KDP businesses allow anybody to self-publish their books and use Amazon as a distribution partner. While typically, these businesses were hard to buy or sell, recently, there has been an influx of KDP businesses for sale across major online business brokers.
This represents a large opportunity for an entrepreneur who understands the business model and how to improve these businesses.
What is a KDP business?
KDP refers to the Kindle Direct Publishing program by Amazon. This program allows any person to sign up and start self-publishing their work through the Amazon platform.
Once you enroll in the program, you’ll upload your first book, cover art, and create a basic Amazon listing for the book. After you submit it, it will go through an approval process and then be available for sale on the Amazon platform.
When somebody buys your book, Amazon will print it, ship it to the customer, and take care of all customer service after the purchase. This makes an Amazon KDP business extremely passive.
Note: One common misconception is that you must be an author to enroll in KDP. In fact, many books using the KDP take the form of logbooks, gratitude journals, and coloring books. These so-called “pattern books” simply use a repeated PDF pattern on ~150 pages and some nice cover art to create a journal. These low-content books are perfect for the KDP platform.
One of the biggest advantages of enrolling in the KDP program is the distribution. After submitting your book, it will instantly be available to purchase through Amazon.com, the Kindle store, and audiobook options like ACX and IngramSpark.
Amazon does take additional fees for the distribution and access it gives though. As the author and seller of the book, you will only receive (60% of the list price – printing costs). Printing costs depend on the type of ink used in the book and the number of pages.
Here’s how the math breaks down for a 300-page black ink book selling for $9.99.
- Royalty Rate = (0.6 * $9.99) = $5.99
- Printing Cost = $0.85 (Fixed) + 300*0.012 (Page Count) = $4.45
- Profit: $1.54
These low margins can make marketing for a KDP business difficult.
Should You Buy vs Build a KDP Business?
It can be difficult to decide whether to buy vs build a KDP business. One mental model for this decision is determining the replacement cost.
How long would it take you to create the existing catalog from scratch?
Many KDP businesses list hundreds of books on the Amazon marketplace. The average book length varies but is typically around 100 – 200 pages. To create that many books, you must hire a team of ghostwriters, plan out the content, get the book formatted, get cover art, and more. This entire process could take months, depending on the type of books the business sells.
How established are the current Amazon listings?
When buying a KDP business, you will be taking over the entire KDP account and all of the Amazon listings. The strength of Amazon listings is critical to the success of the business. When deciding whether to buy or build a KDP business, look at the number of reviews on the top-selling books in the business.
How long would it take you to amass 2,000+ 5-star reviews?
Keep in mind that getting a large number of reviews on Amazon has been getting harder and harder over the past few years.
Does the KDP business have an existing audience to market to?
Some of the best KDP businesses have email lists filled with 1,000s of past customers. Maintained correctly, these email lists are extremely valuable because a business owner can launch new books using the email list. Creating this audience from scratch can be difficult.
Where To Buy A KDP Business?
Empire Flippers is one of the largest online business marketplaces and it may contain one of the widest selections of KDP businesses for sale. On its marketplace currently are 10+ KDP listings ranging from $70,000 to $1,000,000+ in list price.
For each listing, Empire Flippers will prepare a brief summary of the business, a P&L, and a brief document containing the most relevant information for the specific business type. For a KDP business, that would be information about the best-selling books in the catalog, revenue concentration by book, and whether or not Amazon advertising was used.
Flippa is one of the oldest and largest online business marketplaces. It is an open marketplace which means that any business owner can list their business for sale on their platform. Because of this, they often have thousands of listings for sale in different categories and business models.
However, because Flippa does not use a broker model (like Empire Flippers), prospective buyers have to take care to perform extensive due diligence on the numbers and information in the listing.
How To Value A KDP business
A KDP business is typically valued on a monthly multiple of net profit. For many of these businesses, the profit and loss statement is simple.
KDP Royalties – Amazon Advertising Spend = Net Profit
After looking at the net profit, brokers assign a multiple to the net profit to determine the listing price. Most KDP businesses for sale now have a multiple of between 36 – 40x but this range can go up or down depending on the quality of the business.
