Sell My Business – Best Way To Maximize Price (in 2020)
There are many tiny details involved when attempting to sell your e-commerce business. Believe it or not, selling your business is a lot tougher than making the decision to purchase one. This process can be very complex, or it can be a swift and easy transaction (depending on who you work with). Today we will talk about the options you have for selling your website and what the market is currently looking for.
What Are the Right Reasons to Sell?
There are many different reasons for wanting to exit your business; we will go over a few for you to look at:
- Retirement: You might be looking to sell your business so you can retire.
- Other Opportunities: Maybe you have too many projects to handle at once or you are tired of the business you are currently working with.
- Financial Needs: These types of problems are common and can range from partner disputes to just needing cash in hand.
- Healthy Market: It might just be the perfect time to sell your business. You no longer have to worry about the financial crisis from 2007/2008, the market has recovered since, increasing M&A activity.
- Offer You Can’t Refuse: Maybe you weren’t planning to sell, but someone made you an offer that is impossible to ignore.
How Do I Improve Value?
Increasing the value of your business can be simple. Having the sales increase can easily raise the profitability of your business. The following list highlights some of the things you can do to improve the value:
- Technology: Update your business processes with the current technology.
- Bank Statement: Make copies and provide proof of all financial gains.
- Company Growth: Take the time to highlight the growing aspects of the company.
- Revenue: Demonstrate diversity and stable growth.
Here are other factors that influence the value of your business, although these factors are harder to control:
- Legal Issues: Try to put it all on the table.
- Declining Financials: Turn these around as soon as possible.
- Labor: Attempt to cut any costs that are too high.
- Steady Financials: You must address every transaction that occurs.
What Should I Look for in a Deal?
Getting overly excited is common when trying to sell a business. Try not to let yourself look at numbers and predict your own fate; take the time to look at reality. That 1 million dollar deal can quickly be eaten up by other obligations such as contingencies and payment terms. Before you settle, make sure you are getting exactly what you want.
Once you settle on a number, attempt to look at the payment terms. Make sure you know the answers to the following questions:
- When will the payments be made?
- How will you be paid for the sale?
- Who has control of the business?
- Will I retain power if things go south?
Your ultimate goal is to gain as much money as possible when selling your e-commerce business. Unless you somehow have control of shares or you are maintaining some partial profit from the company, you will want to surrender all control of the company.
Who Might Buy My Business?
There are a of variety of buyers interested in buying e-commerce businesses. The buyers all can be placed into basic personas such as:
- Established Internet Entrepreneurs: These are the type of people who have years of experience in the industry and have a grasp at what it is to run a business. They could be looking to add another business to their portfolio or attempting to pick a new one up after a previous sale.
- Private Equities Companies: These are companies that tend to keep the existing management in place and attempt to grow a business through varying sized stakes in the business.
- Baby Boomers: Once again, as the baby boomer generation retires, they gain interests in such business. Many have gained interest in this sort of project to gain money to fund their retirement.
- Corporate Individual: This is usually someone who is looking to purchase their first e-commerce business. Most are usually C-Level executives with disposable cash at hand, IRA or access to a SBA loan.
- Media Companies: These are very similar to the Private Equity Companies but tend to have a specialization for digital companies and media. If you would like to see a larger example, you can take a look at the recent e-commerce acquisition by Demand Media.
How to Value Your Business
Traditionally when valuating an e-commerce business, there are three basic methods:
- Comparable Sales Methodology: Comparing your business to other similar businesses and seeing how much they have previously sold for. It is a simple self-evaluation method but can be very helpful.
- Asset Methodology: Values the business on the total assets the company currently owns. A good example would be how many pieces of equipment and total cost of equipment.
- Future Earning Methodology: This is an estimation of possible earning in the future for the business, while discounting time value of your money.
Usually a traditional business appraiser will go with a discounted cash flow valuation methodology. However since e-commerce businesses are slightly different from traditional businesses, mainly due to their high dependency and goodwill, the common valuation method is the multiple of earnings method and a more specialized service is recommended.
Still have some questions about selling? Don’t be afraid to ask an expert. Everyone has curiosity when first attempting to take such a large step in their life.