In this article I’m going to tell you how to sell an online business.
I’m going to take you through how to sell a business and at the end of this article I’m going to give you 3 hacks for getting a higher valuation.
1. Is Your Business Sale Ready?
Before you list your business you need to ask yourself if your business is ready for an exit. Most business owners think about exiting their business far too late and their business usually declines in sales months as the owners mentally check out of the business.
The best time to sell a business is usually when you’re not thinking about selling at all. When the business is growing month on month and everything is going great, that’s the best time to sell. Your prospective buyers will love the trailing twelve months revenue and profit figures and they will see a lot of potential in the business post-acquisition.
If you sell your business a few months after a peak and your businesses revenue, profitability or growth has declined the business likely isn’t ready for a sale and you would highly benefit from dedicating 3 months to growing the business prior to an exit.
2. What’s the story of your business exit?
The sale of a business is an emotional experience for buyer and seller and besides the financial elements of the business a buyer really wants to understand the story behind an exit. If the story of your exit is not a good one, buyers might be turned off or feel the business is headed in the wrong direction.
For example, let’s say you ran a business for 2 years, it grew consistently for the first year and a half and in the last 6 months the business has plateaued in growth with a marginal decline in profit. Most sellers indicate they want to sell because they want to try something new, this reason with the financial data taken together is interpreted by most buyers that the seller doesn’t see a future in the business. For this reason having a good exit story is vital.
If you have a growing business and after 2 years of stable growth, with a strong 3 months prior to selling, the business story will be good. The buyer will know that you are selling a good business and believe you when you say you want to try something new.
3. What is your Business Worth?
So your business is ready to sell and now it’s time to get a valuation. The best place to start is with the industry average multiples. But what is a multiple? A multiple in the online business sale world refers to the number you multiply your trailing twelve months (TTM) net profit, or similarly EBITDA (Earnings before Interest, Taxes, Depreciation and amortization). You can look at the industry averages by looking at brokerages and marketplace reports. For example ecommerce brokers sellers on average get a 3.9X multiple on their TTM net profit in 2021.
Now you can look more specifically at the type of business you have and compare that to similarly sold companies. If you have a content site in the car niche and it has 100k in TTM EBITDA, look for similarly sized content sites with similar EBITDA and if you can find a car content site with the same 100k net profit, even better! Then you are basing your valuation completely on data.
You can also use a broker and marketplace valuation tool to do this research for you as they will have access to far more data over a longer period of time that you will most likely. At ecommerce brokers we do this every single day. Follow this link for a free valuation.
4. Where Can I Sell My Business Online For Free?
So you have a rough valuation now and its time to list your business. This is when you decide to sell by yourself or sell with a broker. In my experience selling without a broker when I sold my own ecommerce businesses using a GOOD broker is far superior to selling on your own. But a bad broker is far inferior than selling on your own.
A broker will take you through the whole process and make sure you get every cent you can as fast as possible in a deal with the best deal terms possible. At Ecommerce Brokers we make a point of negotiating the best terms and price possible so much so that we earn our 10% commission purely through negotiation.
5. 3 Hacks for A Higher Valuation:
- This comes down to brand equity and how well defended your business is. An easy way to do this is getting a trademark in the jurisdiction you work in as well as other jurisdictions you could work in the future. Supplier exclusivity agreements are the next step you can take. Finally patents, this usually isn’t possible for most ecommerce businesses but if you can get this it would be fantastic for your exit.
- The more you automate your business, the easier it is for a person to buy and then operate it. This is a massive factor that buyers look for when they are reviewing businesses.
- 3 Strong Growth Months:
- Assure that the 3 months leading up to your exit are strong. This is vital to show this business is going to continue to grow under new management.
6. Should I Sell My Online Business?
If you are looking for an online business broker look no further as Ecommerce Brokers is here for you. Follow this link and we can get your business listed and a valuation within 24 hours.
Now I have a question for you. Do you have an ecommerce business or not? Let me know in the comments below