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BizReport : Internet : July 13, 2019

4 Things to Know Before Selling Your Ecommerce Business

For ecommerce business owners running successful operations, there eventually comes a point in time where the notion of selling the business emerges to the forefront as a lucrative and appealing idea. But before making a decision on this issue, you'll need to do some research.

by BizReport

4 Considerations Worth Weighing

Seasoned entrepreneurs start businesses with an exit strategy in mind. Before they even open up the proverbial doors to their stores, they're already thinking about how and when they'll sell the company. But if this is your first business, you probably didn't enter into it thinking about an exit.

So now that you're at a point where selling is a real possibility, you're left with more questions than you have answers.

As you thinking about the option of selling, you'd be wise to do your due diligence and keep the following considerations in mind:

1. Determine if You're Ready

Before looking at the technical elements of a business transaction, what your business is worth, and how you'll go about finding the right buyer, ask yourself one simple question: Am I ready to exit?

As Pacific Business Brokers explains, "This is both a personal question -- are you psychologically ready to sell -- and one directed toward the business itself. You have to determine if the value of your company is maximized, and how dependent the business is on you? If so, how can you change that? Would the business be severely impacted by the loss of a key customer? Would you be willing to stay on if a buyer wanted you to?"

You won't be able to answer these questions in a 10-minute brainstorming session. It may take days, weeks, or even months to wrap your head around the full extent of a business sale and what it would look like. Grapple with these questions until you experience some clarity.

2. Understand Your Value

Valuation is obviously one of the most important elements of selling a business - and it's not as simple as taking revenue and using a multiple to figure out a fair sales price.

While he readily admits that a 2-3x annual net profit valuation is common for online businesses in the $20,000-$2 million range, entrepreneur Thomas Smale points out that, "E-commerce businesses can require a more detailed valuation compared to other business models due to the variety of costs involved in running the business. Some of these include wholesale costs, processing fees, shipping, fulfillment, marketing (paid and organic) and the cost of employees."

It's best to use as many different formulas and expert opinions as possible when determining a valuation for your business. You'll also want to study the marketplace and see what other similar businesses are going for. (Though this information isn't always made public.)

3. Get Organized

As soon as you know you're going to sell your business, your focus should shift towards getting organized. The sale of a business is a big deal and a buyer will want to see that you have meticulous records.

Accounting is the primary concern. If you've been lazy and disorganized with your accounting, now's the time to turn things around. Hire a full-time CPA if necessary to get you back on track. The last thing you want is for a deal to blow up at the eleventh hour because you don't have accurate information.

4. Research Sales Channels

Finally, make sure you research the options you have for finding buyers. The more visibility you can create for your business, the more competition there will be (theoretically at least). You can use one of the many online business marketplaces where ecommerce owners sell their businesses, or you may decide to use the services of an experienced business broker.

Take Your Time

If you aren't prepared, it's easy to feel pressure to sell your business. Whether this pressure is coming from an internal source or an external one, the push to unload and start fresh is compelling. However, it's imperative that you don't get rushed into making a rash decision (one way or another).

As humans, we are hardwired in such a way that emotions often have a stronger pull than logic. Even when we know the logical choice, we'll let the poignancy of intangible factors sway our decision making. Being aware of this natural penchant is half the battle. The other part is learning how to cut through emotions and make clear decisions based on objective facts and truths.

Nobody can decide for you whether you should sell your business or hold on to it. Ultimately, it's up to you. Take your time and hold off until you're certain you're ready to act.


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