An ecommerce business broker, like Ecommerce Brokers is someone who helps in the sale of online businesses by finding a buyer, negotiating price and closing the deal. We at Ecommerce Brokers work on the buy side and sell side.
I’m going to take you through what an ecommerce business broker is, how they work, what you need to know when buying or selling with them and at the end of the article I’ll give you a 3 step guide to how to find the best ecommerce broker for you.
1. What is the Purpose of an Ecommerce Business Broker?
An ecommerce business broker is a broker who helps in the sale of online businesses. This includes the marketing and presenting of the business and deal to buyers, communication management with buyers, negotiation, due diligence, making sure the deal closes safely and seeing the funds transferred.
I’ve been an ecommerce business broker for over 10 years and we at Ecommerce Brokers have a lot of experience in every step of this journey. There are roughly 10 online business brokerages worldwide that have 1 to 5 online business brokers within their company that have a strong reputation and experience that leads to getting at least 5 deals done per year. These ten online business brokerages usually have their own specialty when it comes to deal size, location, niche and even type of business. At Ecommerce Brokers, as the name suggests we specialize in specifically ecommerce DTC, Shopify and Amazon FBA businesses but have also sold hundreds of content sites, apps and SaaS businesses.
2. What are the Benefits of Using an Ecommerce Business Broker?
Ecommerce business brokers, my industry colleagues, specifically the top 10 reputable brokerages, usually have multiple years of ecommerce experience in building, buying and selling brands, just as we do at Ecommerce Brokers. This means brokers have a personal and specific insight into the businesses they list that means they can more thoroughly sell and market their listings to buyers. This is the main shortcoming of investment bankers and standard brick and mortar business brokers in this arena.
3. How Does an Ecommerce Business Broker Make Money?
They make money from the sale of the business through commission! That’s how you know if an ecommerce broker is good or not to earn a living as a broker, especially over many years you need to be selling businesses consistently as if you don’t sell, you don’t get paid and make a living.
4. What Should I Expect From an Ecommerce Business Broker?
So the first step is to find the right ecommerce broker. At the end of this article I’ll take you through the 3 crucial steps to know if a broker is the right fit for you.
Once you’ve found the right ecommerce broker you will sign an exclusivity agreement. This agreement protects you and the ecommerce broker as it ensures that if they find a buyer for you and they help you close the deal they will in fact get paid. It also protects your businesses confidentiality and limits the time they can work for you.
On average most exclusivity agreements last for 6 to 9 months which takes into account the organizing of the listing information which can take from as little as a few days to 2 weeks. Then comes the marketing process where the broker will go out and actively look for buyers. Across the top 10 online business brokers this usually takes 1-3 months. The strength, growth, sustainability, age and profitability of the business massively determines if the business will sell fast or not.c
That being said, over the next 30-60 days of listing buyers will come in and the ecommerce business broker will liaise with these buyers, negotiate price and terms and come to you, the seller with their offers and information. These buyers should all be under NDA while viewing your confidential business information. Then comes the buyer, seller and broker calls. On these calls you as the seller will be getting to know the buyer and answering a series of questions about your business. The online business broker will prepare you for these calls prior.
After a few calls like this with different buyers you and your broker will decide on the strongest buyer and move forward on an agreed upon price and terms. This final negotiation step is where online business brokers really earn their money. On average at Ecommerce Brokers we successfully increase the sale price of a business during negotiation by up to 35% and are able to strike very favorable deal terms for sellers. This type of negotiation really only comes with experience in buying and selling online businesses for over 10 years. If your online business broker is negotiating 20-35% more money for your business and only charging 10% on average their services are more than worth it!
5. How Do You Sign an LOI?
So now that you’ve negotiated your terms, now it’s time to sign a Letter of Intent. This document confirms the buyer’s interest and your commitment as a seller to this buyer for a period of time and sets out the groundwork for the sales agreement to follow. Depending on the size of your business the due diligence process can take from 30 to 90 days. 30 days is what’s normal for any business under a million dollars.
The due diligence process should be made very simple and smooth by your ecommerce business broker as they should clearly identify what the buyer wants to view in the data room and help you put that information together quickly. Transparency about your business here is key!
6. How Do You Finalize The Sale of Your Online Business?
During the due diligence period the buyer will draft a sales agreement of asset purchase agreement for the final sale of your company and your attorney will review and send back annotations. After a bit of back and forth the document should be finalized come the final day of the exclusivity period.
The final day should be identified as the hand over date. This is the day that the sales agreement is signed and funds are released. This usually means the buyer has put the funds to buy the business into an escrow account which ecommerce business brokers can provide a few days prior. Once the agreement is signed and all the assets have been transferred the funds are released from escrow and you have completed the sale of your online business.
This is where the broker gets paid their commissions of roughly 5-10%.
7. What is the Key Benefit of Using an Ecommerce Broker?
- Experience in ecommerce:
- You need to ensure that your broker has owned and operated online businesses before otherwise they will struggle to fully understand and serve you as a client.
- Sold in your niche before:
- Finding a broker that has sold a business similar to yours is a massive bonus. This isn’t just because they will understand your business and niche better but also because in the process of selling their previous listings in the same niche they will likely have collected a lot of buyers information and emails that are specifically interested in this niche and they can now use this list to sell your business. For example and Ecommerce Brokers we have sold more pet, skincare and apparel businesses than any other category which means we have a huge list of specialized buyers for this category.
- Video testimonials and proof:
- You need to see at least a few testimonials from sellers in the past to prove that they have in fact sold online businesses before. You can view a seller testimonial from Ecommerce Brokers as an example below:
8. Should I use a Business Broker?
Absolutely! If you are looking for an ecommerce business broker look no further as Ecommerce Brokers is here for you. We can get your business listed and a valuation within 24 hours.
Now I have a question for you. Would you use an online business broker? Let me know in the comments below
Author Bio: George Moulos
Forbes 30 Under 30 2020, CEO of Ecommerce-Brokers.com
I own an online M&A firm called www.Ecommerce-Brokers.com and we have 11 years experience helping buyers and sellers acquire and sell millions of dollars worth of online businesses.
Looking To Buy? Visit our Elite Acquirers buy side broker service to learn more here
Looking To Sell? Visit our List With Us page to learn more here