Last Updated on May 11, 2022 by DMEditor
Selling a business is a decision that many entrepreneurs face at some point in their careers. There are several ways to find an interested buyer for your business. In fact, the demand for e-commerce businesses will keep getting higher, with their expected revenues expected to grow to $5.4 trillion by 2022. If you are looking for a place where to sell your ecommerce business, there are many places to find potential buyers.
Before you do that, you need to consider some factors, including the value of your company and the time it will take to find the right buyer.
Also, it would help to decide whether you want to remain an active part of the business and whether you wish to sell privately or on the open market. This article provides you with some information on what selling your e-commerce company can entail, as well as some possible solutions for your particular situation.
Table of Contents
- 1 Things to do Before You Sell Your eCommerce Business
- 1.1 Prepare Your e-Commerce Site for Sale
- 1.2 Update Your Inventory Records
- 1.3 Update Your Financial Records
- 1.4 Come Up With some Standard Operating Procedures (SOPs)
- 1.5 Update Your Customer Data
- 1.6 Check Your Employees and Suppliers Contracts
- 1.7 Contact a Valuation Expert
- 1.8 Keep Your Business Running
- 2 How To Value Your eCommerce Business
- 3 Where to Sell Your e-Commerce Business
- 4 FAQs
- 5 Where to Sell Your eCommerce Business: Conclusion
Things to do Before You Sell Your eCommerce Business
If you have managed to build up a profitable and sustainable business over the years and are ready to sell it, there are many things you need to think about.
The aim here is to make sure that your sale process is as smooth as possible. Before you get into the actual process of interacting with potential buyers, here are a few things you need to do.
Prepare Your e-Commerce Site for Sale
Once you have put your e-commerce site for sale, the first thing that prospective buyers will do is visit your website. When selling your business, you need to make sure that it will appeal to its future owners. You will be passing on the work of running the site to someone else.
To help with this, keep the site clutter-free and straightforward. Make navigation easy by sticking to a standard format, and maintain products within two clicks from the homepage. In short, simplicity is vital.
Update Your Inventory Records
It is normal to have some products go out of stock in your business. When this happens, you will need to update your records accordingly. If you want to sell your e-commerce site successfully, you must ensure the products are in stock.
If your products are marked “out of stock” on nearly every page, customers and prospective buyers will lose interest and not buy from you. When you update your product images, make sure they are perfect. It would be best to optimize those that are still active, making sure the descriptions are clean and accurate.
Update Your Financial Records
Any prospective buyers will want to look at your financial records to get a picture of how the business is doing. Consider getting your finances right before you can secure a deal. A buyer who spots an error might not want to commit, which can be frustrating.
If you have been managing your books of accounts, it might be time to bring in a professional to do it for you. Having someone prepare your financials is quite normal in addition to giving you their unbiased opinions.
In fact, according to a study by Clutch, accounting is the most outsourced business process.
Some of the financial reports that prospective buyers may want to have a look at are:
- Balance sheet
- Income statement
- Profit and loss accounts
- Records of tax returns
Come Up With some Standard Operating Procedures (SOPs)
Simply put, SOPs are like an instruction manual that shows how you undertake some tasks in your e-commerce business.
Here, you may put instructions for tasks that you deem complicated for your prospective buyers.
An SOP is a valuable way to guide people outside of your company. It can be challenging to understand the processes for someone new to the business. But by writing out the steps in detail, you will make the process easier.
Update Your Customer Data
Now that you decided to sell your e-commerce business, you must be up to date with your customer data. Existing customer lists are essential to any business. It is a huge advantage to have a long list of contacts who are already familiar with your brand to the potential buyer.
If the new owner wants to use it, it will help them launch marketing campaigns and promotions. It is easier to sell to people who already know and like your brand.
Check Your Employees and Suppliers Contracts
Any success you may have enjoyed in running your e-commerce business is partly due to the good relationships with your suppliers. It is crucial to inform them of your intention to sell the business.
To protect your prospective buyer, have the suppliers make a written commitment that your current business arrangements will remain even after you exit the scene. Doing so will help the buyer not get caught in a scenario where the supplier increases the prices, affecting their profit margins.
Contact a Valuation Expert
After doing all the above tasks and having your business processes running smoothly, it is time to know what your business is worth. Most business people think they have a good idea of how much their business is worth, which is okay. If you decide to sell without a valuation, you risk messing the whole process.
Quoting a high price may turn away prospective buyers, while a low one may leave you shortchanged.
To get a fair appraisal of your e-commerce website, you should work with a valuer. Instead of guessing about the price, they will give you a ballpark estimate. It is not guaranteed to be the final sale price, but it will provide you with a reasonable estimate. While doing the valuation, the expert will factor in some things, which include;
- Site traffic
- Records of financial position
- Age of your business
- Number of customers
- Intellectual property
- Any patents or trademarks
- State of technology used in the business
- Any other assets listed for sale
Keep Your Business Running
This is perhaps the most important thing to do for your e-commerce business. Some people may start neglecting the business with the anticipation that they will soon be selling it. You find that their commitment reduces drastically, with even the most basic of tasks being delayed or abandoned.
