Over the past few years, we’ve sold multiple businesses and brokered the sales of many others. This means we know a bit more than most about selling online businesses. That’s why we’re writing this guide. These years of experience will help you learn how to sell your online business for the best possible price.
Reasons Why People Sell Their Online Business?
When you tell people you want to sell your cash-generating asset, you might get a few raised eyebrows. “But why would you want to give that up?” The truth is, there are many reasons, and it’s often a very personal decision.
The underlying reason is that you’re sitting on a large pile of cash. An increasing number of entrepreneurs, investors, and private equity firms are ready to spend cash to get what you have.
We’ve heard many reasons since we started brokering deals. Here are some of the most common:
- To receive a huge lump sum of capital
- Entrepreneur burnout
- To fund other projects
- To retire
- To buy a house
As people who have sold businesses before, we understand that business is your baby. So try to sell for the right reasons and it will make the process much easier for everyone.
Can I Sell My Business on My Own?
Yes, this is what’s known as a private sale. Opting for a private sale means you’ll need to locate potential buyers yourself, possibly utilizing platforms like Facebook or marketplaces with no regulations.
While this approach can save you from paying broker commissions, it comes with its own set of challenges. Everything is going to be in your hands; you’ll have to do all the heavy lifting.
This includes vetting potential buyers, communicating, and negotiating terms. You’ll need to manage the transfer to the new owner. This process can be complex and is far too time-consuming for most people.
Another important concern is privacy. Online business owners have to be aware of copycats and competitors trying to view sensitive information. This information should only be revealed to people who can prove they have the capital to purchase and are prepared to sign non-competes. This can be very difficult to do in a private sale and is something we offer as standard on our marketplace.
Things To Keep Readily Available Before Selling
If you’re thinking about selling then now is a good idea to get everything in order. These are the things that buyers are going to ask you for (we have a guide on buying online businesses also). Nobody wants to get caught short; it makes you look unprofessional.
Having these things to hand also allows you to get the most accurate valuation. More than that, they’ll speed up the listing process and ensure you get sold faster.
- Financial Records
- Profit and Loss Statements: Maintain accurate monthly records.
- Revenue Proof: Clear evidence of income and expenses.
- Separation of Accounts: Keep business and personal finances separate.
- Analytics Data
- Traffic Reports: Use tools like Google Analytics with at least six months of data. Ideally 12.
- Source Data: Track where traffic and sales are originating.
- Operational Procedures
- Standard Operating Procedures (SOPs): Detailed guides for all business processes.
- Supplier Agreements: Ensure contracts are transferable.
- Outsourcing Documentation: Clearly outline any outsourced tasks and agreements.
- Legal Documents
- Terms of Service: Current and legally sound.
- Intellectual Property: Proof of ownership for any proprietary content or technology.
- Marketing and Growth
- Marketing Strategies: Document past and current campaigns.
- Growth Opportunities: Outline potential areas for expansion.
How to Get The Best Price For Your Online Business?
Preparation is the best way to maximize your sales price. Most buyers want a business with streamlined operations that is steady or growing. Having an exit plan is not just going to help you sell for more, it will also help you sell quicker.
1) Maintain Accurate Financial Records
Ensure your financial records, including profit and loss statements, are up-to-date and organized. Consider hiring an accountant to validate these documents if you’re not going to use a broker that verifies businesses. Inaccurate P&Ls, even by mistake, can spook buyers away.
2) Outsource
Most buyers don’t want to buy a full-time job. They want a business that has outsourced its operations. Businesses that have outsourced operations and low hours worked (a few hours a week) are likely to receive higher valuation multiples.
3) Consistent Traffic and Revenue
Steady is safe. Businesses with steady or steadily growing traffic and revenue are the most desirable to purchase. This type of growth is more easy to predict. A business in a period of sharp growth or decline is more difficult because nobody knows where it will end up. Uncertainty can result in a more difficult business to value.
4) Business Age
Generally, businesses with a longer history of earnings will receive a higher valuation multiple. This is because buyers see them as having a market fit and being more established. Or, to put it another way, less likely to fail.
5) Document Standard Operating Procedures (SOPs)
Create detailed SOPs for your business operations. These documents reassure buyers that the business can run smoothly under new management.
6) Showcase Growth Potential
Highlight the future growth potential of your business. Demonstrate opportunities for expansion through untapped markets, new product lines, or enhanced marketing strategies.
Note that it’s important not to make any big changes in the weeks leading up to listing your business. This can put buyers off as the effect of the changes is unknown. If you already have everything ready, you’re in a good position to sell.
