5 Killer Exit Strategies to Sell Your Online BusinessEditorial Team
Contributed by Blake Hutchison CEO of Flippa.com
You’ve invested time and money into building your online business from scratch, but now you’re ready to embark on a new adventure.
Perhaps you want to free your schedule from the commitment that comes with managing a digital asset.
The thought of traveling the world sounds enticing. Spending more time with family is your priority. Or simply you no longer have the passion for it — and that’s okay.
You may be considering selling your business, and naturally, the thought of it may cause your chest to tighten just a little bit.
But it doesn’t have to be scary or overwhelming.
With these five strategies, your pathway to exit can be smooth and rewarding.
All you have to do is follow the essential steps to ensure a seamless transition.
Valuate Your Business
Whether you’re selling a blog, eCommerce store, or app, it is important to understand how much your business is worth. After all, you’ve spent hours putting in the work to sustain your company and it’s only natural that you sell it for its true sales value.
An accurate valuation will provide you with a current market value and also assess your business’s performance.
It’s important to keep in mind that there is a possibility that your business may be worth more or less than originally anticipated.
Doing a valuation also serves to prompt business owners to reflect on their business operations and costs and cast the information from an objective perspective. In other words, the valuation is driven by facts and figures and that’s what buyers want to see.
An online valuation tool like Flippa’s is created with historical sales data from a wide pool of digital businesses and offers sellers instant price points and insights on how to improve sellability. With online businesses constantly evolving, you’re able to receive real-time updates at the tip of your fingers.
Understanding the Numbers
Website valuations can be calculated by the Seller’s Discretionary Earnings (SDE), which is essentially the net profit of the business.
Your valuation formula is then calculated as follows:
Annual Net Profit (Cash Flow) x Multiple (Years) = Website Value
The multiple is the number of years that the cash flow is worth.
Potential buyers sometimes view a company’s multiple as the amount of time they can expect to gain back the money they initially put down to purchase an asset.
For example, a content blog is up for sale for $3,000 with a multiple of 2x.
Assuming that revenue remains consistent, the buyer can expect to receive their money back in 2 years.
Of course, it’s important to note that this is only if income remains consistent. Putting in the work to ensure that your online company successfully thrives is important.
The first step of a valuation will give you the opportunity to increase your company’s value before officially listing it for sale.
Polish Your Business
Like a home being staged for sale, your online business should be ready for listing.
Put yourself in the buyer’s shoes and think about what you would look for before purchasing a business.
Perhaps you own an eCommerce business. It’s important that your website is easy to maneuver when customers visit your page. Make sure users are able to purchase a product without any hassle. Handle any supplier issues and ensure those dropshipping relationships are solid before transferring your assets to its next owner.
Is the drop-down menu working? Are visitors able to easily find the information they’re looking for on your blog?
UX (User Experience) is important.
Consider asking a friend or family member for feedback on navigating your site. If you have customer reviews, understand what concerns they have when visiting your online business.
You may find that you’ve overlooked a technical issue on the backend of your website and this can be an opportunity to fix your coding.
Your content blog may need a new SEO strategy to raise your monthly traffic.
Your social media accounts can use a good revamp with up-to-date content.
Additionally, consider offering seller’s financing to make your online business more attractive to potential buyers. Instead of directly financing yourself, reach out to a professional for legal guidance, someone who will clearly outline the loan terms and details of the contract.
If you have the capacity, don’t hesitate to hire someone that can help elevate your website to where it needs to be before it’s sold.
Think of all the possible elements of your online business that can be improved before selling it.
Doing your due diligence to ensure that your business is ready for listing can save you time when it comes to successfully selling in the long run.
Choose a Sales Method
So you’ve completed a valuation and scrubbed your website clean — now what?
Whether on social media or in person, consider announcing to your network about selling your business. Word of mouth gets around pretty quickly, and chances are someone in your circle knows somebody who is looking to purchase an online business.
