Preparing for a Web-Based Business Sale: 4 Things You Must Consider
Today is a golden age for doing business online. Global eCommerce sales are estimated to reach $5 billion in 2021, which means that there are plenty of opportunities for entrepreneurs to carve their own niche in almost any industry.
However, when it comes to making a web-based business sale, things are often not as simple as looking at its monthly revenue and coming up with a price.
Numerous factors go into determining how much a web-based business is worth, and those that are less experienced with selling a business online might find it hard to get the asking price that they were hoping for.
Luckily, every part of selling an online business can be broken down into actionable steps that anyone can follow and execute, given enough time and preparation.
4 Things for a Web-Based Business Sale
So, to help you get started, let’s go over some of the most important things you must consider when selling your online business if you want to get the best price possible.
1. Figure Out Why You Want to Sell
Before you can get into technical details like figuring out what is a 409a valuation or where to look for prospective buyers, you will need to take a step back and look into your own motivations for selling in the first place.
That will not only help you become more confident that you’re making the right decision at this point in time but will also provide guidance about what selling approaches might make the most sense in your situation.
For many online business owners, selling their business isn’t something that they plan in advance and is purely circumstantial.
Perhaps you have unexpected personal expenses that you need to cover quickly? Or maybe you have a business opportunity that you feel is worthy of investment only if you can act fast?
In these instances, time will be an essential factor, and you might have to make concessions in the way that you sell or approach buyers.
However, if you’re selling because you feel like the current economic climate would provide you with the most value, you can allow yourself to be more patient and explore all options before settling on a price and a buyer that you feel gives you the best value.
Sometimes, you may feel like your business has reached its peak and is starting to plateau, which might also be a good time to sell, as its value may start decreasing over time.
Finally, you may simply find that the time it takes to run the business just isn’t worth it anymore, especially if you have other projects that you want to focus on. In this case, selling quickly might also be preferable so that you can spend more time on what you feel are your most productive pursuits at the moment.
While this step may seem arbitrary, knowing your motivations and your expectations before going into the sales process itself will help you keep a cool head, maintain focus, and avoid making crucial mistakes that might leave you unsatisfied with the results that you are able to get.
2. Spruce Up Your Website
When you’re selling your online business, you are not only selling an asset that makes money but is also selling all of the technical aspects that are part of making it run.
It’s likely that your website plays a central role in making sales, which is why making it look more appealing to buyers is essential if you don’t want to run into hurdles halfway to making a sale to an interested buyer.
The good news is, if your site is already making money, it doesn’t require a complete overhaul and might only need a few key upgrades to instantly become more appealing to prospective buyers and simultaneously raise the price that you can potentially ask for.
Today, online buyers are more sophisticated than ever and expect a certain level of convenience when browsing a website. Google is also clamping down on those that don’t cater to mobile audiences and has even started punishing non-responsive sites.
Therefore, you should make sure that your website is based on convenient and responsive web design, is lightning fast, and has easy-to-understand navigation that’s created to match the preferences and habits of your audience.
3. Determine Your Business Value
Once you make your website appealing to potential buyers as possible, you can start thinking about how much your web-based business sale could potentially be worth.
Most business owners tend to overvalue their business because the remaining objective about its worth isn’t easy.
They’ve poured months or years into making the business generate a profit, so when setting a value in their head, they usually aren’t able to objectively look at what the business can offer to prospective buyers.
Luckily, you don’t have to come up with the number on your own – there are a few different methods you can use to come up with a realistic price that would at least be in the ballpark of what you should eventually be able to get.
One of the simplest approaches is to multiply your average monthly earning by a set number of months and set that as the price that you want to get.
The specific number of months that you should multiply will depend on the industry that you operate in, the type of web-based business sale that you are making, how stable your sales have been in the past, and whether you are on a rising curve or plateauing.
If you have a larger and more established business that has a relatively stable revenue each month, you can use a more advanced method called discounted cash flow.
In many ways, this method is similar to the monthly average multiplier method discussed above, but it also takes into account the worth of the dollar today and in the future, calculating that difference to determine a fair price to pay today against the potential future earnings.
For most, this method might not be the way to go, not only because it is more complicated but also because it requires the ability to accurately predict the earnings for your business, which is not always easy when the majority of your sales come online.
Finally, if you’re unsure about how to use the above calculations in your situation, it’s always a good idea to look for similar web-based business sale listings on popular listing sites.
4. Think of How You’ll Attract Buyers
You can spend a lot of time and money preparing your online business for a sale, but all of that won’t matter if you can’t find the right buyers who are interested in buying it.
Sure, there are plenty of different approaches for selling a business online, but not all of them will be applicable in your situation, so you need to focus on the methods that are the most likely to deliver the results that you want and attract the buyers that might be looking for the type of business that you are selling.
But what exactly are your options?
Well, many novice sellers don’t want to pay commissions to a broker and thus end up trying to sell the site themselves.
They either attempt to list their business on sites like BizBuySell or look for a seller on their own, but both approaches have drawbacks that can cause a lot of headaches without producing the expected results.
When you list on a website like BizBuySell, you are competing with hundreds or even thousands of similar online businesses, so your chances of attracting a buyer that is a good fit have the resources to make a purchase, and is genuinely interested are quite slim.
In the end, you might engage with a few people, but you will likely find that the talks don’t reach anything productive and end up costing you time and effort.
Alternatively, you could take a proactive approach and try to reach out to a strategic buyer or a bigger competitor, offering to merge your business into theirs and buy you out of your own company.
While that does sound appealing, and can be very lucrative, it’s actually quite rare, especially when you’re the one trying to make the sale happen.
Even if you are able to find a more prominent company that shows interest, going from a preliminary offer to a finalized deal is a long and arduous process. Some companies end up spending years finalizing the deal only to have it fall through at the last minute for a variety of seemingly unrelated factors.
Therefore, your best bet, in the long run, is to employ the services of a professional broker who has the connections, the expertise, and the understanding of the industry that you are operating to match you with the best buyers and give you the best chance of achieving the goals that you set out.
Whether you’re selling your entire business, or just want to figure out how to sell a domain name that has a lot of value in your industry, having a professional broker on your site will help you come up with a much better strategy and set more realistic expectations, while leveraging what you have to get as much from the sale as possible.
Sure, you will have to pay a commission, but the time you save by allowing a professional to handle the sale, not to mention their ability to get the best price, will be well worth it in the end.
Before you can begin the preparations for the Web-based Business Sale, you need to determine why you want to sell in the first place, as that will dictate how patient you can be, what price you can expect to get, and even where you should look for buyers.
Make sure your site is set up for success in today’s digital world by making it fast, mobile-friendly, and has convenient navigation that’s designed based on the preferences of your audience.
Finally, determine the price and figure out whether you want to list the business for sale yourself, try to reach out to prospective buyers directly, or opt for the services of a professional broker.