Amazon FBA Due Diligence: 10 Questions to Ask

If you're looking at buying an Amazon FBA business, you're joining one of the hottest markets in e-commerce. But here's the truth: the difference between a great deal and an expensive mistake often comes down to asking the right questions during due diligence.

What is Amazon FBA due diligence?

Amazon FBA due diligence is the comprehensive investigation process buyers undertake before acquiring an FBA business. It involves examining every aspect of the business - from financial performance and operational efficiency to brand strength and growth potential. Think of it as a deep dive into the business's past, present, and future to verify its true value and identify any potential risks.

Why is Amazon FBA due diligence important?

Due diligence is crucial when buying an Amazon FBA business because of its unique complexities. You're not just buying a business - you're taking over an Amazon seller account with its own history and potential issues. A thorough investigation helps uncover deal-breakers like account violations, supplier problems, or unstable revenue streams.

Most importantly, proper due diligence helps you avoid costly surprises after purchase. Understanding challenges before you buy allows you to negotiate better terms or walk away from risky deals.

What due diligence should I handle personally?

The depth of due diligence you'll need varies significantly depending on your acquisition path. When buying directly from a seller independently, you'll need to handle every aspect of verification yourself - from account health analysis to supplier verification. In these cases, it's often worth investing in professional help, like an experienced Amazon FBA accountant or consultant, to avoid missing critical issues.

Going through established brokers or curated marketplaces can reduce your due diligence burden, as they typically perform initial vetting and provide standardized financial records. However, don't fall into the trap of completely delegating your due diligence to others. Even with vetted listings, you should still independently verify key aspects like the checklist below. 

Remember - while brokers and marketplaces can save you time and reduce risk, you're still the one making the investment. Finding the right balance between leveraging their pre-vetting and conducting your own verification is key to making a sound acquisition decision.

10-question Amazon FBA due diligence checklist

1. "Could you walk me through how you're calculating the profit numbers?"

When looking at an Amazon FBA business, getting clear profit numbers is essential. You need to know if the seller is painting an accurate picture or just showing exciting revenue numbers. Many sellers forget to include critical costs that can significantly impact profitability. A thorough understanding of their profit calculation method will reveal both their business acumen and potential hidden costs you'll need to account for.

Key areas to verify:

• Amazon's fees including referral fees (15%), FBA fees, and seasonal storage fees

• Marketing costs and advertising spend beyond basic PPC

• Hidden operational expenses like software subscriptions and VA costs

Pro tip: Always ask for historical profit data - Amazon changes fees regularly, so what was profitable last year might be squeezed now.

2. "Have there been any account health issues in the last 24 months?”

Account health history can make or break your investment. Make sure you understand potential red flags and ongoing issues that could impact the business after purchase. A single unresolved issue could spiral into serious problems after acquisition. Amazon's strict policies mean that past violations can have long-lasting implications, and understanding this history is crucial for assessing risk.

Key areas to verify:

• Policy violations, warnings, and their resolution history

• Customer metrics including ODR, returns, and feedback patterns

• Performance metrics like Late Shipment Rate and Valid Tracking Rate

Pro tip: Always request the Account Health dashboard - hesitation to share this is a major red flag.

3. "Which products drive most of your revenue, and how stable are they?"

Understanding revenue drivers is crucial for evaluating business stability. Don't just accept high-level revenue breakdowns - you need the full picture of where the money comes from. Many FBA businesses appear diversified but actually rely heavily on just one or two products. A clear understanding of product performance patterns and dependencies will help you assess the true risk level and potential of the business.

Key areas to verify:

• Revenue concentration across products and risk assessment

• Seasonal patterns and their impact on cash flow

• Product lifecycle stages and growth trajectories

Pro tip: Always verify stability claims with actual month-over-month data for at least 12 months.

4. "How reliable are your current suppliers?"

Supply chain stability is fundamental to FBA success in today's market. Many businesses fail due to supplier issues, so you need to understand the complete supplier landscape. Poor supplier relationships or lack of backup options can quickly derail even the most profitable business. Understanding not just current relationships but also past challenges will reveal potential vulnerabilities and the true strength of their supply chain management.

