While most people are interested in how to start a business online, there might come a time when you think about how to sell your online business. The process can be overwhelming, and without knowing the right protocol, you might put off the sale and lose value. In this article, we provide a detailed guide on how to sell an online business in the most effective way.
Before we get into the details of selling your online business, let’s understand what we mean by an ‘online business.’ It could be an e-commerce store, dropshipping site, affiliate marketing site, SaaS business, blog, mobile app, or a productized service.
Why you might need to sell your online business
There are different reasons for selling your online business. Maybe the going is good and you want to cash in while it’s possible. Some of the other reasons include:
- You want to devote more time to your family
- You’re ready to start a new business
- You want to travel
- You need the capital to invest somewhere else
- You want to retire
No matter what the reason, once you’ve decided it’s time to exit, you should look at how you can sell your online business.
How to sell your online business
There are primarily four ways to sell your online business. These include listing your business privately, selling to a strategic buyer or competitor, selling to an employee, or selling via a broker.
Listing your business privately
If you decide to list your business, the first step is to find out which online marketplaces you’d want to list your business. These sites allow you to showcase your business in front of buyers and brokers. Some of the most popular marketplaces are BizBuySell, BizQuest, BusinessBroker, and BusinessesForSale. You can also list your business on popular classifieds for greater visibility.
The biggest advantage of listing on an online marketplace or classifieds site is that you get to put your business in front of thousands of potential buyers. There would be interested individuals and organizations from around the country or even the world. But that means you’ll be competing with thousands of other businesses for their attention.
Anyone looking for a business in your category can compare your business’s performance against others. Even after you get queries, you’ll still be evaluated against others, which would affect the value you can get. But if you’ve robust financials, you can also turn the tables and get buyers to compete with each other.
Selling to a strategic buyer or competitor
Another option is to sell your online business to a competitor or strategic buyer. They would see the value in your business’s potential and realize the synergy they can create with their existing business or investments. In such sales, the prospective buyer would be the first to contact you. In some cases, they might initiate inquiries even before you decide to sell your online business.
Once they contact you and get all the information from you, they will do due diligence on your business. If everything’s as it seems, there shouldn’t be any problem. The issue in such sales is that they would also be contacting others like you. You’d in effect be competing with other businesses for a sale unless what you offer is unique and you have a demonstrable leadership position in the industry.
If it’s a direct competitor, you should be careful not to share too much information about your business since that could be a tactic on their side to know more about you. Other than the financials, don’t give any strategic plans. This is why you should always have clarity about the investor and how serious they’re about buying your online business.
Selling your business to an employee
One or more of your employees might be interested in buying out your stake in your online business. While this doesn’t often happen in medium or large enterprises, it’s popular in the small business world. The biggest benefit is that you don’t have to waste time looking outside for investors. Your employees would know everything about your business, and you won’t have to share too much information either.
A drawback is that an employee usually wouldn’t have the necessary capital to invest. They might need months or even years to arrange the funds for the investment. Sometimes they might offer to pay back over years or offer you a minority stake. If these options make sense to you, they’re worth exploring.
One way to make it easy for your employees is to suggest early on that you’re planning to sell your business and ask if they’re interested. If you give them ample time, they might be able to arrange the capital.
Selling through a broker
The most common way is to use a broker to sell your online business. Brokers would have verified lists of buyers and investors, and in several cases, they would have facilitated sales for them. Secondly, brokers would also know about the financial bandwidth of buyers and you won’t have to waste time confirming their credentials.
The third advantage is that a broker would have a longer list of potential buyers for each category. This would give you more freedom to negotiate the price. You would also be able to find a buyer who’s genuinely interested in your business.
Of course, like with any deal involving a broker, you’ll have to pay their commission. You also can’t be completely certain whose interests a business broker would be serving. But if it saves you time, it’s worthwhile to use the services of a business brokerage.
How to prepare to sell your online business
Deciding on the buyer or finalizing how to sell your online business is only part of the process. An equally important part is getting your documentation in order because you want your listing to be professional and all the information you share to be accurate.
Get accurate data
The first step is to collect all data regarding your online business. Be clear about how much traffic your website gets, the page that gets the highest number of visitors, the kind of customers you have, and details about your marketing tactics. You should also share your conversion rates, bestselling product or service, and how you manage your email list.
Get your financial documents in order
At the end of the day, every sale is a financial transaction. Your buyer would want to know the financial health of your business and its growth prospects for them to determine the value of your online business. Make sure that your finances are up to date and run them by a bookkeeper or accountant for greater credibility.
Develop a standard operating procedure (SOP)
Beyond the financial data and website statistics, it would help to create an SOP with information about your systems and processes. This document explains how you run your business, from choosing and listing products to search engine optimization (SEO) to content creation. Your SOP will answer several questions your buyers might have. It also helps new owners continue business operations without any interruptions.
Getting the highest possible value for your online business
There are several things you can do to generate the highest possible value when you sell your online business. It’s important to start these early since they will take some time to produce results.
Optimize your website
Ensure that your website is optimized to attract more traffic and increase conversion. Importantly, your site should be optimized for the relevant keywords. A website is the first thing a prospective buyer will visit and it should convey that you’re a professional online business with immense growth potential.
Grow your relationships with your partners
Stable businesses have strong partnerships with their suppliers, vendors, and marketing agencies. These ensure that you get the best possible products and services without having to find new partners. That’s something that potential buyers would appreciate since it signals strong business fundamentals and excellent work culture.
Accelerate your efforts
To get maximum value, make the year you sell the best year for your business. Cut down on operational expenditure, identify your bestselling products, ramp up your marketing efforts while optimizing costs, increase the number of website visitors, and improve conversion. To make it truly effective, you should start ramping up your efforts a year in advance.
How much can you get when you sell your online business?
Brokers and prospective buyers use a formula to find out the value of your online business. You get it by multiplying your net monthly profit (profit after expenses) by anything from 20 to 60. So, if your average net monthly profit is $20,000, multiplying it with a conservative multiple of 20 gets you $400,000.
The multiple would be higher if you’re in a high-growth segment or if you’re doing well in a category that’s poised to grow significantly in the future.
In short
If you plan to sell your online business, the most important thing to do is to start early. You would need at least a year, if not more, to get your systems and processes in place, accelerate your marketing efforts, and find suitable buyers. By following the steps in this guide, you’ll get the maximum value for your online business.