If you’re selling your business to someone you know, bring in a trusted third party. This is especially important as the buyer will want to do their due diligence with financials. This will also provide them with the reassurance they need to make the best decision possible on their investment.
You may even sell to a friend or family member. Assuming your relationship with them is a close one, you can serve as a trusted adviser after the transfer of assets takes place. After all, you know the business in and out and can provide them with the necessary guidance to continuously grow the company.
Besides a general announcement online, email close connections to get the word out. You can also join online niche communities as these channels can serve as an opportunity to reach out to people who are curious and informed about your industry.
Unless you know someone directly in your circle who’s interested in purchasing your business, it may be difficult to find a buyer on your own. You can hire an expert seller like a broker who will attend to every stage of your business’s selling process.
Experienced brokers are well-versed on the current market and understand industry niches.
Search for a professional broker that has knowledge in the industry you’re looking to sell. They can offer you advice on what to look out for when selling a business and later guide you through the negotiation process.
Additionally, start thinking about your margins and how you want to sell your business. Map out the possibilities of who can end up purchasing your business. Think about whether you want a clean exit or are willing to stay on for a period of time to advise the new owner.
Prepare Your Business’s Documentation
Whether you’ve found a friend to purchase your business or matched with a buyer on an online community, congratulations because you’re now ready to hand over your baby to a prospective buyer!
Before placing your business for sale, it’s important to ensure that you have all the necessary documentation. Like a potential buyer sifting through a home’s proof of inspection, a buyer wants to know that your business has been nurtured and is in good condition.
Have your company’s proof of revenue ready from at least the past 12 months.
Provide any proof of tax returns, bank statements, balancing sheets, income statements, etc.
Be ready to answer any questions about revenue gaps to prospective buyers.
If your sales were lower during the summer months compared to the end of the year, perhaps the holiday season caused a spike in sales.
Think of a house being staged for sale. You want to be able to have all your questions answered during the open house. Your realtor should be able to verify how old the house is, what renovations have taken place, and details on the neighborhood’s community.
Naturally, having your questions answered will allow you to make a more informed decision on whether or not you want to purchase the house.
The same idea goes for your business. Put yourself in the buyer’s shoes and anticipate all the questions they’ll ask.
Gather any necessary information like insights on your website’s traffic.
Google Analytics allows you to track data from your website, social networks, and blogs. It’s crucial to have information on the number of visits to your website, source of traffic, visitor duration, geographic location, and more.
With proof of a verified track record, a potential buyer will be more confident in investing in your business.
Having your website data handy will also give you an opportunity to make any necessary changes to your website before handing it over to a buyer.
For example, if you notice that your website has barely seen any traffic within the past three months, maybe it’s time to start brainstorming a strategy to increase user traffic.
Consider why a certain blog post performed better in terms of readership. What kind of content resonates with viewers more?
If you have access to your company’s social media platforms, make sure you’re ready to hand over all the necessary account passwords and email addresses when time comes to transfer your assets.
When it comes to managing your business, it may be normal to lax during this period, but consider this a crucial time frame to nurture your company before handing it over to its next owner.
You’re Now Ready to Sell
Feel free to pop a bottle of champagne because you’ve just reached a milestone on your selling journey.
You’ve gone through the negotiation process with a buyer, accepted the offer, and now you’re ready to transfer your assets.
This final step will allow you to discuss the details of any online assets and cover any lingering questions. Depending on the business type, some offers may require further due diligence or finance.
You can now breathe a collective sigh of relief because your hard work has paid off.
That 2-month vacation is on the horizon. Your next online business awaits you.
More free time sounds enticing.
Enjoy. You deserve it.
About Blake Hutchison
Blake Hutchison is an accomplished entrepreneur and the CEO of Flippa.com. Prior to Flippa Blake was the general manager and chief revenue officer of Luxury Escapes and head of strategic partnerships at Xero. Blake was also the founder of GOOD44, a venture capital-backed specialty food marketplace helping small business owners target a new customer base.