Selling your own online store is not easy, in fact, it is likely the hardest thing you will ever sell. Hopefully, the biggest thing you sell is as well. It was for my own business, which I sold in February 2022.
Are you really ready to sell your online store? (Know all your numbers, not just net profit, profit margins, average net monthly profit, and sales)
I first attempted to sell one of my online businesses in 2016, but I truly wasn't prepared both mentally as well as financially. The biggest thing that prevents an online business from getting to market or listing on an online marketplace is your bookkeeping. You should know your average net monthly profit every month as a baseline but having a detailed monthly P and L is critical to selling for what you deserve and fast.
Are your books clean? Do they include other companies, personal expenses, accurate inventory, and the list goes on? Think about it from a buyer's perspective. How can a buyer trust you if you can't provide accurate and timely books? The ability to provide great books in a timely manner will make selling your online business 1000X times easier.
Do you have an online sales forecast? (Save time by knowing this)
This was probably one of the hardest things for me to put together for my investment bankers. I candidly have never put together a formal forecast outside of my inventory. The ability to put together an online sales forecast will give buyers confidence not only of your past performance give them much more confidence if you hit your forecast. This is key, dont miss this. A forecast that is way too high and is missed is a warning flag.
Put yourselves in the buyer's shoes (If I was buying this company, would I want to know this)
It is much easier to say than to actually do, but if you can truly picture yourself as a buyer of your business it makes the process of selling so much easier. This was the one mind-shift that allowed me to run a super clean process. Every time I was doing something to sell my online business, I would run it through my buyer's test. "Would I want to know this if I was a buyer?"
Who are you going to sell your online business to?
I have only sold one online business, so I don't have experience with every buyer profile that is out there. These are the most common type of buyers for companies that sell products online.
Ecommerce Aggregators - Selling online is nothing new, but eCommerce generally has grown dramatically since the pandemic. More customers than ever are comfortable buying online. With that momentum, there has also been a large uptick of Aggregators.
These aggregators typically buy one type of business like Amazon or DTC (direct to consumer). These seem to be the most popular for direct-to-consumer or Amazon brands like my eCommerce business sold.
Strategic buyers - These would be a company that is similar to your industry but larger. Typically, you need to be fairly large to catch the eyes of strategic buyers.
Other buyers also include private equity and individuals. The wild part of selling an online business is that you won't know who your buyer will be until you actually go to market. The reality is, you don't need a lot of buyers you just need the right ONE.
Is your online business sales-ready?
I truly believe that every business should be “sales-ready” at all timed…Because you just never know when an opportunity may come up to sell your Ecom brand or you may just want to do something else.
Realistic Valuation (are you ready for the pay day?)
First, you must be realistic about your business. Every business is special to the person that started it, but that doesn’t mean it will be valued at some insane multiple because you worked so hard to build it.
It is a math equation, if you are not 1000% ok with what the net payout after fees and taxes will be…Don’t try to sell it. I recommend getting a few estimated valuations from 3-5 brokers and/or bankers. Everyone is guessing, but most will estimate higher in hopes of getting you to start the process of selling. I’m not saying this is done with malice but it can happen. I would run the numbers on the lowest multiple they gave and then you can do one of 3 things…
1- You can accept that your business may sell for x and be content.
2- Grow it to a number that gives you the net cash out you want.
3- Just continue running as is.
Are you actually comfortable with the potential payday?
If so, go to step 2!
Who should sell your online business?
Next - this was a tough one for me. You will need to decide on how you will sell your business. Will you use a website broker (where your business is publicly listed with a price tag), will you sell it privately to someone you know, or will you use an investment banking firm that will pitch buyers for you in a more discrete way?
From my experience, you should be really doing at least $1 million EBITDA but really over $2 million to use an investment banker. Their fees are high and many will only work with brands doing at least $3 million in EBITDA or higher. Every deal takes an impressive amount of time and effort, even small deals. Hence, why do larger investment banking firms only do larger deals?
