An ecommerce brokerage is a business that helps online business owners exit their company. In this article I’m going to tell you what an ecommerce brokerage is and how they work.
1. What Is A Ecommerce Brokerage?
An online business brokerage is a business that helps online business owners exit their company. This is usually done through the process of having the seller sign an exclusivity agreement with the online business brokerage for a period of time, usually 6-12 months, that secures the brokerages commissions and terms. The brokerage will then use their existing buyers list to find the right buyer for the seller. When the right buyer is found, and after negotiations and due diligence a contract is signed and funds are transferred for the purchase of the business. This is where the online business brokerage gets paid! Online business brokerages get paid a commission of usually 5-15% on the successful exit of a company. This is their main business model.
2. What Should I Know About an Ecommerce Brokerage?
Business brokers can be called advisors, consultants or other any number of names and have been around for over 100 years. However, online business brokerage and online business brokers have largely been around and popular for the last 10-15 years. Their popularity and use increases in parallel with the increased use of the internet, the increase in the number of ecommerce businesses and the increase in ecommerce sales. As you can see from the infographic below, ecommerce sales have been blowing up in the last 10-15 years, and similarly have the use of online business brokerages.
3. Who Operates Ecommerce Brokerages?
Online business brokerages are usually started by founders with a lot of experience in the ecommerce world. Almost all of the owners of the top 10 online business brokerages that I know had already started, built, sold and even bought online businesses before starting their brokerage.
4. Who is George Moulos and Ecommerce Brokers?
The same goes for me, George Moulos and Ecommerce Brokers. I started, built and sold my first online business in 2013 which was a small affiliate site that generated no more than $1,200 a month in profits. After selling another affiliate site, DTC ecommerce business and digital product ecommerce business I started to make small acquisitions to bolt onto my business.
Then, selling a handful of my own online businesses I started helping my marketing agency clients exit their businesses for free! After doing a swift and high quality job for these clients Ecommerce Brokers was born and the referrals started rolling in.
10 years later we have sold over 300 online businesses which includes every type of online business there is. We also expanded our operations to exit planning, post acquisition growth and general business growth consulting. We doubled the size of our business with the introduction of our buy side services called Elite Acquirers where we help buyers look for their exact acquisition criteria. Book a call here
5. What’s the Difference Between an Ecommerce Brokerage and an Investment Banker?
Online business brokerages achieve what investment bankers largely don’t have the experience to be able to do because of their background in ecommerce. Investment bankers largely deal with business exits that are over $100,000,000 USD and are not entirely online. A lack of knowledge or experience in ecommerce can make exiting a business with an investment banker almost impossible as they don’t know how to present the information and brand to prospective buyers. That’s where online business brokers excel!
6. How To Sell With an Ecommerce Brokerage?
So you’ve found a broker like Ecommerce Brokers and you want to get your online business sold. What’s the process?
The first step is to see if your business is sellable in the first place. A quick checklist is;
- Does your business turn a profit?
- Is it over a year old?
- Is it stable and or growing?
If you answered no to any of the above you may find it hard to find a broker to sell your business. That being said if you said yes to all of the above you likely will find a broker. Now it’s time to pick a broker and sign up!
Some sellers want to have more than one brokerage to sell their business however this is counterintuitive as it usually means each broker doesn’t have the certainty that they will get paid nearly as much on a successful exit as if they would if it was their exclusive listing.
7. Find an Ecommerce Brokerage and Stick With Them!
That being said I highly recommend finding a good broker and sticking with them! The next step is to sign an exclusivity agreement which secures the broker’s commissions in the event they do find a buyer and the business is sold. Next you will need to provide a relatively extensive amount of data and information on your business. Transparency is key here. The broker works for you so it’s best you be completely honest and about the good and the bad of your business as they will know the best way to present all of the information to a buyer.
Once the information is prepared the online business broker will list your online business for sale to their site, contact their email list of buyers and actively push your listing.
8. How do I Choose a Ecommerce Brokerage?
- Make sure your business broker has a long list of sales and testimonials, like we do at Ecommerce-Brokers.com
- Make sure your business broker has competitive commission rates and will price match with competing relevant brokers
- Choose a broker that has specific experience in your type of business of niche
9. What is an Example of an Ecommerce Brokerage?
At Ecommerce-Brokers.com we have a 3 phase process. We firstly start with our paid buyers, these are our Elite Acquirers and they are highly vetted buyers. They have proven funds and operate very quickly. Then we go to our large buyer email list that we have built over 10 years. This is where most businesses get sold. Then we also have our 3rd party partnerships with marketplaces and other brokerages that allows us to access a few extra buyers at no extra cost to the seller.
Once a couple buyers have been found communication will be covered by the broker until an offer has been made. Then there will be a buyer, seller and broker call that the broker will lead and moderate. The broker will help in the answering of questions and most importantly negotiation!
10. How Do You Negotiate the Sale of the Business?
Negotiation is where online business brokers really earn their money as their experience can add 10-50% to your valuation and even more importantly they can get you far better sales terms, meaning more money upfront to you!
Once a price and structure is confirmed a Letter of Intent will be signed and a due diligence period will begin. This gives the buyer the exclusive right for this period to do due diligence. The seller cannot talk with other buyers for this period.
11. What Happens During Due Diligence?
During due diligence the sales agreement or asset purchase agreement will be drafted and after some back and forth between the buyers attorney and the sellers attorney the agreement will be finalized. Then comes the handover. During the handover the upfront funds are put in escrow while the assets are transferred and the sales agreement is signed.
After this the online business broker will issue you an invoice for their services, being a commission percentage on the sale. Usually 5-15%.
12. 3 Tips to Getting the Most out of your Ecommerce Brokerage:
- Find one broker who has experience in your specific niche or at least type of business that you build some rapport with over a few calls and stick to them! Jumping between brokers usually leads to a lot of wasted time for all parties involved.
- Be honest and transparent with your broker. Brokers are there to help you and ultimately get paid by you so being fully open and honest about the situation of your business and why your selling will only serve to help you.
- Make sure they are doing consistent outreach to buyers with communication on a weekly or at least fortnightly basis.
13. Online Brokerage Companies
If you are looking for an online business brokerage look no further as Ecommerce-Brokers.com is here for you we can get your business listed and give a valuation within 24 hours.
Now I have a question for you. Have you sold an online business before or not? 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