There are many reasons why people decide to start an online business, but for many owners, there is a clear goal of one day selling that Internet-based business for a profit. If you got your online business off the ground with plans to grow it and one day sell the company to recoup what you invested and make a nice return, it’s important to keep that eventual sale in mind as you make decisions from day to day. All too often, online business owners end up over estimating how much their companies are worth. It’s easy to understand why, of course. Putting in so much time and money is a labor of love, making companies feel incredibly valuable to their owners. Plus, owners typically see the potential their company has in the future and try to assign a dollar value to that. The truth is that if you want to one day sell your online business, it’s important to periodically stop and analyze your business not from your own perspective but from that of a buyer. Doing so will allow you to remove emotion and take a real look at what someone who might be interested in buying your company will see when they examine your online business. Here are five things to consider from the viewpoint of a customer:
1. Your Management Team
You will likely exit your online business once the sale is complete, but your management team may stay on to continue to guide the day-to-day operations of your online business. What credentials do they bring? What value do they offer a prospective buyer? Are you doing enough to empower them to make decisions, so that they can drive the business in your absence? How can you develop them to make your business stronger and more attractive to a prospective buyer? Do you need any new officers? Do you trim your team of unnecessary positions? Find someone more qualified for a job? Take a good long look at your management team and improve as necessary.
2. Your Competition
How stiff is your competition and what have you done to differentiate yourself? A prospective buyer is unlikely to be interested in an online business that has nothing proprietary or unique to offer. Just having a great domain name probably isn’t enough either. You need to be able to show prospective buyers that you are offering something that no one else is or that you have carved a unique niche that your competition will not be able to penetrate with the same level of effectiveness.
3. Your Customer Base
Who is buying from you or using your services? Are all of your eggs in one client’s basket? If your online business exists mainly to work for one large company or offers a product or service that appeals to only a very tiny segment of the population, buyers may be worried about purchasing your business. After all, the market could easily dry up or that one big client could suddenly vanish. Spend some time thinking about whom you’re selling to and how you can create a more stable customer base to benefit a potential buyer.
4. Projections Based on Fact
It’s rare to find an online business owner who won’t put a positive spin on their company’s financial future. Optimism is what keeps you going and continuing to strive toward your goals, but just thinking that your company is going to have a great few years ahead is not going to impress a prospective buyer. You need to make sure that those positive projections have a basis in reality. A history of mild to moderate steady growth over the last few years will be far more impressive to a prospective buyer than your promise that the company is on the verge of exploding with booming sales.
5. Realistic Valuations
Valuing an online company can be tricky, as there are often few assets like real estate and equipment associated with Internet-based businesses. Most of your company’s valuation will come from your sales and profit figures. While potential for growth may give you a small boost, you can’t expect your company to be worth much more than what the financials indicate. If you don’t like the number you come up with based on fact, think about what you can do to improve sales and profits over the next few years to increase the valuation that you can arrive at. If you’re hoping to sell your online business now or even in the distant future, an online business broker can be a valuable asset. A broker can help you analyze your company and give you opinions from a buyer’s perspective, so that you can plan for the future sale and have the best possible chance of selling it at a nice profit. To speak to an online business broker about selling a business, contact our team today.
