5 Steps to Prepare Future You for Selling Your Online Business Here are five important steps to prepare you for selling your business.
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Ever wondered how you would go about selling your online business? With endless information on how to start and grow your online business, when it comes time to sell your online business, it's normal to feel a little stumped. The reality is, the majority of business owners don't start their new venture with the intention to sell, and if they do decide to exit their business, it's usually a confidential process.
So, what steps should you be taking to become more familiar with the process of selling your online business? Read on for five important steps you need to learn today, regardless of whether you're ready to exit your business or not.
Step 1 is the valuation. A good place to start is by looking at your online business's last 12 months' net profit and then multiply this, depending on individual circumstances, from 1 through 5. Based on this model, most businesses realistically sell at a multiply of 2-3.
For example, if your online business made a net profit of $100,000 in the past 12 months, and you were looking to sell your business for a fair price (based on the net profit it is currently generating today), then you'd be looking to multiply by three, resulting in a valuation of $300,000.
Of course, you would then need to consider any additional value factors such as stock on hand, operational equipment, email lists, social followings and customer reviews.
Typically, the higher the valuation, the longer it will take to sell your online business, so you need to be mindful of this. If you are looking for a quicker exit of one to six months, you may need to consider valuing your business off a 1-2 multiply to ensure a faster sale. If you're happy to realistically keep running the business for the next 12+ months, you could opt for a higher 3-5 multiply.
Once you have a general idea of what your business could be worth and how much you would be willing to sell for, it's time to move to the next step.
2. Where to list
Deciding where to list your online business will directly impact your final walk-away price, so it's essential to have a solid understanding of your listing options. The two most popular options are:
Broker sale: Brokers will offer support in helping you value your business and set the sale price. They will handle the entire sale process and vet potential buyers on your behalf. This is ideal if you are time-poor or you need the extra sales support. The downside to this option is brokers often require a substantial up-front fee (which doesn't guarantee a sale) plus a high success fee, normally around 20% of the sale price. For smaller businesses with valuations less than $500,000, this could significantly impact the profit you make from the sale. However, for online businesses valued at $500,000+, enlisting the help of a professional broker may be necessary to reach higher net worth buyers.
Flipping websites: Flipping websites are online marketplaces for buying and selling businesses. They work similarly to a brokerage in the sense that there's a listing fee and a success fee, but the fees are often significantly less (with listing fees starting as low as $49 USD). You can also choose the level of assistance you require, making the whole process tailored to your specific needs.
With free valuation tools and built-in tech to sync data directly from your online store, accounting software, etc — the whole process is extremely user-friendly. Most platforms also provide same-day support, ensuring a smooth and safe transaction for both buyer and seller.
Reputable flipping websites include Flippa and Empire Flippers, so if you are eager to begin planning your exit, research these popular marketplaces and compare them against any brokerage firms you may be considering to ensure you list in the right place for your business.
3. CC someone you can trust
Selling your online business requires a lot of time and energy. For this reason, it's always a good idea to keep another person in the loop that isn't as heavily invested in the sale. This will help to provide an outside perspective on any tough decisions during the sales process.
There may be a lot of back and forth with your broker or potential buyers, so having someone close to you who knows your business well, is level-headed and has your best interest at heart CC'd into all communications will be a game changer. Let them know you value their opinion, and if they have strengths you know will aid the sale, don't be afraid to let them step in if required.
4. Consistency is key
The majority of businesses realistically take 6-12+ months to sell, so it's crucial to maintain "business as usual." Letting your finances, operations or marketing efforts slip because your mind is already starting to think of what's next is a quick way to hinder the sale.
Having standard operating procedures (SOPs) in place across all areas of your business will help clearly outline your current systems and processes to serious buyers in the final stages of negotiation. An organized backend can add thousands of dollars to your final sale price, so it's definitely worth the extra effort to prepare SOPs well in advance.
5. Post-sale support
Last but not least, it's important to mentally prepare yourself for post-sale support. Unlike selling a car or house, most new business owners will expect you to provide a period of support post-sale. So, once you've finally found your buyer, don't expect to be jumping on that plane just yet!
Post-sale support can be negotiated as a short-term contract (usually 3-12 months) where you're paid a handover salary, separate from the sale price, to stay on and support the new owner with all tasks until they find their bearings.
Alternatively, the buyer could ask to withhold a portion of the sale amount in Escrow to ensure you continue to assist them throughout the agreed-upon support period. Although post-sale support is not legally required, offering some form of post-sale support as part of your listing will significantly boost your chances of a successful sale.
While selling your online business can feel overwhelming, following the steps above will ensure a smoother sale and help you achieve the best price possible. Staying up to date with the latest trends and strategies as well as podcasts like Female Startup Club will guide you to understand the current marketplace and gain the insights you need to make that perfect exit.