Sign up to see our latest sites for sale and more!

Category Archives: how to sell internet business

How To Sell Your Ecommerce Business

Guest Post by Jock Purtle

Your ecommerce business is your baby – you’ve invested your blood, sweat, tears, time, energy, and money. However, the time has come to sell. Your goal is to get as much as you possibly can from the sale, and you’re evaluating what you have to do in order to prepare. There are numerous conditions to take into account, and in this post, we will cover them all in order to help you get the highest possible price when the time comes to hand over the reins.
Let’s get down to business.

What is your ecommerce business worth?

There are a variety of factors that must be considered when calculating the value of an ecommerce business. Some factors are affected by external components, such as the type of business you have, the state of the market, and what buyers are willing to pay. However, there are also some common variables to consider, including:
  • The business’ sales
  • The business’ profit
  • Growth trends
  • Drivers of new sales and their sustainability
  • Customer channels and channel breakdowns
  • Market position
  • Existing systems and processes that make the business’ operations run smoothly
Looking at the sales of other ecommerce businesses in the past is a vital component of the valuation process. The image below represents the results of our analysis of the 245 ecommerce business sales between 2010 and 2014. Those 245 sales resulted in a total transaction value of over $117 million.
what we found from our analysis There is a lot of useful information in this data; however, the most important number is the 2.51 average multiple. The average business sold for 2.51 times their annual profit. For example; if a business had $50,000 in profit in 2012, then on average, that business sold for roughly $125,500 [$50,000 x 2.51]

the distribution of sales multiples

As you can see in the distribution graph above, the multiples from these sales ranged from 0.5X – 6.6X. So, if you are valuing a business that earns a net profit of $120,000 per year, the valuation can range from $60,000 – $792,000. The distribution pattern on the graph makes it clear that most businesses are sold for between 1.5 and 3 times their annual net profit, which is fairly close to the general assumption that most small or medium-sized businesses are typically valued at 2-3 times the annual net profit.

What makes an ecommerce business worth more?

For a buyer, what it really comes down to is one coin with two sides: return-on-investment (ROI) versus relative risk. The higher the price, the more risk the potential buyer is taking, and vice versa. The thing that will tempt investors to pay a higher price is diminishing the risk of future failure by ensuring that your online store can answer “Yes” to the following questions:
Does the business…
  • Have a clean legal history?
  • Have good branding with no legal, copyright, or trademark concerns?
  • Have documented systems and processes that allow operations to run smoothly?
  • Have good relationships established with suppliers, and backup suppliers in place?
  • Possess the ability to demonstrate key drivers of new sales?
  • Have a high percentage of repeat customers?
  • Have a high percentage of repeat visitors to the site?
  • Have stable (if not growing) traffic from a variety of sources?
  • Have a long history of traffic stats from Google Adsense or another reputable source?
  • Show potential for growth?

What does the average ecommerce business sell for?

The graph below shows data we analyzed, which shows that typically ecommerce businesses sell somewhere in the $100,000-5m revenue range. However, don’t be concerned if your business is smaller than this. We discuss tactics and places to sell a smaller business later in this post.

where did transactions occur

As the graph indicates, ecommerce businesses can sell for as little as a few thousand dollars to hundreds of millions if not billions of dollars.

Are bigger ecommerce businesses worth more?

In general, the larger the ecommerce business, the more that it is worth. Here is a brief explanation of the graph below. A business that sold for $2 million or more (learn what makes a million dollar ecommerce business in this article), would have an approximate yearly profit of $770,000 ($2 million divided by 2.6). Let’s say that a business sold for $75,000. On average that would mean that its yearly profit was $37,500 ($75,000 divided by 2). A final example would be a business that sold for $500,000. On average that would mean that its yearly profit was $208,000 ($500,000 divided by 2.4).

what size store is worth more

When is the best time to sell your business?

Like many major life decisions, there is never any ‘perfect time’ to sell your business. For the scope of this article, the prime time to sell your ecommerce business is when there has been sustainable growth, as tracked in annual increments. Let’s use the following example:
  • Year 1 – $150,000
  • Year 2 – $305,000
  • Year 3 – $620,000
  • Year 4 – $546,000
In this example, the best time to sell would have been late in year three. You don’t want to make the mistake of selling your business once it’s no longer lighting a fire in you, and the business is starting to decline. This can significantly impact the magnitude of the offers you receive. Other factors can also impact your decision. For example, you may be forced to sell because of external circumstances; or perhaps a potential buyer came along with an offer you couldn’t refuse.

How does the selling process work?

The selling process is fairly straightforward. However, depending on the size and scope of the business, it can be more complex and take additional time. Generally speaking, most sales will happen in the following progression:
  1. Decision to sell.
  2. Valuation (a summary of how much the business is worth).
  3. Prospectus development (legal document in which is contained all the facts and figures concerning the business.
  4. Locate potential buyers (on your own or with assistance from a broker).
  5. Negotiations with buyer (total price and also terms of the deal).
  6. Transfer of cash and assets.
  7. Train new owner.

How long will it take to sell your business?

All businesses are different, and the length of time needed to sell a business depends on many factors that relate to the type of business and the terms of the sale, but in general terms, smaller businesses take less time to sell, and vice versa.
The graph below represents the summary of all the deals that we have completed and the time it took to complete them on average. As you can see, between 50-60% of deals close within 90 days and close to 80% close within four months.

how long will it take to sell

Why do buyers say “No”?

