8 Red Flags to Watch for Before Acquiring an Amazon FBA Brand

At first glance, Amazon FBA businesses often look like a dream: passive income, outsourced logistics, high-margin products, and steady demand.

But look closer, and you’ll find that many of these businesses come with hidden landmines.

I’ve reviewed countless Amazon listings that seemed great on the surface—until I dug into the supply chain, ad strategy, or product defensibility. Suddenly the margins didn’t look so strong. Or worse, the business was one policy update or stockout away from disaster.

The truth is, every Amazon brand carries some level of platform risk. But some are far more fragile than others.

In this post, I’ll walk you through the key red flags I look for when evaluating an Amazon acquisition—things that don’t show up on a P&L, but can tank your investment if you miss them.

1. Over-Reliance on a Single SKU

A single best-selling product isn’t a strength—it’s a risk.

If one SKU is driving 70%, 80%, or even 90% of revenue, the business is dangerously exposed. Any disruption—bad reviews, listing suspension, rising ad costs, or a new competitor—can take the entire business down with it.

And it’s more common than you think.

Many Amazon brands are built on a single early win. The seller found a breakout product, scaled fast, and never got around to building SKU depth. That might look like smart focus during growth, but post-acquisition, it turns into fragility.

What to ask during diligence:

• What % of revenue does the top SKU represent?

• How long has it been the top performer?

• Are there new SKUs in the pipeline—or has the catalog been stagnant?

Why it matters: Diversified product lines reduce risk and improve stability. You don’t want your entire investment riding on a single ASIN.

2. No Strategy to Reduce Platform Dependency

Let’s be clear: every Amazon FBA business is platform-dependent by definition. But not every seller is equally vulnerable.

Some founders recognize the risk and take steps to reduce it. Others just hope Amazon doesn’t change the rules.

When a brand is 100% reliant on Amazon—with no off-platform presence, no customer list, no backup fulfillment options—that’s a red flag. You're not just buying a business. You’re buying a position on someone else’s shelf. And that shelf can disappear overnight.

What to look for:

• No email list, no social following, no DTC website

• No plans for off-Amazon expansion

• No ability to fulfill outside FBA

What to ask:

• Have you tested off-Amazon sales channels?

• Is there a branded domain? Are you collecting customer data?

• What happens if your FBA account is suspended?

Why it matters: You don’t need a full-blown DTC operation, but there should be some strategy to mitigate Amazon’s control. If there’s no plan in place, you’ll have to build one from scratch after the acquisition—and that takes time and capital.

3. High Likelihood That Amazon Will Enter the Niche

This is a risk buyers often underestimate—until it’s too late.

If a product is simple, popular, and easy to replicate, there’s a good chance Amazon has noticed. And when Amazon launches its own competing version, it tends to show up at the top of the search results—whether it earns that spot or not.

Some categories are more vulnerable than others:

• Commoditized household goods

• Simple electronics or accessories

• Anything with consistent high volume and no IP protection

If you see “Amazon Basics” or similar private-label lines dominating the first page of results, tread carefully.

What to ask:

• Is Amazon already in this category?

• Does your product have any protection (design patent, utility patent, trademark)?

• What differentiates you from other sellers—or Amazon itself?

Why it matters: Even if the business is doing well now, you need to assess how durable it is if Amazon becomes a direct competitor. If the product is a commodity, you’re buying shelf space that Amazon can take back.

4. Weak Differentiation or No IP Protection

One of the most common issues I see in Amazon brands for sale is a complete lack of defensibility. The product might be well-packaged and selling well today, but if it’s easily replicated by another seller—or worse, multiple sellers—it’s just a matter of time before the margins vanish.

This is especially true if:

• The product is sourced from a generic supplier

• There are no meaningful design improvements

• There’s no brand story or customer loyalty beyond the listing

In these cases, the only real moat is the product’s current BSR—and that can disappear fast with one price war or wave of copycats.

What to ask:

• What makes this product different from others in the category?

• Are there design patents, trademarks, or other forms of IP protection?

• Can this exact product be found on Alibaba?

Why it matters: If the brand doesn’t own something—a design, a formula, a loyal audience, or a proprietary supply chain—then all you’re buying is a temporarily well-positioned listing.

