Recently, rapid growth has been recorded in online business industries, especially in the last few “pandemic” years. Many industries, such as SaaS, e-commerce, and e-learning, have significantly felt the power and importance of the internet. Consequently, online businesses gained the interest of brick-and-mortar and internet entrepreneurs, private equity companies, and first-time buyers. So, if you are a business owner that wants to sell online business, they are your target groups.
But, before you get on the market and approach them, you need to perform several activities to make your business ready to sell. Only good preparation and an excellent business exit strategy will lead you to the final goal – selling your online business for the maximum value.
So, you are probably wondering how to sell your online business – where to begin with the whole process and where to market the business after. Well, continue to read this article as we are going to provide you with the best exit strategy solutions and everything you need to know and do to sell your business successfully.
Get Ready Before You Sell Online Business
Preparing and building your business for sale means that you need to clean everything up and get every aspect of your business into order while growing your company’s worth. Every activity needs to be performed efficiently and completely, so thoughtful exit planning is a must. However, preparation is a process that takes time; it cannot be done overnight, so start on time (3 to 6 months before selling, and depending on your business, a year or more), be patient, and have reasonable expectations.
Always focus on getting the maximum out of everything. Your buyer will want to purchase a profitable and sustainable company and get the best for the price they’ll pay. Before the purchase, they will want to know everything about your business, so you must provide them with clear and complete information. And what is more important – start organizing and collecting your documentation on time as that will additionally increase your business value, making it easier to sell online business.
However, as you know, things are moving faster in the online world, so keep in mind to check everything once again before selling, and update if needed.
Now that we have established that, we are going to guide you through this process step-by-step and help you sell a business well-prepared.
Define Standard Operating Procedures
This is the first step if you haven’t done it already. Whether your prospective buyer is an experienced entrepreneur or just entering the world of online business, they would want to know how you manage certain operations step-by-step. That will help them run the company after they purchase it and continue the growth and progress.
Buyers are more likely to invest in businesses where they don’t have to invest much effort. They prefer to continue where you stopped, bearing the fruit.
Defined SOPs are also helpful to you and your online business. An effective system helps you detect the issues and solve them quickly, improving the overall workflow. Also, it helps scale and grow your business sooner and conduct the entire selling process efficiently.
Keep Your Numbers In Order
The numbers speak for your business, no matter what story you’re about to sell to the potential buyer. Everyone interested in your business will want to assess if your business is truly profitable and sustainable by looking at the numbers such as revenue, gross margin, and profit. For example, the revenue and net profits will help them to assess your business value. They’ll also be interested in how much your business is spending on customer acquisition and overhead.
Your financial records must be accurate, complete, and well-organized. Otherwise, you won’t make a deal. Having the records that prove your profitability will increase your chances for selling, so keep financial information ready, especially your profit and loss statement (P&L) and Balance Sheet. Besides profitability, by ensuring that your books are in order, you can show your buyers that your supplier accounts are in good standing (if you’re running an e-commerce business, e.g.) and that all relevant taxes are taken care of.
Paying off your expenses on time is crucial to the prospective buyers, as they are potentially taking on your business’ debts. It’s vital to also stretch your cash flow by paying your creditors with a credit card, for example, buying a few weeks of working capital before you have to pay your credit card. However, suppose your business delays or misses making its payments. In that case, there is no guarantee that suppliers and other business partners will continue to do business with your company after the sale. It’s even worse if this is the issue with some important business partners because, without them, the business may fail, which is exactly what a buyer wants to avoid.
Also, if everything is in order, ensure that the supplier agreements with your business partners are transferable to a new business owner.
Update Website Analytics
You probably keep track of your analytics as it helps you run the business. Accurate website data is one of the first things your buyer would want to look at. They’ll be interested in the amount of traffic that is coming to your website and where that traffic comes from. The website traffic is crucial for determining your conversion rate and potential for further business growth. Therefore, they would want to verify if that data is legit and not spam.
Additionally, the diversity of traffic is a plus. The general traffic should be a healthy mix of organic, paid, direct, social media, and referral traffic. Also, ensure your website has high-quality backlinks as that will contribute to your website worth.
Of course, you won’t release every piece of information about website analytics until the buyer due diligence process. Still, you should keep track of your analytics and update them frequently to show the company’s historical records.
Clean Your Website
The next step is to check your whole website and ensure it’s clean, updated without any issue. SEO is an essential aspect of every online business, so start by checking for duplicate content and your website’s link profile.
The Google algorithm can struggle to determine the difference between the original source of content and the duplicate. If some of your pages aren’t ranking on Google, check if duplicate content is the reason. Perhaps you accidentally created it, or someone copied your content.
You can check it by running your content through some online service that searches the web for the matching content. If someone has stolen your content, ask politely to take it down, or, if they refuse, contact Google directly and submit a DMCA Takedown Request.
Your link profile is one of the most critical factors for a high ranking on Google. It describes the quality of the backlinks (links that refer to your website). Having a clean and good backlink profile without spammy links will positively affect your potential buyer’s decision. Besides, that is especially important if you depend mostly on SEO and rely on organic search as a traffic source.
You can check your link profile by using SEO software like Ahrefs, SEMRush, or SEO Moz, and if you find out that your site has many wrong links, you can remove them by using Google Disavow Tool.
Even if spam links don’t affect your Google ranking, they can affect your analytics. Your conversion rate numbers may be showing like you have a pile of potential customers, but they aren’t buying your product, and that can’t seem good to a prospective buyer.
