I Lost $220,000 on One Amazon Brand. Here's Every Dollar and Why It Happened.

So this is my Empire Flippers buying dashboard. And as you can see, it's 5 acquisitions, real money, real listing. And the second one I ever bought was called Relax Support. And you can see it right there. It's the very second one that I went ahead and purchased. And it cost me everything I thought I knew about buying Amazon FBA businesses because I ended up losing over $220,000 on just that deal alone. And it wasn't because the seller lied, not because the numbers were wrong, but it's because I saw signals and I basically called it leverage. And this video is every dollar and exactly why it happened exactly. And as you can see, we go through the actual dashboard, you can see the purchase details, you can even see the listing still on Empire Flippers as far as it being sold, but let's go over exactly how I lost $220,000 on this actual listing. Because at a glance, this is how the deal looked like exactly. My net loss was around $220,000. I went ahead and committed over $400,000 on this deal, the brand, the listing, when I went ahead and acquired it, when it actually became mine, which was on February 3rd, 2023. And I exited this actual business in early 2025 with the losses of $220,000. So if you do the math, I only held this business for around 2 years, right? The actual purchase price of the business was $227,000. The inventory itself was $194,000, which we'll go over in a second why this kind of led to why my business basically failed when when it came to Empire— I mean, uh, Relax Support. Trailing 12 months, when I went ahead and purchased it, it was averaging around $130,000 per month in revenue. Um, revenue peak was in April 2022, and at close, the business was making $92,000. And the crazy part about it is that when I purchased the business that December time, that December of 2022 was actually negative $4,000. And the thing is, you would think to yourself, You saw these signs coming. You saw that the profit margin was only 9%. As you see here, the multiple was out of whack. The SKU count, the tacos is low. Why the heck did you still purchase this business? Number one, there is a sunken cost fallacy here. I negotiated back and forth with the seller time and time again, and when it came down to actually closing on the deal, I just wanted it to be over. With. There's literally no excuse to it. I made a bad financial decision with this actual product. But the number 2 reason is because this seller continued to discount the product. So whenever something came up where I said, hey, there's a negative, there's a glaring red mark here, he said, it's okay, I'll discount the business even further and further down where it got to the point where I paid $194,000 for the inventory itself. But he had over $400,000 worth of inventory. So my position, I said these numbers are actually wrong because I'm getting such a huge discount on the inventory itself where we have a bunch of room to work with to scale this business out. And at the same time, when we go back to Empire Flippers, you can see that I actually— let's go back to the purchases. I purchased another business alongside of this, which is called Maverick, that was still doing very, very good, right? So at the time of this actual business, when I acquired it, I acquired 2— Maverick and I acquired Relax Support. So keep this in mind when we go through this actual, um, you know, information here. But how did the loss breakdown actually happen? The acquisition payment, obviously $200,000 plus, uh, stability payments, because you can see here, we did do seller financing on the actual deal itself. When we go back, you can see that our purchase details was $227,000, but I only paid $225,000 upfront, which again, it's a smart way to negotiate deals when you're buying Amazon FBA businesses or any business in general. I went ahead and paid $194,000, 2 years of operating losses as well. So we'll go over the storage fees, the PPC spend, the 3, uh, third-party logistics company, the staff that I went ahead and included here as far as hiring an agency to try and have this business survive. We'll go over all of this, right? But you have to understand that we still made money, right? So like we were still recouping money. We're still making sales. We were still going ahead and selling through this dead inventory that we got at a huge, huge discount. And at the very end, we were still able to recover some more money when it came to like liquidating getting coupons, doing deals, using Amazon's liquidation program itself. And at the very end, we were still able to write off a lot of these business losses. Remember, we had another business that we went ahead and purchased at the very same time as this, and that business was thriving. So we ended up making the decision to close this business down primarily due to the fact that we were able to write off this actual business based on the basis that we had in this business. But still a total net loss of $220,000. So let's go over why this business actually collapsed in the first place. Number 1, and we're going to go over 3 failure modes that actually determined that this business went ahead and failed. Number 1 was a search volume collapse. This business, Relax Support, was a lumbar support wedge pillow type of business. So think about this. When we purchased this business back in 2021, 2022, the trailing 12 months, something was going on. People were working from home, had home offices. So with that, there was a lot of stipends or credits that companies were giving to have an employee have a home office. So when we're looking back at search volume, we started noticing that when we acquired the business in 2022, people were returning back to work, right? So the thing is that our ACOS, our numbers, our ranking, our bestseller ranking for a lot of these keywords, we were still dominating. So in the lumbar support space, we were still the top 10 lumbar support pillow company out there. The problem, the search volume wasn't there. There. No matter how much we pushed to try and get more and more sales, you cannot force a customer to type in lumbar support pillow