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Selling a business is no easy feat, especially if it’s an online business. If you’re looking for a buyer but don’t know how to sell your business, don’t worry. We’ve got you covered. In this comprehensive article, we take you through the various stages of selling an online business and explain how you can go through those stages. These include determining the reason for selling the business, collecting all your data and numbers, evaluating your business, searching for buyers, making the sales pitch, negotiating, closing, and handing the business over. Without further ado, let’s get started.
Before you take any step, ask yourself why you are selling your business. Below are a few reasons we’ve highlighted. You might identify with one or more reasons:
- You want to retire
- You are bored of the business
- You do not know how to take the business to the next stage
- You want to take a sabbatical after facing burnout
- You want to exit while you’re on a high
- You are unable to do the business profitable
- The business is no longer profitable (give tips on how to try and get max profit when this is the case as it's not so attractive to buyers, but you need to be honest)
Whatever the reason, have a clear understanding of it. If the last point is challenging for you, it will be difficult to sell the business, but not impossible. In the upcoming sections, we’ll explain how.
Once you decide to sell your company, start the collection process. You’ll be collecting and analyzing data and collating all important documents. This includes collecting data on your revenue, expenses, and more. It also involves preparing bank statements and tax return documents of the recent past (At least 3 to 4 years) and getting them reviewed by an accountant. Make a list of what and all will be going with the business. These can be:
- Your workforce
- Your contacts
- Your customer base
- Your mailing list
- Your sales channels
Once you clearly understand your numbers and what you want to sell, you move on to the evaluation stage.
Evaluation is a complex and extensive stage requiring you to assess multiple variables, but let us help you simplify. Here’s a quick list of things you must look at, assess, or ask yourself while evaluating your business.
- Once you’ve analyzed all your revenue and expenses data, determine if your business is stable, growing, or declining.
- Find out if your business is growing due to a market trend or has shown steady growth recently.
- Once you’ve done so, calculate your average net profit on a monthly or yearly basis based on how old/new your business is.
- Are there any opportunities for growth?
- If yes, what do those opportunities look like? What are the avenues? How can you implement them? Make a plan for the same.
- Find out what loopholes and flaws exist in your business.
- These are obstacles that prevent you from growing further.
- Figure out different measures with which these loopholes and flaws in the business can be fixed.
- Implement them and determine tangible results of the same. This could be increased productivity, higher revenue, higher profits, or something else.
- Find out what the sources of your revenue are.
- Ensure that there’s enough diversity in your sales/revenue channels
- Determine if there can be more avenues for sales.
- Make a plan on how those can be tapped into.
- Know how old your business is.
- Find out what kind of ups and downs you have faced.
- Document how you’ve tackled the downs.
- Highlight how you’ve risen.
- Once you list things that go with the business, recheck if the list still holds true.
- Find out if employee contracts are transferable to another business.
- Determine the value of your contacts, channels, and plans for growth
- Gauge the kind of issues that might occur once the business is sold.
- Chalk out a contingency plan for such potential challenges and account for such plans in your valuation.
Once you have accounted for all this, you can use several formulae to evaluate the big number. One of the ways is to find the product of your average net profit (yearly/month) and a multiplier. This multiplier can be any number based on the factors above. The better the business is doing and the stronger the promise of growth, the higher your multiplier can be.
After arriving at the big number, determine the pricing window. A pricing window is a period after which the price may change. Ideally, your pricing window must be at least a year if you’re a small to medium business. This way, you promise your valuation number won’t change during this period. The pricing window assures the buyer that the business is stable.
Once you’ve completed the valuation, you must create a roadmap. This roadmap would end with you putting your business for sale. Hence you must plan for 12 months in advance.
Keep a plan with milestones for 12 months before, 6 months before, 3 months before, 1 week before, and the D-day! Between each milestone, set a goal for the tasks you will complete. Once you’ve set them, get started!
- Start stably growing your revenue and traffic. Buyers don’t like sudden spikes as they consider it a red flag.
- Create all necessary contracts for employees and freelancers.
- If a non-disclosure is required, add them to the contracts.
- Make contracts for your suppliers and other necessary stakeholders too.
- Have a streamlined revenue and traffic tracking system, and ensure you are facilitating a well-oiled machine.
- Look at your branding, tonalities, communications, etc., across channels. The purpose is to ensure everything is cohesive and fits together to build the larger company.
- Conduct audits for your website’s SEO and the complete business.
- Find the loopholes using different tools, fix them, and get everything in order.
- Start conducting audits for the valuation process you did. Find out the company's valuation through different tools and services to understand your number. You’ll realize if it is too high, low, or average.
- Once you do this, you’ll also know the minimum value at which you want to sell. Know that this is not the valuation number. The number indicates the minimum amount you want to earn after selling the business. Keep this number in mind closer to D-day and definitely during your negotiation, as you don’t want to earn anything less than what you deserve.
- While evaluating, you made a few growth plans based on the opportunities. If you didn’t make them then, make them now.
- The plans will include provisions to tap into new markets, expand into newer territories, diversify to new channels, and more.
- Besides these, create SOPs (Statement of Purposes) for all your workflows, systems, and modules.
