Have you built a profitable eCommerce business that you’ve put your heart and soul into and made the decision to sell it? If so, then congratulations. Building your eCommerce business was difficult, and selling it will be no easy feat either. In this post, you will learn the various factors to consider to realize the highest value for your eCommerce business.
What is your eCommerce Business Worth?
Profitable E-commerce businesses are highly valuable. The valuation of these companies can range from a few thousand dollars to 10 figures. It is largely based on several factors, but most importantly profitability. The average eCommerce business with annual profit under $750,000 with growing sales and profitability will sell for between a 2.75 to 3.5 multiple. Business with profitability above $750,000 generally range from a 3.25 to a 4x+ multiple. There are many other factors that go into the valuation such as trends with the business, industry, marketing diversification, repeat customer base, etc.
How to Increase eCommerce Business Value Before Selling
Here are some of the ways of increasing the value of your eCommerce business before selling:
- Integrate Across All Channels. Make sure your business strategy is diverse and includes traffic from as many eCommerce marketplaces as possible: Amazon, eBay, Walmart, Jet, etc
- Invest in Mobile: Make sure that your website is enabled for transactions across all types of devices and the experience is responsive to that device. Mobile ecommerce sales now exceed sales placed via desktop computers.
- Increase the percentage of repeat buyers via email marketing, social, and retargeting. Having an existing customer returning customer base lowers risk for investment.
- Partner with suppliers of inventory and have backup suppliers to ensure a steady flow of orders with no dips in trending due to out of stock items.
- Sell internet only brands or create your own private label brands. Creating private label also increases profit margin per product in most cases.
- No current or pending legal concerns.
- Clean financial documents and tax returns. Nothing will scare away a buyer faster than a murky financial history. Having this well documented supports a higher multiple.
- Well documented processes and systems of running the business. Ease of hand off is taken into consideration for a new buyer investing in a business.
- Reduce all unnecessary overhead. Anything that increase the profit margin on the business will have an effect on the potential value for sale. Reducing extra staff, vendors, marketing efforts not returning profit, subscriptions, etc will have a material impact on profit margin.
Selling Process of an eCommerce Business
The process of selling an eCommerce business depends on multiple factors but the most important is the size of the company, industry and financial history.
The selling process of an online business is typically a 10-step process:
- The Decision to Sell
- Business Valuation
- Listing Agreement
- Sales Presentation and Due Diligence Preparation
- Secure a letter of intent (LOI) and/or offer to purchase (OTP)
- Due Diligence
- Asset Purchase Agreement
- Transitional Support
Sell Your eCommerce Business with Acquisitions Direct
Acquisitions Direct is a nationally recognized Internet business brokers firm that brings together Buyers and Sellers of Internet based businesses. With hundreds of successful business transactions in the past 20+ years ranging from $250k to over $30 million, our team of experienced business brokers have what it takes to ensure a smooth brokerage process for our clients. Our brokers and advisors have all created, managed and sold their own online businesses giving them the experience needed to guide you every step of the way.