and actually purchase that product. So you can see here that when we acquired the business, there was just a straight downhill as far as search volume is concerned for this actual keyword. The thing is, if we look at the data now, you actually see some reversal going around the other side. That now more and more people are actually searching this up. But it was a— we were losing so much money at that time that the best decision at that point in time was to go ahead and kind of liquidate and move on from it. So rule number 1 that I always tell people that are interested in purchasing an Amazon FBA business is that you have to pull keyword trend. And you can do that by utilizing the Product Opportunity Explorer on the Amazon seller dashboard itself. So before acquiring anything, if you see a decline of more than 30% from its peak and its trend and it's still falling, that's a clear, clear sign to walk away. This is one of the key things that I look for now based on experience that I look for whenever I acquire a business. A business could be collapsing with revenue, but as long as there's a good positive trend in the search volume, you know that you can go in there, optimize PPC, optimize impressions, and start going ahead and getting more and more momentum. There is no momentum if search volume is falling off a cliff. So that's number one, as far as why this actual business failed. Failure number 2 was the same reason why I thought we had a huge deal on this actual business, and that was dead inventory and long-term storage. Fees. So the reason why this individual said that they had $400,000 worth of inventory was because they stated that they hired an agency, a PPC agency, and said they will blow this out of the water. And the only issue as to why they won't hit certain revenue figures is if they run out of stock. So It's understandable. During 2020, 2021, everything was booming in Amazon. You see, you saw all these aggregators, you saw this, and somebody's selling you the world that you're going to have all these revenue figures. It makes maybe sense at that point in time. So this person bought $400,000 of inventory because this PPC agency went ahead and saw, uh, and, uh, went ahead and told them to, which again, they purchased it. So I acquired this $400,000 worth of inventory for $194,000. And I thought, Dude, we're getting such a great deal that if nothing else, this is how we'll make our initial money back. Well, you don't know what you don't know. And this is why my experience has taught me to look at deals completely differently now. Because when we acquired the business, storage fees weren't a huge deal. It wasn't until we started seeing a bump up in some of this inventory, because again, this actual item and we go back here, had a lot of SKUs, right? You can see 17 different SKUs for this actual product. So at the time, we started getting some to be long-term storage fees, which meant that they've been in Amazon's warehouse for more than 12 months. And at the beginning, it wasn't a big deal because it was small inventory that wasn't already moving. So they didn't order a lot of this actual inventory. The problem came during Q4. So you can see that inventory started slightly rising, and it wasn't until Q4 where Amazon goes ahead and charges you almost double the amount to store your items in their warehouses. Because now Amazon doesn't want you to treat their fulfillment centers as warehouses. They want you to treat it as a basically a middle point to a customer purchasing the product and then delivering it. So we basically got annihilated any single profit we could have actually made in 2023 because of these long-term storage fees. But we caught it early. So what did we decide to do? Well, we decided to go ahead and have or transfer these actual items from Amazon's fulfillment center to a 3PL. And if you guys have been in Amazon FBA for a little while now, or, you know, don't know about Amazon FBA, I'll tell you the story. Back in 2022, 2023, Amazon still allowed you to pull out inventory from the warehouse for a very cheap amount. We're talking about $0.50 per unit regardless of what size and weight it might have been. Well, even though we were able to pull that inventory out at a very cheap cost, shipping it back into Amazon was the problem itself because these are pillows. These are high volume size type of items that it costs a lot of money. We're basically paying double for the COGS itself. So any savings we had when we acquired the business basically got eaten up from this. So rule number 2 that I always tell people is you want to check the inventory age of every single item they have in Amazon, and you want to calculate what a 90-day sell rate window looks like. And any inventory beyond 12 months of supply is worth $0. So I accidentally did this model with its actual business, but I still ended up failing. So any inventory between 6 months to 12 months must be discounted before underwriting this actual deal and never use 12-month averages to project forward demand faster than that. Because like I mentioned before, search volume can crater. You want to be able to use the most recent 90-day sell-through to determine how much inventory they actually have. Because if you rely on year-over-year numbers, you will get stuck basically how I got stuck at. So that's number 2, right? So let's go ahead and go over failure number 3, which is the compounding effect of everything this, this actual problem had, right? Because right now we had slow sell-through because of that slow sell-through. We had inventory aging. And when inventory aging started happening, we started going ahead and having these long-term storage fees, which basically compressed any type of margin we went ahead and had, right? So we basically had no margin in this actual business. And then we had no capital to actually pivot, right? Do we come out? Do we go ahead and kind of throw away the current color variations? So we try and see what's happening now when it came to like heated lumbar support pillow being like the new trend. We didn't have enough money or enough data to really know how to go ahead and pivot from this actual business. And