviews within 60 days. You'll merge everything. So now you have like blue, orange, red, and on.

And then while all this is happening, you're also gonna be working with influencers who are doing the organic UGC content. These are like, go find a mommy blogger, like if you're selling a stroller accessory, go find a mommy blogger, there are so many that are sub 100,000 followers. They're hungry, and a lot of the time, they just want the free product.

So you send them free products, and you say, hey, I don't need anything from you, I just want you to use your product, and if you feel inclined, I with your audience. So that's called seeding, and I'm sure you know about that. So you're going to be very aggressive. I always tell people to send out at least 50 free units and just ship them to their house.

So, typically, Instagrammers have their address listed somewhere, or it's a P.O. box, and make it personalized. Include a letter, include a, like make it look ike a special looking box. And you want them to be like, wow, this is cool. Like I have a baby, I have a stroller, this accessory, maybe it's a fan. I love it. It's improved my life. Are they promoting you in those first 60 days?

The whole goal is to develop a relationship where you can send more new product launches to them, and then they continually promote you. There's some monetary stuff going on for those relationships, but the product seeding gets you in the door because it's free, right?

You've given them who don't like free products. And then there are other services out there like Stack Influence, you can use Lavanta, and there is Incense. And so basically those are all different angles on how they work with influencers, but the whole point is leveraging influencers to drive traffic to your listing, to drive your BSR.

So that's the whole goal of that strategy. The rest is mechanical, making sure you SEO optimize on your listing, making sure that you have the framework in your mind for being optimized for Rufus.

So, Rufus is the AI side of Amazon. You need to make sure that you're feeding Rufus the correct information. A lot of sellers will neglect this. I wrote this yesterday. A lot of people will, they'll just say like, Oh, I don't need to worry about my social media posts on Amazon.

And a lot of sellers are like, there are social media posts on Amazon? It's like, yeah, it will bring a flood of free traffic right now in 2025. It will boost your impressions. You'll have new customers for free.

But all you have to do is post once a day or maybe every other day, and have keyword-rich content on your posts. And so for anyone listening, your posts are nestled. If you go to anyone's store page, store front page for their brand, you'll see on the menu bar that it says posts.

That's where you see the social media posts. Very few people go there. But what that does it's feed the AI system for Rufus. So Rufus will capture a lot of that social media content that you're kind of limited on your listing, right? You have your bullet points.

Yeah, you are. Yeah, it's good. The way I think about it is like, you do some influencer marketing, you send out a bunch of products to mums, and then you get some user-generated content, and then you take that from them. They send it to you using the PRAM, and they love it and all that sort of stuff.

And you post it on the, well, you can't do that. You're limited in your listing, but you can post it regularly. So that's where that compounding comes in is sending out products to people and using user-generated content for those posts.

Absolutely. A lot of that content can be recycled. A lot of that can be turned into social media stuff just for TikTok. You can recycle it for your social media posts on Amazon. The whole goal is keyword-rich content.

So every single post that you do, especially on Amazon, should have like a very specific long-tail keyword. And so a lot of sellers neglect it because we're like, Hey, you know, is it going to do anything? Let me just say this. Every legit brand.

Like we're talking like anyone doing between 10 and 50 million a year, guess what they're doing? Aggressive social media posting. There's a reason for that because they know the results. They've seen it. And so if you think you're smarter than them, that's very unwise. I don't like to do it.

It's like you being lazy is not going to achieve anything. The reality is that the data has proven that it is worth your time. Have your VA do it, leverage your staff, and invest in places where everyone else is not investing because the vast majority of Chinese sellers on Amazon are not touching social media posts.

They don't view it as worth their time. Isn't that Amazon 101? Thinking outside the box, I'm going to do things that other people are not doing. I mean, that is the ultimate hack.

One of the beautiful things about Amazon is that they've got a pool of people. The pool is in front of you, but you've got so many other people competing within that pool to sell their products. So you have to stay.

Right. Yeah, that's amazing. Wow. What a recap on the variants, staying ahead of the pack, turning on PPC, using Vine, using Rufus, and social media. Wow. So much in that, John. Appreciate it.

Yeah, no problem. I like to say it's a little sciencey now on Amazon. There are so many moving parts. And there's a reason I have a newsletter with Amazon Siders. I have a story every week. Like that's how often Amazon changes now. It used to be like every six months, literally weekly. So Amazon has some dramatic changes to FBA every week now. And then I write about it in my newsletter. Like that's how often it happens.

You have to stay on top of this stuff. You have to pay attention, and really, you have to be ready to adapt. What worked last week might not work this week. And so you have to just be open to that.

Yeah. And as changes in social media change on Amazon, like we all see how fast social changes on all the other platforms. It's isn't a just evolve so fast and already kind of has already.

Oh yeah, Rufus I think is used by think roughly 15 % of all searches now. Yeah, wow. And it's really in your face. I don't use it personally, but it's really in your face. It pops up every single time. It's like, can Rufus help you?

It's very useful, though, for asking questions. And I have used it for really specific questions. It could be like a podcast setup, or it could be some tool in the garden. We're doing some gardening outside. Yeah. What's the best way to get roots out of the ground?

Rufus is going to be able to capture that granular information. You, as a brand owner, want to be optimized for that, and then a potential seller or buyer of a business, you want to make sure that the business has done that for you. And if they haven't done those things, then it's like, okay, well, the multiple might go down a little bit because I need to have some capital for investing in that myself.

Which is an opportunity. Like when we talk about like maybe a seller isn't as on top of their inventory or as on top of their benefits, and having a product that is superior to everybody else's, five steps ahead. It is, you can purchase for a lower multiple and use that as leverage to get a lower multiple.

Yes, it's a risk as well, but it's also an advantage, but you just kind of need to weigh out like what sort of army you're going to and leverage, you're going to pull for growth when you do purchase it. Then what's the risk of like getting that to market, getting that channel to work for you, compared to where the competitors are with that channel as well, and how hard it might be?

Yeah, absolutely. That is the right framework to be in, for sure.

Yeah, John, thank you for your time, man. Let's get people on your newsletter. I'll put a link in the show notes, but like, is there anything else that you want to…

I do a lot of social media, so a lot of this is outside of my newsletter, but if you go to Twitter, you can probably actually look up my name, John Elder. My handle is black label ADVSR. And then my link is in there for the newsletter. I do a lot, I would say most of my content is free on social media, on LinkedIn, on Twitter. I save my, we'll just call it the Ferrari content for my newsletter.

And that's free as well, by the way. So yeah, I just have a passion now for teaching people the right strategies, how to adapt, how to stay ahead of the curve, and crush your competition on Amazon.

Yeah, because that's fierce man, and that's what you got to do, right? You've got to be aggressive towards killing the competition.

Yeah, the days of not logging into your Amazon account for 24 hours are long gone.

Yeah. Absolutely. Thanks so much for coming on, John. Appreciate you.

My pleasure. It was great to be on.

Yeah, guys, there'll be links to blacklobaladvisor.com, also the newsletter, and Twitter in the show notes.

Everybody listening, thank you for listening, and I'll see you in the next one.