There may come a time when you want or even need to sell your online business. The thought can be overwhelming, especially if you don’t know where to start. But preparing in advance will help you make the most of your sale and get as much value as possible.
If you’re on the fence or wondering if your business can grab a good price, these are the types of businesses most commonly sold:
- Ecommerce stores
- Dropshipping sites
- Affiliate sites
- SaaS businesses
- Mobile apps
- Productized services
Why you might need to sell your business
People may opt to sell their businesses for lots of reasons. Often it’s because there’s a good opportunity; maybe business is good and you want to cash in while you can. But there are plenty of other situations that might push you toward a sale, including:
- A change in personal circumstances, like starting a family
- Taking time off to travel
- Readiness for a new business adventure
- Wanting the money to invest elsewhere
No one but you can decide when it’s the right time to sell your business, but it helps to know what you’re working with if the thought has been on your mind.
Preparing to sell your business: what you should do
Selling your business means getting your documents, paperwork, and finances in order so operations can continue to run as normal under the new ownership. The slicker you can make the transition, the easier it will be to sell your business and, ultimately, get a good price for it.
To ensure a smooth sale, you’ll need effective systems that are already in place and working, consistent and accurate data, and easy-to-manage, healthy finances.
It can help to have these three things in order before you even consider selling. In fact, they’re the bedrock of running a business, and it will never hurt to have them set up and ready to go from the very first moment you start trading.
Here’s how you can do that.
Collect accurate data
Accurate data will indicate how well your business is doing in a non-monetary sense. It will give potential buyers an idea about how much traffic your site gets, what kind of customers you serve, and how effective your marketing efforts are.
When collecting accurate data, think about:
- Tracking the traffic going to your site (including which pages are the most popular and the source of visits)
- Gathering information about your customers (including where they’re from, their interests, and previous purchasing history)
- Monitoring your conversion rates
- Getting data about your email lists and contacts (including how many people are on your lists and how warm they are as leads or customers)
Keep your finances up to date
Keeping accurate figures relating to your sales and expenses is crucial in determining the value of your business. This is probably the most important thing you’ll need when selling, so tracking your finances and documenting them correctly from the start will save you many headaches.
Rather than rushing to compile your figures just before you sell, do it right from the start. This will also help you stay on top of your expenses and give you a good insight into how well your business is doing. If you have the resources, get an accountant or bookkeeper to ensure you’re doing everything correctly. Having a second set of professional eyes on your numbers will help establish credibility when you’re ready to sell, too.
Create a standard operating procedure
Putting together a standard operating procedure (SOP) will help you define your systems and processes to potential buyers. It’s essentially a document that details how you handle various tasks, like choosing products, carrying out keyword research, writing product listings, optimizing for search engines, and creating content.
Similar to your finances, it helps to document these processes as you go. Instead of scrambling at the last minute to create a haphazard folder of information, carefully outline each process so the buyer can continue to carry out operations as normal. This will also help ensure they’re accurate and up to date. If you change a process somewhere along the line, be sure to alter it in your SOP as well to avoid the new owner leaning on old systems.
How to get the most value from selling your business
Of course you want to get the best price possible for your business—after all, you’ve spent time, money, and effort getting it to a point where you can sell it. There are some things you can do to help elevate the value of your business and make sure it’s in tip-top shape before the sale.
1. Clean up your SEO and optimize your site
Having a well-optimized website usually means more traffic and more potential customers. Making sure your website is optimized for well-searched keywords so it ranks high inGoogle search results will add to your case when you’re trying to sell. Solid SEO efforts also mean consistent (and often constantly improving) traffic numbers—something prospects will be pleased to hear about.
2. Create transferable deals with suppliers
Lots of businesses have struck up special deals with their suppliers—especially if they’ve been working together for a long time. If a deal has helped your business succeed or is a crucial part of your operations, it’s important that it continues after the sale (or that, at the very least, you mention that it contributes to your success).
If you can, make sure the deals you have in place with suppliers, manufacturers, influencers, and other partners will still carry on under new ownership. For example, if you’ve got a deal with a specific supplier who gives you a discount that helps increase your profit margins, make sure that’s carried over for the new owner.
3. Level up your year
Is selling your business on the horizon for you? If so, it’s time to ramp up your efforts. While you might feel like slowing down in the year before you sell (especially if you’ve got other ventures or adventures on your mind), keeping activity high and numbers strong in your final year will really help you get the best price possible.
The more profit you have, the more you can sell your online business for. So, if you know you want to sell in the next 12 months, start increasing your marketing efforts and streamlining operations to get a final big revenue push. Most buyers will scrutinize your last year of sales, so showing high numbers will increase your chances of getting a good price.
How much can you sell your business for?
Your business may be priceless to you, but there’s always a number attached. In fact, there are two parts to the standard valuation formula for an online business:
- Average net monthly profit (profit less expenses) over a period of at least 12 months
- The sales multiple
To figure out your sales multiple, use this formula:
[average net profit] x (20 to 60+) = listing price
For example, if your average net monthly profit is $15,000 and you go for a conservative 20 times sales multiple, the listing price of your business would be $300,000. If your business has huge growth potential and has doubled or tripled in monthly revenue month after month, you can go for a higher multiple (if you go for 60 times, your listing price would be a very comfortable $900,000).
This formula can work backward or forward. You can either sell your business for between 20 to 60 times your average monthly net profit, or you can identify how much you want to sell your business for and then figure out how much you need to be making each month to get that.
If you’re dead set on generating $500,000 for the sale of your business, you can safely assume that you’d need to be making an average net monthly profit of $25,000.
Where can you easily and safely sell your online business?
Ready to sell but not sure where to even start looking for a buyer? Here are the three main ways you can safely sell your online business.
1. Private sale
Much like selling a car privately, you’re in charge of finding potential buyers, transferring all the data, and conducting every negotiation. Doing it this way saves you the brokerage fee, but it can be time consuming, and you need to know your stuff and be good at negotiating to get the best results.
2. Broker sale
Broker sales instill the help of a third-party broker who is well versed in helping people buy and sell online businesses. To sell your business this way, you’ll need to hand over all the relevant data you have to the broker who will handle it from there. The information you need includes:
- Website traffic data
- Proof of revenue and earnings
- Proof of ownership of relevant domains, brands, and trademarks
3. Buying, selling, and flipping websites
The influx of online businesses has given rise to what are dubbed “flipping websites,” which are essentially marketplaces for buying and selling businesses. They work similarly to a brokerage, but already have a captive built-in audience and tend to charge lower rates than brokers or take a cut of the sale.
Popular buying, selling, and flipping websites include:
- Shopify Exchange
- Empire Flippers
- Side Projectors
Reduce the overwhelm by preparing to sell your online business
Selling your online business can feel overwhelming, but it can also be incredibly exciting—especially if it’s something you’ve planned for since the very start. Reduce the overwhelm by preparing everything you need upfront. Not only will this help you stay on top of your books and processes for your own sake, but it’ll also make sure you have an easy sale and get the best price.