5. Unstable Inventory and Stockout History

Inventory mismanagement is one of the fastest ways to kill an Amazon business—and one of the easiest things to miss in diligence.

When a top-selling SKU runs out of stock, Amazon penalizes it. BSR drops, organic rank falls, and sales plummet. And getting back to your previous rank isn’t just a matter of restocking—it can take serious ad spend and time to recover momentum.

What’s worse: some sellers understate how often they’ve run out of stock or how long restocking really takes.

What to ask:

• How often have top SKUs stocked out in the last 12–24 months?

• What are the average lead times for reordering?

• Do they use forecasting tools or just order based on gut feel?

What to look for:

• Revenue “dips” with no clear explanation

• No 3PL relationship or backup inventory plan

• Sole reliance on FBA with no flexibility

Why it matters: Inventory stability is fundamental. If the seller hasn’t mastered this, you’ll be stuck cleaning up their operational mess—and possibly burning cash doing it.

6. Rising Ad Spend, Falling Organic Rank

Strong ad performance can be a good thing—if it’s part of a healthy, profitable flywheel. But when a brand is spending more just to maintain the same level of sales, that’s a red flag.

It usually means one of three things:

• The product is losing relevance or rank

• Competitors are outbidding them for top search terms

• Organic traffic is drying up, and they’re compensating with spend

You might still see revenue growing in the P&L—but behind the scenes, margins are getting thinner, and customer acquisition costs are creeping up.

What to ask:

• How has ACoS (Advertising Cost of Sale) trended over the past 12 months?

• What % of revenue comes from organic vs. paid traffic?

• Are any SKUs completely reliant on PPC to generate sales?

What to look for:

• Decreasing margins despite steady or rising revenue

• High ad spend on low-converting products

• No strategy for SEO optimization or review generation

Why it matters: If paid ads are propping up the business, you’re not buying a brand—you’re buying a paid traffic engine that may be losing efficiency. That’s not inherently bad—but it needs to be priced accordingly.

7. No Clear Operational SOPs or Hand-Off Plan

Some sellers are great at building Amazon businesses—but they’ve done it all from memory. When it comes time to hand over the keys, they can’t explain how they run things, because everything lives in their head.

That’s fine for them—but a nightmare for you.

If there are no written standard operating procedures (SOPs), no supplier contacts organized, no documented advertising strategy, and no clarity around inventory management, you’ll spend your first three months just trying to figure out what’s going on.

What to ask:

• Do you have documented SOPs for ordering, inventory, ads, and customer service?

• Can you provide a supplier contact list and communications history?

• Who on the team (if anyone) will stay on post-sale?

What to look for:

• Disorganized operations

• Reliance on founder’s personal involvement

• No backend systems (like inventory software, automated reordering, or ad management tools)

Why it matters: Even a solid business becomes risky when there’s no playbook. Without clear documentation, you're flying blind—and potentially setting yourself up for a rocky transition.

8. Recent Revenue Spikes Without Clear Cause

A sudden surge in revenue can look like a big win—but if that spike isn’t repeatable, it’s a trap.

Some sellers time their exits right after a strong seasonal cycle, a viral moment, or a one-time influencer push. Others might juice sales with deep discounts or aggressive ad spend that isn’t sustainable.

Without context, that growth can make the business seem more valuable than it actually is.

What to ask:

• What caused the recent growth? (Be specific.)

• Was it organic, paid, influencer-driven, or seasonal?

• Is that channel still producing results—or was it a one-off?

What to look for:

• A big gap between TTM (trailing twelve months) revenue and the average of the prior 2–3 years

• No systems in place to repeat the growth driver

• Lack of clarity around customer acquisition sources

Why it matters: You’re not buying past performance—you’re buying future potential. If revenue is inflated by a non-repeatable event, it’s critical to adjust your valuation accordingly.

Don’t Buy Blind—Interrogate the Risk

Every Amazon FBA business comes with risk. Platform dependency, policy volatility, and competitive pressure are part of the model. But not all brands are created equal.

The red flags above aren’t always deal-killers—but they are signals that you need to dig deeper, ask harder questions, and protect your downside.

Because once you sign the deal, you own the risk.

Great acquisitions don’t just have upside. They have clarity. And that starts by knowing exactly what to look for—before it’s too late.