Alex Michael·June 21, 2022

How to Acquire & Grow an FBA Business

Alex Michael, a former tech sales professional with prior stints in oil and gas, energy trading consulting, and live event ticketing, acquired Wallaroo Wallets — an FBA brand selling a premium leather phone wallet on Amazon — in February 2022 for $675k plus ~$56k in inventory, financed via SBA loan with roughly 10% down. The business had $650k in revenue and $182k SDE in 2021 and was growing organically at ~40% YoY, putting 2022 on track for ~$900k revenue. The two college-friend founders had let the business run on autopilot while holding day jobs, and Alex won the deal not on price (he was an SBA buyer competing against cash) but by being first on the call and positioning himself as a personal steward rather than an aggregator. The core thesis rests on Wallaroo's review moat and brand goodwill built over six years, strong unit economics (landed cost ~$2, sells for ~$14, ~30% net margin), and the Amazon flywheel (spending ~$15k/month on PPC at a 20-23% TACoS). Key risks include Amazon platform dependency (37% revenue share before ads), lack of customer data ownership, and a low-ticket product requiring volume scale. Alex's near-term growth plan is building out a Shopify D2C channel and expanding to Amazon Canada and Walmart, and he gave notice from his tech sales job the day before recording to go full-time on the business.

Deal facts

purchase price: $675k (plus ~$56k inventory)
sde ebitda: SDE $182k
revenue: $650k (2021)
financing structure: SBA loan (~10% down, $67.5k equity), seller note covering inventory (~$56k); interest rate ~6%, 10-year term; ~$74k/month loan payment mentioned (likely $7,400/month)
notes: Listed at ~$632k; buyer offered $675k (~$43k over asking). Inventory purchased separately via seller note. Loan arranged through E-Commerce Lending (Steven Speer). Business acquired February 2022.

Why this business

Alex was drawn to e-commerce for lifestyle flexibility (single, 30, didn't want to be anchored to a physical location), and to FBA specifically because of the automation built into supply chain and fulfillment. Wallaroo had strong first-mover advantage in its category with a large review base, a quality product competing at a premium price point against cheap competitors, and clear untapped growth potential (no D2C channel, no Amazon Canada, underinvested ad spend). The sellers were founders close to his age who he connected with personally, and he positioned himself as a hands-on steward rather than an aggregator.

What's working

Amazon flywheel: increasing ad spend drives organic rank improvements, creating a virtuous cycle of growth; revenue growing ~40% YoY to ~$900k in 2022
Strong unit economics: landed cost ~$1.96/unit (via air freight), sells for $13.95, ~28-33% net margin after Amazon FBA fees (~$5.13/unit) and ~20-23% total advertising cost of sale
First-mover and review moat: Wallaroo has the most reviews and highest stars in its category, hard for competitors to catch up; premium leather quality vs. cheap silicone alternatives
Air freight shift: switching from ocean freight to air freight (25 cents more per unit) tightened supply chain from months to 2-3 weeks, critical amid pandemic port congestion
Strong seller relationship: founders provided weekly 'Walla Weekly' business updates during diligence and were transparent about supply chain challenges; Alex met one founder for dinner post-close
Growing category: phone wallet category itself is expanding as consumers carry fewer physical items

What's hard

Platform risk / Amazon dependency: Amazon takes ~37% of revenue through FBA fees alone before advertising, and any algorithm or policy change can affect rankings and sales
No customer relationship: Amazon obfuscates customer data (only first name and state visible), no email list, can't do retention marketing directly
D2C channel is hard to build: website existed but only got an order every 3-4 days; Shopify conversion rates (1-2%) vs. Amazon (10-15%) are dramatically lower; Facebook ads only just launched
Low ticket item creates volume dependency: at $13.95, growth requires either volume scale or channel/product line expansion; limited margin cushion for mistakes
Competitive category with low barriers: easy for new entrants to manufacture a similar product; ongoing competition from cheaper alternatives
SBA loan as cash buyer disadvantage: lost multiple offers to cash buyers before winning Wallaroo; SBA process slower and less certain than cash

Notable quotes

I said on the call with them I was like look guys I'm the opposite of that like I'm not going to be an aggregator this isn't going to be one of 30 brands in my portfolio it's not going to be something that I just lump in that you know it just becomes a cog — this is going to be my baby just like it was yours and I'm gonna take care of it and I'm gonna give it the time and attention it deserves.

Don't skimp on things like lawyers and accountants and due diligence.

Amazon's a 37 percent partner in this whole endeavor right and that's before ads.

Go into it with that mindset — whether or not you're an aggregator, whether or not you have a whole bunch of money, whether or not you're a cash buyer, those things can obviously go out the window if you just treat people like humans.