About Selling your eCommerce Business
Selling your eCommerce Business: You’re the proud owner of an e-commerce business that has seen increasing revenue and now wants to sell. You’ve probably put in countless hours of hard work and equity to build a profitable website, and your goal now is to get the best return on your investment. Well, if you want to get your eCommerce website ready to sell in the best possible way, you’ve come to the right place. In this article by realtor expert Thomas Smale of FE International, we examine the options you have when considering selling from e-commerce websites and how you can maximize the overall selling price of your business.
What is the Value of my eCommerce?
Ecommerce businesses are evaluated using a variety of metrics. Typical factors often assessed in determining the multiple for your business are the volume of sales required to realize your revenue, the distribution of income among products, the cost base, marketing spend, and multiples made on previous transactions. For example, the average selling price of an e-commerce business is about 2 to 3 time’s annual net income for companies in the $20,000 to $2 million range.
Ecommerce businesses may require a more detailed assessment than other business models due to the variable costs of running the business. Some include wholesale costs, handling fees, shipping, fulfilment, marketing (paid and organic), and labour costs. In addition, most companies are valued at the seller’s discretionary profit, eliminating one-time costs and owner compensation. However, the latter varies depending on your involvement in the day-to-day operations. Together, these facets make it harder to evaluate and sell an eCommerce business compared to other niches, but thankfully, eCommerce is one of the most standard business models among buyers.
An experienced website broker can provide you with the most accurate assessment by combining industry knowledge and in-depth analysis of the unique aspects of your business. At FE International, we have sold nearly 350 companies online and have the most data points in the industry to ensure our valuations are the most accurate.
Tip: Beware of brokers who quote exaggerated valuation multiples. This is a tactic used by some brokers to lure sellers into long-term agency agreements and often results in no offer or sale. Also, be wary of brokers who use “voluntary” purchase clauses. It can cost you thousands of dollars if you decide not to accept an offer or sell your business.
What makes an eCommerce Website Valuable?
An eCommerce business is valuable because buyers can expect a return on investment (ROI). The Value of an eCommerce business depends on many company-specific factors, but how much a buyer is willing to pay also depends on the relative risk. Shoppers want their money back as soon as possible – they pay more or less for an eCommerce business depending on the risk, the likelihood of profit, and whether it’s worth it. The less risk and time it takes, the more times you can expect to sell eCommerce websites.
How can I Increase the Value of my eCommerce for Buyers?
You can increase the Value of your eCommerce business by reducing risk for a buyer. The most excellent way to do this is to assign the following characteristics to your online shop:
- Aged site – at least 12-24 months
- Predictable critical drivers of new sales
- Diversified traffic sources, PPC, organic, referrals, and social networks
- Traffic statistics (Google Analytics or other) with a long history
- Trademarks without any trademark, copyright, or legal concerns
- A dedicated and growing mailing list
- Clear growth potential
- A history of stable or growing income
- A high percentage of returning visitors and sales
- Diverse revenue base (i.e., no product accounts for 100% of revenue)
- A growing niche or industry
- Strong gross margin
- Low physical inventory/cash requirements
- Optimized and scalable systems and processes
- Proven stock order/dropship/fulfilment processes
- A proven team on site
- Use of CRM and sales software (HubSpot does both)
- Strong supplier relationships built with guarantees in place
When is the Finest Time to sell my Top-rated eCommerce Business?
The finest time to sell your eCommerce business depends on your personal goals and the business situation. However, choosing the right time to publish cannot be underestimated if you are serious about selling and aiming to reach as many people as possible.
The eCommerce companies that score the highest multipliers are the ones that meet the criteria discussed earlier. Unfortunately, this is often not achieved quickly, so a sale can leave Value on the table due to short-term personal goals or external factors.
Consult an online broker beforehand to find out what you can do to increase the value of your business. For example, exit planning (even if you’re not selling) can often result in small efficiencies in multiple areas, resulting in a giant profit swing.
Tip: Avoid selling right after the high season. You can often get more Value by selling just before or during a seasonal uptrend, as buyers will be reassured by the high numbers and may want quick execution to capture a portion of the higher revenue (thereby reducing selling time). Investment). Their investment)
Where Can I Sell My Ecommerce Business?
Rated Sites, Marketplaces, and Forums – Best Choice for Small Businesses (Under $20,000) – Small businesses making less than $1,000 per month are typically best sold privately by the owner through sites or forums classified as follows:
Shopify Forum – A great place to communicate with small buyers and sellers. They also have a helpful eCommerce chat room for everything from reviews of your store to crowdfunding tips.
Arguably one of the best marketplaces for buying and selling small eCommerce businesses.
This Shopify resource allows you to rate your store, create a public listing, and receive offers from buyers. It’s one of the safest ways to sell shopping sites online, and it’s connected to Shopify. Of course, I would always recommend using a broker when your sales are in a particular range, but you can always use that as a starting point for your assessment.
One of the internet’s most original forums and a great place to attach with potential buyers and those interested in online entrepreneurship.
Best for Mid-Size Businesses ($205-20M) – Mid-size businesses valued at $5-5M are best sold through an experienced website broker. They have an extensive list of qualified buyers and the experience to negotiate and structure a better deal than you could. A website broker can also advise you on exploiting the Value of your business during the sales planning phase. Click here if you want to sell your business. Digital outlets have a decent broker program.
