Even if it’s not currently on your mind to sell your business, it may be a reality in the future. When it’s time to sell your online business, you don’t want to be left scrambling to get everything together at the last minute.
Even if you hang on to your business for a long time or decide not to sell, the steps in this article will help you set up your business to run more efficiently than over 90 percent of online businesses. This will give you an edge over the competition!
The reason for having your business fully packaged and ready to sell is that your circumstances can change quickly. Sometimes it’s the illness of a family member or yourself; other times, your priorities change, and you want to use your success to travel for a year.
Maybe you have an even better business idea to re-invest your money. Whatever the change may be, having your business prepared to sell at a moment’s notice will open up opportunities.
This article will walk you through a step-by-step process when it comes to preparing to sell your business online. There are tasks to complete early on, determining the value of your business, deciding the right time to sell, and things to do before selling. If you don’t plan to sell, there are still some ‘best practices’ you can embark on to help it run more efficiently, so you have to do less work.
These are the types of online business that are typically listed for sale:
- Display advertising sites
- Amazon affiliate sites
- Affiliate sites
- Dropshipping businesses
- Shopify or e-commerce stores
- Lead generation sites
- Mobile apps
- Product services
Preparing Your Business for Sale at the Beginning
Before you can ever think about selling your business, there are a few things you need to get in order: systems for effective day-to-day operations, consistent analysis data, easily managed finances.
Having a wealth of historical performance data will support the asking price for your business. Buyers want to see numbers and historical performance. The sooner you get this information organized, the higher you can value your business.
Benefits of This Process for Business Owners
- Streamlining business operations because your systems and processes are in order
- Solid data and statistics to show business performance
- Identify weak spots in your business and where you need improvement
- Automated process to scale and grow your business
It’s essential to prove to prospective buyers that they are investing in a profitable business. No one wants to take on the liability. If you go through this process early in your business, you can make more money when it’s time to sell. The longer it’s been profitable, the higher the asking price.
In the Beginning
Here’s a list of things you should implement as soon as possible in your business operations:
When buyers vet an online business, they want to know how much traffic the business is getting and where it comes from. Tools like Google Analytics or Clicky can give you the ability to track site traffic.
You want analytics from a tracking tool because anyone can fake traffic data in a spreadsheet. So, you need to prove the traffic is real and organic. It also proves that your leads are real users, not spam traffic from Siberia.
This information also helps you run your business because you get a consistent view of performance. In addition, when you know what is or isn’t performing, you can conduct testing and improve your performance rates.
Your business accounts should be clearly separated from your personal account. If you are using your personal bank account for business expenses, stop now! It’s a messy way to manage business finances and an absolute nightmare for showing profitability to a potential buyer.
Buyers want to see proof of profits when assessing your business value. If you can’t provide clear account information, or your books are a mess, you can’t prove anything.
Good bookkeeping is also essential when it comes to tax time. You need financial statements and an overview of profits and losses. If you’re not good at keeping books yourself, consider hiring a bookkeeper or accountant. There are options for bookkeepers online that handle things remotely over cloud-based software.
Create Standard Operating Procedures
You should have an operating manual that outlines your daily tasks: selecting products, keyword research, product listings, SEO optimizing, content creation, bookkeeping, etc. Create separate operational procedure manuals for more complicated tasks.
Creating these procedures turns your business into a well-oiled machine. This is great for buyers who simply want to assume ownership of a fully operational business. It’s also great for you because it will allow you to be more hands-off in your work.
Determining the Right Time to Sell
Figuring out when is the best time to sell your business will be determined by what you’re looking to get out of the sale. How much money you need to make matters too. If you need to offload your business to take care of a family member, you might be less concerned about the sale value and more concerned about a quick sale.
On the other hand, if you want to spend the next year traveling or retire completely, you might need more money.
Establish Your Goals for Selling Your Business
Then you can use a valuation formula to help you determine how much net profit you need to make on the sale of your business.
Two factors are involved in a valuation formula:
- Net monthly profits over 12 months
- Your sales multiple
The formula is: [6-12 month average net profit]x(20 to 60+) = Listing Price
This is a simple version. There are several more detailed valuation formulas to calculate the value of your business online.
Things to Do Six Months Before the Sale
If you are considering selling your business, take some time six months before listing and clean up any issues that could impact your business’s value.
Fix Your SEO
Check for duplicate content, take some down, rewrite old content, clean up your site links.
Solidify supplier contracts so there’s no painful transition to a new owner, outsource work or recruit new employees, develop a marketing plan.
Things to Do Three Months Before Sale
- Review and update your standard operating procedures.
- Update social media marketing
- Ensure your terms of the service agreement is up to date
- Review your analytics and finances
How to Sell Your Online Business
There are two ways to sell your online business, each with its own advantages and disadvantages.
Privately selling your business can save you a lot of money by avoiding realtor fees. There are, however, some downfalls to selling your business privately:
Unlike realty brokerages, you probably don’t have an ongoing list of potential buyers. The sale can take a lot longer if you don’t have connections.
it’s common to encounter many prospective buyers who aren’t really serious or try to buy your business for way less than it’s worth.
Negotiating a sale price on a business you’ve poured your heart and soul into is tough.
It’s easy to miss things when your business changes hands, and it can become a long, painful process if you don’t know what you’re doing.
Use a Broker
There are online business brokers who specialize in selling online businesses. The most common reason for choosing a broker is that you give them all the pertinent information on the business for sale, and the broker does everything else. Examples of brokerages that specialize in online business sales are FE International and Flippa.
Brokers usually have contacts, and pre-vetted buyer lists at their disposal, helping them make a quick sale. They also have a process to follow to make the transition of the business seamless. They might charge more, but they save you a lot of work.
That said, there are still some downsides to using a broker:
- There aren’t a lot of experienced brokers for online businesses
- You have to spend the time to vet the broker
- Brokers who do their job well are expensive. Some charge as much as 15% commission on your sale.
Final Tips for Selling Your Business
Talk about your business failures. This seems like odd advice, but showing projected growth and potential will increase the value of your business. There are a significant number of buyers who like to buy underperforming businesses.
Most want to grow the business. However, you see growth potential, and an opportunity for growth will sometimes inspire buyers to make you an offer, with a bonus to be paid when it reaches its potential value.