- Recheck all your data, analysis, business processes, traffic, revenue, and more to ensure everything is in place.
- Start looking at different online and offline avenues to sell your online business.
- Find out the different broker charges and determine if you want to sell by yourself or via a broker.
- While the brokers may charge a fee, experienced people or experienced entities will help your company reach a good buyer market and make the process of negotiation, migration, and the complete handover simple.
- Collate all the necessary information, documents, SOPs, and more in one place. This can be a cloud link or hard drive, based on your convenience.
- Prepare a potential list of buyers you would want to approach to sell your business.
- Do your homework on each of these in terms of what stage of their professional life they are in, what they are looking for, they will understand your business, they are a good choice to lead the business further and more.
- Finalize the list of potential buyers.
- Prepare a list of questions you want to ask the buyers. More importantly, prepare a set of answers for questions that buyers will ask you.
- Enlist your business for sale and patiently wait.
Once you meet with the buyer, your pitch will start. In this stage, you’ll take the buyers through your company's revenue model, the profits it has made, and the opportunities for growth, and highlight how the buyer will benefit from buying the company. In the end, showcase your evaluation and mention how you’ve tried to vet the evaluation using different tools and services and why you think this is the perfect number for the business.
A few things to remember are:
- Always be confident about what you’re pitching.
- Always be as clear and transparent as possible. Don’t be afraid to showcase your shortcomings because that would portray ingenuity.
- While discussing the setbacks, mention how they can be solved and the plan the buyers can use if and when they buy the company.
- Talk about the growth opportunities and how the buyers can take the company forward. You can also showcase your plans for the same.
This is perhaps the most difficult stage during the pitch. While negotiating, listen to the buyer and understand their origin. Try to read between the lines to understand their motive behind the counteroffer.
Stay confident about your numbers and know that if the buyer engages with you for a long, they see potential in the business, and that’s why they have reached the negotiation stage. So, remember your minimum number, as mentioned in the previous section, and negotiate accordingly.
In this process, you close the deal and sell your business. Before you close, check all the terms and conditions, the contracts, payment terms, and formal documents to ensure no issues afterward. Finally, the handover stage is when you transfer the business completely to the buyer. With these, you have successfully sold your business.
Now that you know how to sell a business, there’s one part that we should discuss. What questions will the buyers ask, and how can one reply? Let’s find out.
- Why are you selling this business?
This is to understand if everything is good with the business and the motive behind the sale. So keep things as transparent as possible while throwing a positive light on the business.
- What is your company’s valuation?
Mention your company’s evaluation and sound confident when you do so. More often than not, there’s a moment of silence after the numbers are mentioned, but it’s alright. Let it sink in before you move to the next question or the next point of the topic.
- How has the company been evaluated?
Discuss your evaluation method, as different companies evaluate differently. Also, mention the services or tools you’ve used in the evaluation process and how you arrived at the number.
- What is the business’s financial health?
This is to understand the revenue, sales channels, expenses, and profits. Buyers will also want to know if the company is in debt. So, talk about the current state of things and then drive the conversation toward growth opportunities.
- What are the growth opportunities?
Often buyers will ask this question. So elucidate the different ways and facets in which the company can grow. Give a glimpse of the growth plans you made during the preparation stage. Elaborate but pre-empt questions that they might have and let the buyers ask them. It would show you’re not in a rush and have prepared everything well.
- How is the management team?
This is an important question that you’ll need to answer well. Talk about your management’s skill sets and the value they have provided to the company. Also, mention how they will be valuable in the future too.
- What components will be part of the sale?
List what you’ll be selling when you sell the company.
- What kind of licenses do you need to run your business?
If your online business requires any compliance or licenses, mention them when asked this.
- What does your competition look like?
Do not get defensive while talking about your competition. Highlight the competitors and your business’s pros and cons objectively.
- What kind of expenses does the business incur?
You can cover this while talking about the company's financial health, but elaborate more on this when asked this question.
- What will be the handover period?
This is an important question that indicates if you have thought everything through. So, give the number.
- How old or new is the business?
Usually, people trust old companies relatively more because it shows that the old company has managed to stay healthy even after several ups and downs.
- What are the payment terms to buy the business?
You can discuss the selling price and the various terms, including the advance, the duration between each payment, the modes, and more.
- What is the customer sentiment?
This is to understand the kind of relationship you have with the customer. how they might feel after a company is acquired, what the brand loyalty is.
- Has there been a high turnover of staff?
This is to understand whether the staff has been happy with the company.
You must answer these important questions with honesty, transparency, and, most importantly, tact. Before we wrap up, let’s look at a few websites to enlist your online business.
- Business Exits
- Motion Invest
- Empire Flippers
- Dealflow Brokerage
- Quiet Light Brokerage
- Website Closers
- Digital Exits
- FE International
- acquired.com - see if they have any articles.
With 18 years of experience in the eCommerce industry, I have successfully launched and grown multiple e-commerce businesses, the 2nd one hit 7-figures in revenue within its first year. In 2022, I joined a European food technology equipment and IT service provider as their Head of E-commerce, overseeing 14 eshops across Europe and South Africa. Selljam is where I share all those ecommerce tips, tricks and hacks learned along the way that I hope will also help you on your journey to success.