Key areas to verify:

• Historical performance including stock-outs and delivery consistency

• Backup supplier relationships and diversification strategies

• Payment terms, MOQs, and pricing stability history

Pro tip: Ask about specific supply chain problems they've faced and how they were resolved.

5. "What steps have you taken to protect the brand?"

Brand protection has become increasingly crucial for long-term success on Amazon. Many businesses get blindsided by competitors or hijackers due to inadequate protection measures. Understanding their brand protection strategy reveals both their business sophistication and the defensibility of their market position. A well-protected brand can be worth significantly more than one that's vulnerable to competition.

Key areas to verify:

• Legal protection status including trademarks and Brand Registry

• Anti-hijacking systems and unauthorized seller prevention

• Customer loyalty building outside Amazon's platform

Pro tip: Ask for specific examples of how they've defended against brand threats.

6. "Who are your biggest competitors and how do you stay ahead?"

Understanding competitive positioning reveals both market knowledge and strategic thinking in the Amazon landscape. Many sellers lack deep competitive awareness or rely on temporary advantages. Their grasp of the competitive landscape indicates their strategic capabilities and market understanding. The competitive strategy can also reveal potential threats and opportunities you'll inherit with the business.

Key areas to verify:

• Detailed knowledge of top 5-10 competitors

• Sustainable competitive advantages beyond pricing

• Market trend awareness and adaptation strategies

Pro tip: Cross-reference their claims with your own research on Amazon.

7. "What exactly am I getting in this sale?"

Asset inclusion clarity prevents post-sale disputes and surprises that could affect business continuity. Many deals face issues because of assumptions about what's included in the transfer. A detailed understanding of included assets is crucial for valuation and transition planning. Sometimes the most valuable assets aren't the obvious ones, so detailed documentation is essential.

Key areas to verify:

• Physical assets including inventory and materials

• Intellectual property and brand assets

• Digital assets like accounts and software licenses

Pro tip: Get a detailed, written inventory of all included assets before proceeding.

8. "Walk me through a typical month running this business."

Understanding operational reality prevents post-purchase surprises and helps with transition planning. Many sellers downplay the actual work involved or oversimplify complex operations. The day-to-day operations often reveal hidden complexities and opportunities for improvement. A clear picture of routine operations helps you plan for the transition and identify areas needing attention.

Key areas to verify:

• Daily and weekly time commitments

• Inventory and PPC management routines

• Customer service and problem-solving systems

Pro tip: Be very skeptical of "passive income" or "hands-off" claims.

9. "What made you decide to sell now?"

Timing often reveals hidden opportunities or concerns that might not be apparent in the business metrics. The real reason for selling might differ from the stated one and could indicate future challenges. Understanding their motivation helps you assess the deal's urgency and potentially negotiate better terms. Their answer often reveals both business health and potential future challenges.

Key areas to verify:

• Alignment between stated reason and business performance

• Market timing and industry trends

• Investment needs and growth challenges

Pro tip: Watch for inconsistencies between their story and the business data.

10. "Where do you see the biggest opportunities for growth?"

Understanding growth potential is crucial for valuing the business and planning your investment strategy. The seller's insight into growth opportunities can reveal both the business's potential and its current limitations. Their answer often indicates how well they understand their market and what resources might be needed to take the business to the next level. Watch for opportunities that seem obvious but haven't been pursued.

Key areas to verify:

• Specific, data-backed growth opportunities

• Resource requirements for each opportunity

• Market validation of growth potential

Pro tip: Make sure the opportunities align with your capabilities and resources.

Next steps

The best deals often come from understanding not just what the seller is telling you, but what they might be leaving out. Use these questions as your starting point, but be ready to dig deeper when answers raise new questions.

And finally, remember that no business is perfect - the goal is to understand the risks and opportunities so you can make an informed decision.

If you're not at the due diligence stage yet, check out these curated and vetted Amazon FBA businesses for sale.