So, to sum up: a cleaned link profile will get you the most accurate analytics data and enable you to sell your business for the best price.
Create Marketing Plan
You know your business the best, so creating a marketing plan for further growth will show the prospective buyers that you care about their success after purchase. Include several ideas, procedures, and plans for business growth that buyers would find attractive and promising.
When all of the mentioned activities are completed, it’s time to determine the worth of your online business.
How To Price Your Online Business?
The assessment of your online business worth includes several factors in which the prospective buyers will be interested when deciding whether to make a purchase and for what price.
These factors include sales, COGS, yearly net profits, business growth trends, customer acquisition and breakdown of acquisition channels, scalability of the business, market position, the time spent running the company, and the business systems and processes.
The two most significant factors are your yearly net profits and business growth trend. Most buyers will look at the earnings multiple to determine the actual worth of the business.
There is an effective formula that can help you determine your business’s primary listing price before negotiations. So, the average monthly net profit (for 12 months period at least) multiplies with the sales multiple (20 to 60+)
[6-12 Months’ Average Net Profit] x (20 to 60+) = Listing Price
If you aim to sell your online business profitably, you can start by estimating the buyout price and then go backwards. Establish the monthly revenue and profit targets to show you how much you need to earn and what steps you need to take to get to the estimated value. It’s best to start with this around six months before you start preparing for sale.
If you want to maximize the price that a future buyer is willing to pay, focus on two key areas: ROI (return-on-investment) and relative risk. Businesses with lower risk will get higher premiums on the open market and will sell much easier.
Many buyers of online businesses are willing to pay a premium because they expect to receive ROI in 2 or 3 years despite any growth changes. In some cases, that can bring the ROI even faster – in one year. Another reason is that buying a profitable business has more chances of success than starting a business from scratch.
However, each online business is different from another, and so are the valuation models. It will be best to consult professionals such as business brokers or M&A advisors as they are very experienced in valuing the business and determining the right and maximum price.
So, after the preparation and setting the price, you are ready to go to the market. Let’s see where and how to sell your online business.
Where to Sell Online Business?
The way you choose to sell your online business can determine its final value. The choice also depends on the actual worth of the website and the revenue and profit it generates.
There are four ways to sell an online business: direct sales, an online business marketplace, auction sites, and brokers or M&A advisors.
Direct sales imply exploring your business network – suppliers, customers, partners, or competitors, to find a buyer. If you choose this option, the entire sale process relies on you and the other party without mediation, so the expertise, experience, and understanding of the process are required. Both parties need to establish trust and thoroughly perform the whole process, which is often expensive.
Business marketplaces are the platforms where you can list your business on these sites for which you are charged a listing fee and 15% sales commission. They connect online business sellers and buyers, making the entire process more manageable. Besides that, some marketplaces help with the payment process and administration. However, the overall success of selling on the marketplace depends on both seller’s and the buyer’s credibility and honesty.
Auction sites are the internet platforms where potential buyers place bids for your business. The business owner, aka the seller, is also charged with a listing fee and a commission of up to 15%.
It may look simple to sell through these websites, but expertise is required for each online business to achieve accurate value. Therefore, they are the best option for startups or smaller websites under $20,000.
Lastly, let the professionals handle it – hire experienced M&A advisors or business brokers and facilitate the sale process. They can create a successful business exit strategy, determine the accurate value of your business, easily connect you with potential buyers, negotiate and get the best deal, carry out the due diligence process, and, finally, sell your online business for the maximum price.
Fees charged are comparable to the marketplaces’ and auction sites’ fees and vary on the reputation and offered services of M&A advisors. The commission of M&A advisory services covers the expert support and legal fees the seller will receive throughout the sale process.
Sell Online Business With Final Ascent’s M&A Advisors
With their valuable experience and knowledge, our M&A advisors will contribute to the success of your business exit strategy. They will come up with the best exit strategy solutions, advise you on improving the exit strategy, and market your online business to ensure you reach the maximum value.
Here’s how we can help you to sell an online business:
Initial valuation and assessment. When you contact Final Ascent, we want to learn about you, your business, and your goals. Then we assess your accurate business worth and determine the initial value.
Strategy mapping. Next, we can develop a business exit strategy for your company. If you already have one, we can go over it, advise you with the potential improvements and set reasonable goals based on your business state, goals, and valuation.
Discovery and planning. We help you to check your finances once again and ensure that everything is perfectly in order. We prepare initial memorandums and analyze every possible risk.
Finding the buyers. We target qualified buyers and build competitive interest in your business through a controlled bid process. You won’t have to worry about the buyer’s credibility and whether they are earnest about purchasing your business. We are here to screen your potential buyers properly and connect you with promising ones.
Securing buyer conversations. Confidentiality is 100% secured with us, managed via automated nondisclosure agreements and our commitment to privacy through the sales process. We also leverage encrypted, confidential M&A deal software and data rooms. We ensure that your conversations with buyers and the due diligence process are secured.
Negotiating and closing. When our outstanding skills and experience get you the highest price possible, we assist with closing.
We are your trusted exit authority™ and one of the leading M&A advisory firms serving middle-market businesses with revenue above $10M.
Choosing the wrong advisor could cost you valuable time, resources, and money in a less than efficient exit. When you work with one of our trusted M&A advisors, you know that you’ll get the maximum value when you sell your online business.
You can even speed up the whole selling process by hiring us in the very beginning. We are here to help you with everything needed, from day one to a wealthy lifestyle.
Let’s make your online business ready to sell for the maximum price!