Online businesses (under $1 million in ebitda) may want to use a website broker
If you are under $1 million Ebitda - a website broker who has a database of buyers may be your best chance of getting a deal done and they typically work with deals of almost any size within reason.
Regardless of if you go with a broker or investment banking firm, I would ask them to do a “bake-off." I think it’s called that, but it’s a process they do all the time. They put together a deck of how they would position your brand, who they would pitch to, and my favorite part - how much they think it will sell for!
This can take some time but is worth it to choose the right banker or broker to get you…because you will be working with them A LOT!
Once you have chosen a banker or broker it’s time to get to work. I candidly never worked so hard in my life…but it was worth the effort.
Dial in your marketing materials to sell your online business
The next step is to get your CIM or deck put together- this will be painful for most. For the select few that have a firm grasp on their financials, it won’t be as bad, but still be painful.
If you don’t have a bookkeeper and accountant that creates accurate monthly p and ls….STOP, you will not be able to sell your business. Having impeccable books and the ability to update them as the process goes on is the most important thing to getting a deal done.
It took me roughly 2 years of prep to get to a place where our books were dialed in and could be updated at any given moment. This is the type of prep work that you have to do to get a deal done. And quickly!
Stay organized and sell your business fast
One of the most pivotal things I did pre-market, was setting up a Monday dot com board. Well, I set a lot of them up. I then uploaded all of my most important documents…All of them! I organized them in a logical way that I could actually search through. This way, when we went to market, I could present any document to a buyer, lawyer …whoever. I don’t care if you use google drive or Dropbox, but you need to have your documents in a place where they can easily be presented.
This homework will give buyers confidence in your business and help you close faster.
"Speed is a big part of a successful close, time kills most deals"
I gotta take a step back, I feel like I’m lecturing
Have fun as you sell your business (Even the fastest sale takes time)
Selling your e-commerce business should be fun, and exciting and hopefully bring you a life-changing amount of cash!
I wish I could say it won’t be exhausting, both emotionally and mentally but if you're ready it will be worth it. I hope!
Once you provide your team with all their requested financials and information about the company. They will start marketing your deck and update you with any traction. I took it upon myself to try and find potential buyers as well. I’m glad I did!
At this point, you will start to get a rough idea of what your business may be worth and what type of deal structure you may be looking it.
Everything is negotiable! I found it 100 percent transparent, candid, and just open was insanely powerful to build trust and find a buyer that I wanted to sell to. Because both parties have to be happy for a deal to be considered a win.
Collecting accurate data through the selling process and hitting your forecast is critical to getting a deal closed
If you have received an LOI, it means your getting close but are far from closed. At this point, for my own store, I focused on collecting accurate data, hitting the sales forecast I set out, and lastly providing the data requested insanely fast.
The best thing I did in the selling process, was what I did years before I decided to sell the business. I put together a detailed operating manual and hired experts to run each part of my business. This gave me tons of free time to focus on providing the buyers with the information they needed.
If you are still working 40-plus hours a week in your business and need to hit the forecasted numbers, it's going to be difficult to do both. Selling your online business is like having a full-time job and I treated it like one. '
Due diligence doesn't haven't to be difficult
I truly believe every small business owner should set up their own business for sale. You never know when you may want to sell and it is so much easier to make your business sellable from the first day you start selling online versus 3 or 5 or 10 years into running the company.
I took a lot of time before I had my second child to make sure the business could operate without me, this was my secret to being able to provide all the information for due diligence quickly. A buyer will know you're serious and have a great business if you can provide info quickly and accurately. It only took me 2 kids to get my systems in order, but I am glad I did well before I went to market.
Be clear on the transfer process and what you want life to be like after the sale
Most of my offers had some contingency that wanted me to stay on, so it was incredibly important that I sold to someone that I could work with and for in the long term. You may get a number of offers and some may offer a better price but make sure you take into account the likelihood to close and ease of transition.
There is so much that goes into selling an online business and everyone's experience is truly unique. Have fun with it, it's an amazing learning process and can provide more cash than ever running a business ever could!