Selling an online business is both exciting and scary. You can ease the process by carefully planning each step. What steps must you take when doing so?
Gather Important Documents
Before listing your business for sale, you should have detailed records in order. These documents will give buyers confidence and allow them to accurately assess the business. Important items to prepare include:
– 3 to 5 years of financial statements, including profit & loss, balance sheets, and tax returns
– Customer lists, contacts, and traffic/sales analytics – Explanations of processes, systems, tools, and intellectual property
– Agreements with outside partners, such as the landlord
– Legal documents related to the business
Setting a Price
When setting an asking price for selling your online business, there are several factors to consider. First, calculate the annual profits or cash flow the business generates. Estimate maintainable earnings by averaging profits over the last three years. Multiply this number by an industry-standard multiple, which is usually between three to five times for most online businesses.
Additionally, consider the assets and intellectual property of the business. Evaluate things like the website itself, branding, trademarks, patents, inventory, and other assets. Estimate their tangible value and factor this into your overall asking price.
You’ll also want to assess intangible assets like brand awareness, authority, web traffic, email lists, social media followings, and repeat customer loyalty. These drive future revenues and should increase your valuation beyond just profits times a multiple.
Finally, research asking prices for other similar online businesses that have recently sold. Let market comps guide and validate your price determination. Aim high but realistically to allow some negotiation room. Justifying all valuation factors with evidence will make buyers more likely to agree to your ideal asking price.
List with a Business Broker
Business brokers essentially act as sales agents to facilitate deals between buyers and sellers. The services they may provide include:
– Valuing your company to set an alluring yet feasible asking price
– Listing and marketing through their contacts and industry knowledge
– Qualifying and screening buyers before forwarding offers
– Handling negotiations to net you the maximum sale price
– Assisting with paperwork, legalities, and escrow closing
Typically brokers charge a percentage commission (up to 15%) from the final sale price. Weigh the tradeoff between this fee and the effective convenience of letting an experienced broker manage the deal. You don’t need a business broker, but it is helpful to have one.
Advertise and Field Offers
Aside from engaging a broker, you can promote your listing through various online channels. Create posts advertising the fundamentals of your business through relevant websites, newsletters, and forums. Make use of your existing customer network by announcing the sale as well. Then patiently await serious prospect inquiries to come in.
As you receive offers, vet each carefully based on elements like price, payment terms, contingencies around ownership transfer, timing guarantees, conditions, buyer financing, experience level, and more. Moving too quickly into a suboptimal deal may cost you, so decline politely if needed.
Prepare for Ownership Transfer
With an accepted offer in hand, now facilitate the legal transfer of your business entirely to the buyer. Work constructively through the buyer’s remaining due diligence questions and demonstration of proof-of-concept items. Engage lawyers to handle the business purchase contract and associated documents. Follow your lawyer’s counsel to protect yourself sufficiently. Finalize the transition of all systems, data, processes, and assets based on the agreement.
Complete Closing and Transition Support
As closing day approaches, review all contracts, payments, and procedures with your lawyers and financial partners to ensure readiness. After successfully closing the deal, focus energy on supporting the buyer with a smooth transition for as long as was agreed upon. Be available to introduce your prior relationships, train on tools and software, explain methodologies, consult on the business, or assist per the buyer’s needs during the initial transition phase.
Following these key steps can lead you through the multifaceted process of selling an established online business. With diligence and care, your likelihood of a successfully completed deal greatly increases.