basically we could not recover any search volume or clear out any type of inventory because we couldn't, right? We couldn't force people to look up lumbar support pillows or any variation of those actual keywords because if people aren't searching up on Amazon, there is no demand for it because we can basically try our best to be in the top 10, but if you're in the top 10 of any type of subcategory whatsoever, there is a ceiling to the category that you're currently in. So what I put right here, the decision timeline, which went ahead and kind of happened— if you guys want to go ahead and kind of, uh, read through that, you guys can. You can pause this actual video and read through that. But number 3 here is know your category fee structure before you bid on any type of actual business, right? Bulk products have a ceiling. And again, this was lumbar supports. This was wedge pillows, even though they didn't weigh a ton, where in this case they did actually weigh some pounds itself. They take up a lot of room when it came to fees. So if you look over here, right? So the best way to know it is that COGS right now, there was an opportunity, right? 32% or close to 33% were COGS. 8% was TACOS, which is advertising. So that meant 40% of all expenses came through, uh, advertising and COGS. And then 9% came through an actual profit margin. So this means that 51% of expenses came through Amazon fees themselves. And the reason why I bring that up is because we all know that there's a 15% fee to actually sell on Amazon, right? But the thing is, there's other fees associated— fulfillment costs, storage costs, returns, refunds. Uh, any type of deal that you're going ahead and running on Amazon would at 51%, this business was not properly optimized in order to go ahead and basically have a sustainable type of business model. So the margin is not really real here, right? So that's number 3. So the 3 checklists based on this failed product, based on me losing more than $220,000 is Check search volume because this trend is probably one of the most important things on Amazon that I've been burned by before, because you can anticipate the trend that just happened in 12 months, but we don't know if these categories are fads. We don't know what's going on in the real world that's affecting this actual search volume. So you want to make sure that you keep track of this as a number one rule. Number 2 rule, Value the inventory by age, not by actual count. So if they have a bunch of inventory in their actual warehouse, count that inventory correctly, right? So this means that anything between 6 months to 12 months, you discount it heavily. I would even say 50% to be correct, to go ahead and kind of go through the other side. And anything that's in there by 12 months or more, count that at zero because it's already getting eaten up alive by long-term storage fees. And then know your category fee structure, right? Know exactly how much money is going into Amazon, right? What is the proper way to optimize? Because our sense was, hey, we'll go ahead and increase prices when it came to, to kind of lower our COGS and then renegotiate our pricing to lower our COGS as well. Well, it didn't happen because Amazon went ahead and ate up all of our actual profit. So these whole 3 rules are in the autopsy checklist that I have down here below as well, or I'll have it linked down below. And if we were to go ahead and go through the actual autopsy, which we'll go over right now on the actual website, you will see these were the numbers. If I inputted these numbers into the free autopsy deal, right, you can go ahead and kind of use this on my website. There's no emails, no accounts necessary. So you don't have to go ahead and put in your information whatsoever. You will see that by just simply putting in these numbers, being a one-time purchase type of product, because this is not a supplement, We saw the declining trends over the last 6 months. We saw that the owner went ahead and added back his actual add-backs as far as his salary is concerned back into the actual business. And yes, we went ahead and operated Amazon FBA businesses. We saw that this opt-out result was a high overall risk to go ahead and purchase the actual business. Why? Because of the fact that the margin wasn't there. Right? And the multiple wasn't there either. So there were so many glaring red flags that if I had this tool from the very beginning, I wouldn't have even considered looking or talking to this individual whatsoever because this deal was not a deal to even look at. So if you guys want to look up your deal, regardless if it's from Empire Flippers, from Quiet Life, from Flippa, from Website Closers, go ahead and use this autopsy. Again, it's completely for free. You don't have to put in an email whatsoever, but I wish I had this type of software before I went ahead and purchased any of these actual businesses. So if you guys have been following along in this series, you guys saw that this wasn't the only one that I lost money on. I bought a supplements brand and I went ahead and talked about that supplements brand, which is the number We'll see here going back this Nudery Labs Naturals. So if you guys want to hear that story of how I lost $60,000 on that actual deal, go check it out on the actual YouTube channel. It's the one right before this one. And then I'm going to go ahead and reveal why I passed on a certain type of deal. And it was a gaming type of brand. We're going to go ahead and keep it anonymous right now, but I have all the figures as far as why I walked away from it. And you guys are gonna want to go ahead and see it because I'm gonna analyze it as if I'm analyzing a deal that you bring to me. Because there are some glaring red flags that on the surface, on paper, it looks like a great deal to have. But once we look under the COVID or under the hood in this actual situation, we see that there are glaring red flags that were both found on the supplements brand and this video right over here. So if you guys are interested in following along, buying, selling, scaling out Amazon FBA, All I ask for in return, like, subscribe. But until next time, guys, peace.