Whether you are selling your online business because you have reached retirement, or you just want to go down a different road, there are some things you need to do to ensure that the online business is ready for sale.
Keep in mind that even if you take the proper steps, the sale of an Internet company can take from three months to over a year. Selling or buying an Internet company is a complex activity that requires one party to coordinate the activities of the seller and the buyer, and experienced business brokers have the experience and training to assume that role. In fact, many business transactions fail when the buyer and/or seller try to exclude the business broker from the sale. A business broker can help you with the selling process, every step of the way.
The first thing you should do to get your online business ready for sale is get a realistic idea of what it is worth. Many business owners mistakenly think the value of the company is based on revenue; instead, it is the cash flow and earnings before interest, taxes, depreciation, and amortization that determine the price. The future potential also plays a role in determining a company’s worth. You can get an assessment of your company’s worth from a number of sources, from local accounting firms to investment banking firms to regional business brokers. If you are selling an online business, it is best to get an evaluation from an Internet Business Broker. Business Brokers that specialize in the online industry can provide additional guidance and also consultations to help prepare the business for sale. From there, take the following steps:
Get your books in order – Buyers usually like to see at least three years’ worth of financial statements, and the more solid information you can provide (such as CPA compiled or audited statements), the more likely a buyer will be interested in your company. Pay specific attention to accrued expenses, depreciation and inventory, the balance sheet, and contracts with customers, vendors, partners, and employees. This is the most important step in the process for both the buyer and the seller. Having this information correct and buttoned up will speed up the selling process.
Make sure you have a clear understanding of the true profitability of your business – Provide clear documentation for all your expenses, including nonoperational expenses and expenses that you incur on an infrequent basis.
Look at all your contracts – Examine your supplier and customer contracts to make sure the terms and conditions will not expire or require renegotiation right after the sale goes through. If there are any contracts that serve little purpose or cause unnecessary stress or strain on the company, terminate them.
Record company policies and procedures – Ideally, you should create a policies and procedures manual that will help the incoming owner know exactly how to best run the company. This should include unspoken and undocumented techniques.
Review your leases – If you have real estate leases that tie your business to a specific location, make sure they do not require renegotiation or expire over the time you are planning to sell your company.
Solidify your workforce – If you foresee any personnel changes, try to make them before the sale goes through. A company with a stable employee base will be more attractive to potential buyers.
Prepare for the sale – Once you have gone through all the above steps, make sure you have a strong advisory team in place. In addition to an accountant and an attorney, hire a business broker. These advisors will guide you during every step of the sale, and they will help determine the type of buyer for your online business. These experts will also help you maintain confidentiality during the transaction.
When you look for a business broker, search for someone who has a detailed understanding of the buying and selling of online companies so he or she can effectively facilitate the transaction.