If the business has a large variety of books and no book accounts for a significant portion of revenue, the multiple typically increases.
If the business has a large existing audience that is actively engaged and can be used to assist with new product launches, the multiple can increase.
Due Diligence When Buying a KDP Business
While KDP businesses are less complex than most other business models, it is important to go through an extensive due diligence process before acquiring any KDP business for sale.
First, any enterprising buyer should look to see if the account has ever received warnings of copyright or trademark infringement from Amazon. Amazon takes these offenses very seriously and will terminate the entire KDP account if you demonstrate a pattern of continually breaking the rules.
If the account has received multiple warnings, it’s best to look elsewhere for a potential acquisition.
Amazon Marketing Strategy
Most KDP businesses use Amazon marketing services to run ads on Amazon and promote their books. When talking to the seller, ask them about their current ad strategy and how it’s evolved over the past few months/years.
Royalties on KDP books are low, meaning any ad strategy must have a high return on ad spend (ROAS) to be profitable. Ask the seller questions like:
- What is their ROAS on their ads for the past month, 3 months, 6 months? Is it increasing or decreasing?
- What is their current campaign structure? Are they using auto or manual campaigns?
- Are they using different ad types such as Sponsored Brands, Sponsored Brands Videos, and Sponsored Display?
These will help assess the potential for changing the ad strategy and increasing profitability and growth.
Many KDP businesses for sale have a catalog filled with 50+ books. Managing such a large catalog can be difficult without processes and a team in place. When looking through the business information, make sure to ask the seller:
- Do they have an established process for launching new books?
- How do they conduct keyword research for new products?
- Do they have writers in place to get new books written?
- Do they have a process in place to optimize their existing listings?
One of the most essential questions to ask is to determine how they created their existing books. Did they hire ghostwriters or create the books themselves? If the seller wrote all of the books themselves, a new buyer may have to hire a writer – at an additional cost.
When anybody can sign up for the KDP platform and start publishing books for sale on Amazon, competition can be rampant. The best differentiator, in this case, has an external audience.
When looking at a KDP business for sale, look to see if they have an email list, their own website, a Facebook group, or another method of communication with buyers.
Having an external audience can help drive sales velocity on Amazon, improve your new product launches, and develop a moat around your products vs the competition.
How To Transfer a KDP Business
Similar to transferring an Amazon FBA business, when you transfer a KDP business, you will be taking over the entire KDP account. To do that, you will log in as the old owner and make the following changes:
- Change the contact information
- Retake the tax interview
- Change any payment information related to the account
After this is done, the new owner will assume ownership of the KDP account and can continue running the business.
FAQs about buying a KDP business?
How much does it cost to start a KDP business?
It is free to start a KDP business. You can create an account at Amazon KDP and start publishing your book in as little as an afternoon. To publish a book, you’ll need the content for the book, which you can either create yourself or hire a ghostwriter to write for you. Ghostwriter costs can range from $100 – $1,000+ depending on the length and material of the book. A typical 100 – 150 page cost may be around $350.
How much does it cost to buy a KDP business?
The majority of KDP businesses for sale are listed for amounts ranging from $50,000 – $250,000+. Currently, there are multiple KDP businesses for sale in the mid-6 figures and a couple with a list price of $1,000,000+. However, most KDP businesses can be bought for 5 to 6 figures.
Why do people sell their KDP business?
Most people sell their KDP businesses due to other time commitments, burnout, or a desire for something new. KDP businesses are typically valued at a 30-36x monthly multiple, equating to 2.5 – 3 years of future earnings. Many owners want to cash in and then use that money for something else – like a down payment on a house or reinvesting into another business.
KDP can be an incredibly lucrative business model that doesn’t take a large time commitment in order to grow.
- Make sure to evaluate the strength of the Amazon listings and marketing strategy
- Ensure the seller has SOPs and a team in place for researching and launching new books
- Buying a business that has a large external audience is a big advantage