Indeed, you may soon be parting ways with your business, but it is crucial to give it your undivided attention all the same. This will ensure that all your records and processes will be up to date when the new buyer comes in, making the transition easier.
You may even have a change of heart about selling the business. In such a situation, imagine how you would feel having a backlog of things you did not do, hoping that you would sell and move on? Your total commitment is, therefore, vital to all parties involved in the sale process.
How To Value Your eCommerce Business
Various types of calculations can help determine the value of an e-commerce business. Each uses different factors to calculate worth, and some are better suited for certain situations than others.
Choose the one which is right for your business, depending on its needs. Below are a few methods you can use to get the value of your e-commerce business.
Multiple Seller Discretionary Earnings
This type of valuation factors your e-commerce business’ historical earnings – usually for a period of the past 12 months. In that period, the total net profit made is multiplied by a multiple that ranges from 1.5 to 5 to arrive at the business’ valuation.
The calculation is done as follows:
SDE x Multiple = Business Value
Let us assume that your business had a net profit (Sellers Discretionary Earnings) of $180,000 for the last 12 months. If we use a multiple of 2.5, it means your business is worth $450,000, as shown in the calculation below.
$180,000 x 2.5 = $450,000
SDE is a common way to determine the worth of an e-commerce business. You start by calculating the company’s operating profit and adding back potential expenses that a new owner might not incur, such as the owner’s compensation, personal expenses, and non-recurring or unrelated business items.
By understanding your subsidiary’s expenses and income, you can decide what to include in the sale and how to make your financials cleaner. A clean financial history will be more attractive to potential buyers and help you negotiate better terms.
Discounted Cash-flow Analysis
While this is not a standard method to value an e-commerce business, it is a crucial one all the same. A DCF analysis projects a business’ future value. It is a projection of a company’s value, adjusted for inflation and time. It is a measure of potential return on investment.
Estimating the worth of an e-commerce business using this method can be tricky. This analysis is best for traditional businesses with a stable history. e-commerce business sales fluctuate more, meaning this analysis may not be perfect for them. But it can still give an idea of what the company is worth in the future.
Precedent Sales Method
This valuation method uses the sale value of other similar businesses as points of reference. In such a situation, the valuation criteria for your business may be different from the one you want to compare it to, and it may not be relevant to your situation.
You need to identify the metrics used in such a transaction to come up with an accurate comparison.
Where to Sell Your e-Commerce Business
You can sell your e-commerce business through forums, classified websites, and other marketplaces. Below are some of the platforms and marketplaces that you can use.
QuietLight brokerage is a company that sells profitable online businesses. As a seller, you get a free valuation of your business from a professional analyst. All their advisors are highly experienced, having bought, built, or sold an online business before.
This is one of the most popular platforms that you can use to sell your business. It has facilitated the sales of over 250,000 businesses. You can search business listings based on age, category, and price.
In addition, you can also do curated searches of various businesses based on your preferences. Flippa will charge you a 5 to 15% commission on the sale price.
FE International is a company that specializes in merger-and-acquisitions and deals in business sales from $50,000 to $5,000,000. They work with businesses from a variety of fields such as SaaS, e-commerce, and content.
The company guides you through all the milestones to ensure that your transaction is successful. They also assist in negotiating the terms, valuation, strategizing, legal structuring, and so on.
Digital exits deals in sales of e-commerce businesses that make between $250,000 to $5,000,000 annual profits. When evaluating the value of your business, Digital Exits uses several factors.
Some of them are its profitability, projected future growth rate, number of website visitors, age of the business, backlinks from other websites, type of business, and its competitors.
Empire flippers boast an 82% success rate in selling through the platform, having made transactions worth over $313, 965, 099. The platform has strict requirements for sellers, including 12 months of revenue and monthly profits of at least $1,000.
If you use this platform to sell your e-commerce business, you will be charged a commission of between 2 to 15 percent upon completion of the transaction.
This site allows you to sell all your side projects like blogs, e-commerce businesses, SaaS products, and so on for free. If you have a project which you are no longer interested in, you can sell it on this platform. Side Projectors also allows you to showcase your work with the hope of finding a collaborator.
Exchange is a Shopify marketplace to buy and sell e-commerce businesses. Sellers can list their business publicly or privately.
Click the “Sell your business” option to learn more about getting a valuation and creating your listing. You can also decide what price you think your business is worth and the kind of traffic data you want to share.
Answer: Some of the factors used to determine the value are
• Site traffic
• The financial situation of the business
• Operational costs
• Number of customers
• The products you are selling
Answer: When you’re ready to sell your e-commerce business, it’s crucial to find a broker that specializes in eCommerce. This will give you a better chance of connecting with interested buyers.
Answer: Brokers may charge you a commission of between 5-10 percent of the sale price. In addition, you may be required to pay marketing fees in advance.
Where to Sell Your eCommerce Business: Conclusion
A lot of people are interested in becoming eCommerce entrepreneurs in this digital age. Buying an existing e-commerce business is more appealing to investors than starting one from scratch.
The high demand for e-commerce businesses has created a booming industry. Once you factor in all the points discussed above, you can make a decent profit by selling your eCommerce business.