Follow This Process To Sell Your Online Business
To make the sale process as smooth as possible, getting everything in order saves you time. It also makes you look more professional to potential buyers.
Here’s a seller checklist that we use to help sellers:
- Get a professional valuation and book an exit planning call. This will help you to know exactly what to do to sell.
- Organize your financials. You should already have a P&L but double check everything is correct. Find any anomalies or big changes and note what caused them. This is one of the first things buyers will ask about.
- Collate supporting documents. Make sure SOPs are created for repetitive tasks. This ensures the buyer has the information they need to run the business or hire new employees.
- Employee and supplier contracts. If you have employees, freelancers, or suppliers you’ll want to see if they’re open to working with a new owner. This means you can let the buyer know that contracts can easily be transferred.
- List your business. With all the admin work done and a valuation you’re happy with, it’s time to list your business for sale. Most sellers opt for a broker due to the ease of finding buyers. But, whatever your sales method, your business is ready.
- Manage buyer interest. Try to be responsive to buyers. There’s going to be a lot of questions and potentially offers. It’s also recommended to qualify if potential buyers are serious if you’re using a marketplace that doesn’t do it for you.
- Accept an offer. Choose the best offer for your business and be open to deal structures. Make sure that you’re covered with legally binding contracts and Escrow.
- Transfer the business. Accounts and services will need to be safely transferred from seller to buyer. If you’ve not done this before consider consulting someone with experience.
Where Can You Sell It?
Gone are the days when you’d have to find a buyer yourself. Now sellers are spoilt for choice when it comes to selling their online business. However, this brings about a new problem; which should you choose?
These are the main options:
- Online Marketplaces
- Industry Forums and Communities
- Social Media
- Personal Network
As owners of marketplace Ecomswap, we believe that a marketplace is the best option. But, you should be careful about which marketplace you use. Not all marketplaces will offer the same level of service or privacy.
We help sellers prepare for a sale by verifying their financial documents, valuation, and marketing their business. This comes with the security of knowing that your business is only going to be seen by verified buyers.
Verified buyers are people we know have the capital and desire to purchase your business. This means you avoid tire-kickers and those simply trying to steal ideas. This is something that every seller has to be aware of. Especially those that choose to sell privately or with an unregulated marketplace.
When Is The Best Time To Put Your Business On Sale?
There’s not one right time for everyone. The best advice we can give you is to get regular professional valuations and write down a reasonable number you’d be happy with. When your business gets there, it’s time to sell because there’s no way to “time” the market.
Valuation multiples do fluctuate. The market for online businesses goes through highs and lows like any other market. But waiting for the market to change can cause more problems than solutions. Online businesses are volatile; there’s no guarantee that your profits will last forever.
Sure there are things you can do to get your business in order. We’ve already mentioned them in this article. But, there’s no best time of the year. It has to be a personal decision.
If your business is seasonal, putting it on the market as it comes to high season can be a good way to convince buyers to buy quickly. However, it’s not going to get you any more money as a 12-month pricing average will be used to negate the effects of seasonality.
However, we’ve also learned that stability is better than crazy growth and personal choice is better than trying to time the market.
How Much Time Will It Take?
Sale time is highly dependent on the individual business. Some businesses can take one day to accept an offer while another can six months.
To give you a clearer picture, here are some key factors that can impact the selling timeline:
- Business size: Larger businesses often have more complexities which can increase the time it takes to sell.
- Market demand: High demand for businesses in your niche can speed up the sale.
- Preparation: Properly organized financial records and documented processes help with listing and due diligence.
- Use of a broker: Hiring a business broker might quicken the process compared to handling a private sale.
- Pricing: Setting a realistic price based on your business’s value can attract buyers quicker.
Sellers must factor in the time it takes to transfer the business to the buyer. Once the offer is accepted, there will be a revenue verification process. On top of this, it can take one to two weeks to transfer details for some businesses. For example, content websites need to have all their affiliate links changed.
Key Takeaways
The key to selling your business for the best price is to make it attractive to buyers. While raising your net profit is the best way to get a higher valuation, it’s not always the best way to sell your business.
Most buyers want to purchase a business that can be run hands-off. Purchasing something with 40 hours a week of required work can be more difficult to sell. Outsource operations where possible and avoid making any wholesale changes right before selling.
If you want to get free professional advice, reach out to our Team at Ecomswap. We would be happy to provide you with the best exit planning strategy!