Some private equity firms are actively involved in buying businesses online. For example, try We Buy sites known to buy regularly from established retail locations.
How Long Does It Take to Selling an Ecommerce Business?
When choosing a website broker, the time it takes to sell an eCommerce business usually depends on the dual deal and the terms of the agreement. As you might expect, large deals ($1 million+) tend to take longer to sell than small businesses. This is attributed to the complexity of the business and the associated duty of care. However, at FE International, 85% of online companies sell within 60 days.
Small websites with fewer moving parts tend to sell much faster. For example, if your business is a micro business (less than $10,000) and you’ve decided to sell it on a marketplace, the sale might only take a few weeks.
What Could Prevent a Buyer from Bidding on my eCommerce?
We’ve covered the steps you can take to ensure you get the best rating for your eCommerce business. But it’s also essential to understand why a buyer might not be interested in your site or end the transaction. We’ve listed a few reasons to keep in mind:
- The wrong business model or the wrong niche
- Your stats or data don’t match
- A buyer encounters a problem that causes them to reconsider their offer
- The seller wants more amount than the buyer is willing to pay
- Trends related to a specific company or market (e.g., unfavourable products, niches, “fads”)
- Portability issues
- Financial situation, brand, or product of the company
- Buyer financing fails
Post-Sales Transition Planning
It’s important to realize that the transition process requires extensive planning so that you can execute it properly when the time comes. For example, if you are selling your business, several steps are necessary to ensure proper ownership transfer and allow the new owner to move smoothly into their new managerial position. It is also possible that you or some of your employees will participate in this transition.
After all, your technical support team is probably wondering what they will do after selling the company.
When selling eCommerce websites, you need to be careful about whom you’re working with, especially if you’re going through an online exchange or marketplace. The same goes for eCommerce site buyers, as you may be speaking to someone who has no interest in helping you with the transition.
An excellent way to mitigate this problem is to check the exchange’s website to see if there is some checkbox or field that indicates you’re ready to train the new owners. Not only does this make sense of trust and potentially attract multiple buyers, but you know your business hasn’t failed after the switch.
The same applies if you work with a broker. Be sure to let the agent know you want a training and transition process that will be detailed in the sales documentation. Again, this should be a difficult selling point as a new buyer has no idea how your operation works, especially on a day-to-day basis.
Therefore, we recommend creating a transition plan before selling your online store. This could include details such as B. when the training takes place, which should be involved in the activity, and when the money is exchanged.
This brings us to our last point. When you sell online shopping sites, making the shopper feel comfortable is in your best interest. But, unfortunately, there is no guarantee that the buyer will not withdraw from the transaction at any time.
There are not always strict rules that guarantee the buyer will pay on time or without hassle. You may find a buyer who is dissatisfy with the training and decides that with such a lack of knowledge. They are not comfortable running such a business.
Overall, it’s up to you to plan the transition and give your buyers all the training they need to increase ROI from the start and run your business the way it should.
Avoid Anxiety When Selling Ecommerce Business Sites
Another factor to consider is the underlying fear that you might miss out on significant future gains. For example, who says the new owner won’t make billions of dollars from the business you built if you sell outright? In that case, you wouldn’t make a penny.
This is in no way destine to scare you but to answer the thought of almost every business owner trying to sell eCommerce websites.
We’ve all heard stories of small business owners who sold to investors only to find their business eventually morphed into a global phenomenon.
Do your best to get that fear out of your head completely. This is because a massive explosion in popularity is often associate with the sale itself. It’s possible that the new owner has incredible connections in this market and has been able to close many more deals than you. So in that situation, your paycheck from the sale was probably the most you would ever get.
Many sales also lead to a turning point. With the new owner taking the company in a new direction in search of new revenue streams. In short, some people are destine to entrepreneurs, while others would instead take on a well-maintain business and grow it. If you consider yourself more of an entrepreneur. You may find that making money selling your website is an excellent opportunity to start a new business.
Please Make Sure Your Reason for Selling is Valid
I was once told that buying a $30,000 suit is no good if that particular suit has no value to you. Some wealthy people might like the idea of having the best possible fabrics and the most expensive suit buttons. Although no one else could tell the difference.
I also have a friend who wears microfiber wetsuits, which are generally reasonably price. But they look great, and he likes these suits because he’s vegan and doesn’t like the idea of wearing wool (which costs more).
It is essential to evaluate your business before selling eCommerce websites.
Why Should the Sale be Valuable?
Would it allow you to achieve your dream of buying a boat with your spouse and sailing around the world? Would you be able to take the money and focus on an exciting furniture-making business? Or may you are just exhaust from this business?
At the very least, you need to find a reason to keep or sell your business. Otherwise, you might regret it in the future.
Also, think about why your business might be good to keep. Maybe it gives you a purpose and a task to do every day. On the other hand, you may worry that the selling price is not enough to focus on your passion.
Force yourself to understand the “why” before negotiating with another person. Some business owners enjoy selling eCommerce websites – it’s almost like a hobby. But most Devils Duels look at one company, so it’s a little more personal.
Selling your eCommerce business the decision to market your business is not easy. Whatever your reason for selling, following the advice. In this article will ensure you get the maximum out of your eCommerce business.