You have invested a lot of time, money, and effort to build a profitable e-commerce business, and now, you want to sell it. Perhaps you want to sell your business to raise capital for another venture. Low cash-flow can limit marketing activities, expansion to other eCommerce platforms, inventory replacement, and product offerings.
Some people sell their business e-commerce business for personal reasons such as raising funds to buy a house. Regardless of your reason, you should know how to increase the value of your e-commerce business to maximise your investment.
How to Increase the Value of Your E-commerce Business
Reduce the risk of buying your e-commerce business to potential buyers. There are various ways to do this. Your e-commerce business must be at least 12 to 24 months old and has a growing and engaged mailing list, diversified traffic sources, clear growth potential, traffic stats with an extensive history and brand with no legal, trademark, or copyright concerns.
It should also have a history of growing or stable revenue, solid gross profit margin, low cash, and physical stock requirements, repeat sales and visitors, growing industry or niche, and diverse revenue base. Potential buyers are more likely to show interest in an e-commerce business with scalable and streamlined processes and systems, proven team, fulfilment ordering, warehouse and dropship processes, resilient relationships with trustworthy suppliers and sales and CRM software.
Best Time to Sell Your e-Commerce Business
The right time to sell an e-commerce business depends on the situation of your business and your personal goals. Selling due to external factors or short-term personal goals may lower the value of your business. Talk to an online business broker in advance to get an idea of how to boost the store’s value. Exit planning can help improve the efficiency of several areas in your business, which can boost your profits as well. Try selling your business during or before a seasonal uptick because potential buyers probably want a quick way to get the businesses with higher revenues.
What to Do When Selling Your e-Commerce Business
Selling your e-commerce business is a great source of money provided that you do it right. You can either sell it yourself or work with a broker. Preparing your e-commerce business for sale takes a lot of effort, time, and money, so hiring a broker will make everything easier for you. The broker will ask you about your historical performance as well as yearly and monthly profit, revenue, and expenses.
They will also ask you about the kind of products you are selling, which are the best-sellers and which ones don’t sell a lot and how long you’ve been in business. You will be asked how you run your business and to provide evidence of the figures like screenshots of your bank statements and Google Analytics. Aside from this, you will need to update your profit figures, revenues, and expenses every month.
The broker will take note of the information and determine the potential value of your e-commerce business. He will consider the age of your business, the revenue production’s stability, and the number of transactions or traffic you have. The broker will also consider the Profit margin, expenses as well as assets and services involved in the sale such as marketing, social media presence, and inventory acquisition.
Just remember that brokers charge commission fees. Small brokers charge about 15% of the store’s selling price. They spend a lot of money, effort, and time to conduct research on your competitors and the marketplace, promote your business, and contact potential buyers.
How to Find a Buyer
You will sign a listing agreement, which states your responsibilities and the broker’s responsibilities as well. The broker will then list your e-commerce business on their website and start promoting it to approved buyers. You have to complete a listing questionnaire as well. Be honest. Don’t make any claims that you can’t deliver. You should also give the broker suggestions about potential buyers. This will help them find a buyer a lot faster.
Always communicate with your broker. Don’t be stressed if you were not able to sell your business within one or two months. It might take six months or even longer sell your e-commerce business. Continue running your business to the best of your ability during this period. Your business will lose its value if it’s neglected.
Expect to discuss your business with potential buyers. Talk about your reason for starting the business and how you’ve managed it all this time. Prepare your finances, vendor information, analytics, and software details in advance so that you can show them proof of the figures you’ve stated. You should also answer any questions honestly and avoid making false or exaggerated claims. Potential buyers won’t like it.
You should be ready to negotiate the price of your business anytime. Don’t worry because your broker will be there to help you. Potential buyers will send a letter of intent to buy your business. You have to prepare a due diligence file. It contains your product invoices, analytics, employee contracts, service invoices, software data, vendor information, service contracts, bank statements, and profit/loss statements. Remember that the buyer may still refuse to proceed with the purchase.
Both parties will sign a contract for sale once they have agreed on the sale price. The buyer will deposit the money to escrow. The broker’s commission will be deducted from the payment. You need to complete the necessary asset and account transfers once the sale is completed. Your post-sale responsibilities also include training the new owner to run the business.
Regardless of your reason for selling your e-commerce business, you should be prepared so that you can maximise its value and your profit. The selling price will be lower if the business has limited buyer interest or marginal performance. Consult with successful eCommerce retailers, your accountant, or other people who can give good advice. Be wary of brokers who quote a higher price. If you want to hire a broker, find one you will be comfortable working with.