How to get top dollar when you sell your eCommerce business | Australia - Cloud Point of Sale Software for Retail & Hospitality

Building a successful online business involves a lot of blood, sweat and tears not to mention time and effort, so it is natural to want to get the maximum value for it when you decide to sell.

Here we are going to look at some of the questions you may have when it comes to selling, and how you can ensure you get top dollar for your ecommerce business.

How do I know how much to sell for?

The first step before you do anything else is to value your business. Now when it comes to doing valuations they can only ever be guideline figures as any business value relies heavily on the market and the budget of your potential buyer. That said, there a number of considerations that can make a significant impact on the appeal and value of your online store and these can include:

Amount of sales
Amount of profit
Your position in the market
Trends in business growth
The force driving new sales and how sustainable that force is
Which sales channels are generating new customers
What systems and procedures you have in place to run your store
How reliant the business is on you as the owner, would it do just as well under new ownership?

By comparing your business to similar ones that have been sold historically, you will be able to calculate the value of your business. This is most easily done using the average multiple, which is the average multiple of yearly profit that the average business sold for. For example, if the average multiple for businesses of a similar size to yours was 2.32 and it was sold for $100k, it would mean that that particular business would have been making a profit of $43’103 per year. Hopefully you are still with us. But what this means is that you can use this figure to determine where your business fits. E.g. if your business is making larger profits then it’s value could be higher, and vice-versa if your ecommerce store is less profitable then it’s value could be lower. However as a general rule, most small to medium sized businesses sell in the 2-3x valuation range.

But does this mean that my business couldn’t be worth any more than the valuation given?

A valuation is simply a guideline of estimated worth and as we have said, a business is worth whatever a buyer is prepared to pay for it. However in order for the buyer to make the decision as to how much they are willing to spend they will also look at two things – risk and return on investment (ROI). The level of risk associated with the purchase is directly affected by potential ROI and both of these can affect the price offered. The greater the opportunity for a high ROI, the lower the perceived risk and therefore the more the buyer may be prepared to spend to make the purchase.

Can I minimize the perceived risk of my business?

Yes there are ways that you can reduce the perceived risk associated with buying your online store. This is usually achievable by providing evidence of the following:

High % repeat sales and visitors
Potential for growth
Predictable key drivers of new sales
Stable and/or growing web traffic from a variety of organic sources
A strong history of positive traffic stats
Established suppliers and back up suppliers
Standard operating procedures and systems
A brand that has no copyright, trademark or pending/current legal concernsHow do I know it is the right time to sell?

As a general rule, the larger your business grows the more its value will increase. However, that doesn’t necessarily mean you should just hang on to your business for years and years before selling, there are actually factors that you can look at to establish if it might be the right time for you to get the maximum value for your ecommerce business.

The key indicator is regular and sustained growth, evidence by your business accounts. Growth is measured year on year and the trick is to try and sell whilst you are still growing, but not too early and definitely not before you have peaked. Selling a business too early will mean you won’t see what it could potentially be worth, and selling after your growth has peaked and your business is in decline will negatively impact your store’s value and the offers that you will receive.

This is seriously tricky to time, and you may not always get it right! Monitor your growth carefully, and keep an eye on sales trend to try to predict the best time to sell.

So I have decided to sell, what happens next?

Just like selling a property, selling a business is not always straightforward and sometimes it can be more complicated or time consuming than anticipated. However the usual format for selling a business is as follows:

Valuation of your business.
Creation of a sales prospectus containing fact, figures and information that prospective buyers may need.
Seek our prospective buyers.
Negotiate the selling price and other terms and conditions of the sale.
Transfer the money and assets.
Training the new owner to run your business.

Where can I sell my business?

There are numerous sales channels that you can explore when it comes to finding someone to purchase your ecommerce business. The majority of small businesses are sold through private advertisements, classified websites and internet forums. Some of the best ones to check out include: Experienced People, Shopify eCommerce, Flippa and Warrior Forum.

If you have a medium-sized business with a valuation of between $100k and $5m then hiring a broker such as Digital Exits can save you a lot of time and effort.

And if you are lucky enough to grow a business valued upwards of $5m then you should sell through a mergers and acquisition company of investment bank.

How long should I expect the sales process to take?

How long is a piece of string? There is no set time that a sale should take but generally speaking, the smaller and less complicated the business then the quicker the sale should go through.

Who can I expect to be interested in purchasing my business?

Business purchase is becoming an option for a wide range of people and existing businesses. You may get approached by private equity companies, real world store owners looking to branch into digital selling, or first time corporate buyers looking to purchase their very first business. You may also get interest from older individuals looking for new ways to build up their retirement fund, established digital business entrepreneurs and media companies.

My buyer pulled out, what went wrong?

From time to time a sale may not finalise or a prospective buyer may choose not to make an offer at all. This can be for a number of reasons and is rarely a personal reflection on you or your business. Some of the most common reasons include:

The buyer is unable to afford or is unwilling to pay your asking price.
They aren’t interested in your business or niche.
They dislike the branding, finances or products associated with your business.
They feel that the data you have provided doesn’t meet their requirements or expectations.
There are issues with transferring the business.
Their funding falls through.
Or, sometimes, they have found something else that has made them change their mind.

If you sale falls through or a prospective buyer puts the brakes on, the best thing you can do is not get disheartened and start again. The right buyer for your online store is out there!

Finally – our top tips for selling your ecommerce business for top dollar!

Remember to sell your business whilst it is still growing in order to get the best valuation and price!
Always start negotiations higher than what you would consider to be the lowest offer for your business. Negotiating down is far easier and usually makes the buyer feel like they have ‘won’ the battle and got a great deal!
Don’t be pushy when it comes to the sale, let your buyer take their time.
Cash deals are almost always better than any other terms.
Make a thorough job of the paperwork! Everything you agree should be written in the purchase agreement, which means no disputes later on!

You’ve worked hard to start and grow a successful online store and deserve to reap the rewards. We hope that you can use the guidance in this blog post to get top dollar for your ecommerce business.