Looking to sell an ecommerce business? Selling any business can be a potentially complicated process, but when that company is entirely based online, it can be even more confusing. As you have very few “physical” assets for instance, what can you use to value your business? And what would you actually be selling?
In this post, we will take a look at the best way to go about selling an ecommerce business.
When looking to sell an ecommerce business, you first need to understand precisely what it is that you are actually selling. The answer to that question, is that you are selling the website, the contacts, and the brand recognition.
You won’t get much for the actual stock you might have in your inventory, seeing as any company could easily buy that for the same price you paid for it. The value comes from having a platform that can help an owner to reach an audience and thus ship a large number of units at a profit.
One of the best ways to value an ecommerce business and to arrive at a reasonable price to charge for the business, is to use something called earnings multiples.
Earnings multiples is a popular form of business valuation suited to companies that have kept a good and clear record of their financial history – this means all revenue coming in and all the overheads and expenses going out. However, it will not work for companies that have lost a lot of their documents or failed to keep records in the first place (while no company should do this it is not unknown for it to happen as we all know).
The reason for this, is that earnings multiples means valuing the business based on its profits. This will utilise a cost to earnings ratio calculated after tax to see how much revenue comes in in a year. This then gives a rough estimate as to how much the business is ‘worth’ to the buyer and the company is then usually sold for around 5-10 times the annual post tax profit so that it would start earning for the buyer after that amount of time were the company to be left in its current form and continue performing to its current standard.
This figure, however you get it, will help your business brokers to get the best price for you.
When transferring ownership of your website, you will need to log into your hosting account. You’ll then be able to request and authorization code, and initiate the transfer and receiving process. You’ll need to approve the transfer, and will need to contact the registrar (which you may be able to do automatically through your account). The process is slightly different for every type of account, so make sure you look up the instructions for your specific hosting. In some cases, you might be able to simply sell your login details!
If you have products in a warehouse meanwhile, you might need to have these shipped to the new owner as well. Likewise, you might need to transfer ownership of trademarks, and to send over documents such as contact lists.
Closing Comments: The Best Tip of All
While these steps will make it easier to sell your business successfully, the most valuable strategy of all will always be to design your business with an exit strategy in mind: even if you have no intention of selling. That means keeping your documents as organized as possible, keeping your website backed up, and even thinking about things like using Amazon’s fulfilment centers rather than your own warehouses.