When you’ve had a measure of success with your ecommerce store, you might be ready sell.
One of the questions I’m asked all the time is how to go about selling an ecommerce store. An ecommerce storefront is a solution for many with home businesses. But at some point, you become successful enough, or you’re ready to try something new, or you’re just tired. No matter the reason, you want to sell your ecommerce store.
The process can take some time, though. There’s a lot that goes into it, and it’s not uncommon for a deal to fall through. You might be on the verge of two or three deals that don’t make it before something is actually finalized.
Before any deal can be done with any business, you need to have a valuation. This isn’t always as straightforward as it sounds. Part of the issue is that value is somewhat subjective and based on perception. This is true of stock values and it’s also true of business values.
Some of the drivers taken into place with a business valuation include:
- Financials: How easy is it to transfer the revenue streams to the new owner, and can the financial success of your ecommerce store be replicated? The stability of your income, and the length of time the business has been operating matter as well.
- Traffic: Any valuation of an online business includes traffic sources, including search and rankings. Additionally, it’s likely that any business valuation will dig into industry trends related to your business, and whether or not your situation is sustainable.
- Operations: This item delves into the realities of running the ecommerce store. How much time does it require? Is your inventory warehoused or drop-shipped? Do you need technical skill or knowledge? How much have you outsourced? And what is the employee situation?
- Customer base: Your customer demographics will be pored over. On top of that, you will also need to offer an analysis related to the cost of acquiring customers. The way you connect to customers, including social media accounts and email lists, are also considered.
- Market position: The ecommerce store’s position in the market matters as well. What are some of the unique advantages of your business or the products you sell? How have you positioned yourself against the competition?
There might be other factors considered in your ecommerce evaluation, but those are the main issues covered.
Any buyer (or their agent) will likely perform due diligence ahead of time, verifying financials and ensuring that everything is as you present it.
Another consideration when selling your ecommerce business is the value of any inventory you have. This calculation is usually made after the valuation. It can mean adjustments to the final sale price of the business.
When looking at inventory, it is usually valued at cost, although different methods of determining cost can be used. Sometimes the cost is figured using the original invoice, and sometimes it’s a percent of the retail price. There are other formulas that can be used as well.
It’s also important to realize that if you have old or damaged inventory, it might not be valued the same way. In general, the inventory needs to be considered sellable.
Use a Broker or Exchange
One way to make it easier to sell your ecommerce business is to use a broker or an exchange. A broker can guide you through the process, and help you present your base case to buyers. You might have to pay a hefty commission, but it can be worth it. However, you might have a lot of front-end work to take care of.
An exchange, like the one offered by Shopify, can provide you with a place to easily sell your ecommerce business. List your business, and it’s a good way to find interested buyers. In many cases, an exchange can make it easier to interact with buyers eager to take over a successful ecommerce website. Some exchanges can help smooth the transaction, without charging the same fees as a broker.
Once you agree on a sale price and you are ready to hand everything over to the buyer, it’s time to make sure you transfer ownership. There are documents to sign and agreements to make.
When you transfer your ecommerce business, you often agree to hand over the rights to associated social media accounts as well. Make sure you read the paperwork. If you are doing the sale yourself, consider having a trusted professional give everything a final look.
Selling your ecommerce business is a big deal. It can provide you with some ready cash, free up your time, and let move on to something new.