Sometimes a sale falls through or a buyer says, “No.” Some common reasons include:
  • They don’t like the business
  • They don’t like the target demographic
  • Something wrong with the statistics or data
  • A buyer finds something that makes them reconsider their offer
  • Selling price is too high
  • Trends with particular business or market
  • Problems with transferability
  • Financial, branding or product condition of the business
  • The funding just falls through for the buyer

Final Thoughts

Selling an ecommerce business can be a difficult decision for many entrepreneurs. No matter the reason, there are a variety of options for you to find a buyer and sell your business. Following the tips in this post will ensure that you receive the maximum value for your business.
About The Author: jock purtle crop
Jock Purtle is the CEO of Digital Exits. If you are looking to sell your ecommerce business they offer a free valuation service here. Alternatively if you are interested in the buying and selling process you can read their blog, listen to their podcast or access the buying, selling and valuation guides.

How to Prepare and Sell Your Internet Business

sell-your-internet-businessWhen deciding to purchase an internet business for sale you should take into consideration the type of business that not only you want to own, but that someone would want to purchase from you down the road. Of course, you do not go into buying an internet business in hopes of selling it, but you need to think ahead to be prepared to sell your internet business in the future. In this post we will share with you tips on how to prepare and sell your internet business in the future.

It does not matter the circumstances, when the time is right, you want to be able to sell your online store so it can continue to grow even though you are no longer the CEO.

Building WebsiteBuild it Up

An internet business is somewhat like your home – it is an investment into your future. You turn the key to open the door to opportunity, but should realize you need to take the time to make it your own. When you purchase a new home you make modifications to make it even better and more valuable for the future – your online business should be no different!

Build your website business up – make it the best it can be. You will want your business to appeal to others and the best way to do this is WORK it! Your focus should not only be on the products and service you provide to your customers, but your SEO and marketing efforts as well. You want to build a good foundation for your business so it can easily appeal to others. You will want to make valuable improvements to your business in hopes of selling it for even more than what you have invested into it.

The key is to increase your products, increase your vendors, increase your SEO, increase your marketing; all in order to increase your sales. Which will help to increase the overall value of the business in which you are dedicated to building!

Deciding to Sell

Many factors can play into the decision to sell your internet business. Maybe you want to sell the ecommerce business you have built in one industry in order to start a new website in another industry you are passionate about. Maybe it is for personal reasons that you did not foresee when you originally purchased your online store. No matter what the circumstance it is perfectly fine to sell your business. Again, just like your home, you have personal ties to the business. You have put time, money and lots of hard work into building the business so you want to be able to benefit from selling it. Therefore, you need to be prepared as you put your business on the market.

Preparing to Sell Your Internet Businessphotodune-899947-sale-of-business-xs

Have your website up-to-date. It is crucial to keep your products, content, social media and blog current. You do not want a prospective buyer to see old information posted as it can turn them off from even requesting more information.

You will also want to ensure your accounts are up to date and preferably professionally prepared. You will need to be able to verify sales performance if asked by a buyer. Therefore, you should have everything in order even before listing y
our business for sale.

Another area you will want to prepare is data about your recent traffic levels. Buyers will want to ask not only know about your sales, but traffic as well. This is a tell-tell sign of the SEO and marketing work you have done for the business. Having valuable traffic data is a great selling point, plus it helps to validate your hard work!

Internet Business For Sale

Knowing where to list your internet business for sale is another key component in being able to sell the business. There are many different types of business listing sites out there, but we would like to suggest a few to you. Before listing your business for sale – do your homework. Find the right listing site that will give you the best exposure within your budget.

Looking for an affordable method to you’re your business, check out www.flippa.com, or even Craigslist. Flippa has better rates than some of the other business listing sites out there. Searching for a site specific to selling business as there are various ones out there. The key to listing on these sites is finding the listing fee that fits your budget. Having good exposure is key and here are three business listing sites we suggest – www.bizbuysell.com, www.businessbroker.net and www.bizquest.com.

Do you need a business broker? If you are “green” in the sales department or feel like you need some assistance. Then it is advisable you look into hiring a business broker to help facilitate the sell of your business. Matt Maxwell from BusinessBroker.net makes a valid point about hiring a business broker. He says, “Selling a business can be a complex process and it often is advisable to seek the help of a professional business broker.   Business brokers are akin to a real estate agent in the home selling/buying process — they help facilitate the sale or purchase of a business.   Brokers can assist in many ways – they can help you properly price your business, market your business for sale, and once a buyer is secured can help facilitate the transaction.  Because brokers have done many transactions, their experience is invaluable to help you avoid potential pitfalls and overcome potential obstacles which may slow or stop the sale of your business.  Brokers are well connected and can bring to the table an experienced team of accountants, attorneys, financiers, and other needed professionals that help make the deal happen.”

Final Tip

We want to share a bit of final advice, it is simple…..be patient and be realistic.  It will take time to find the right buyer for your business.  Do not rush the process, do not get frustrated, but be patient. You also need to be realistic.   It is important not to overprice your internet business for sale. Before pricing your business it is best to compare your business to other similar types of businesses for sell in order to get an idea of what price range is appropriate for your business.

When deciding to sell your internet business reflect on your experience, the knowledge you gained in the process and congratulate yourself for a job well done as you pass along your creation to the next ecommerce entrepreneur!

photodune-1230816-notebook-with-hand-shake-symbol1-xs

Get instant access to our sites and pricing - Learn More
Pure-Ecommerce has been featured in many top shelf magazines such as Forbes, Entrepreneur and MarketWatch