You may be thinking that because you have strong financial measures and good website traffic, then your online business is an attractive sell, but how easy is it going to be for a buyer to simply step in and start running your operation?
Transferability refers to the ease at which a business changes hands. It’s one of the top factors buyers look at when seeking new opportunities, and something sellers often overlook.
Here are some of the operational aspects that we’ve found are hugely influential in both attractiveness and valuation of a business.
Your Processes
Your day-to-day operations may be second nature to you at this point, but how clear would they be to a new person stepping in? If your business is to be “transferable,” then you should examine your processes and make sure someone else can pick them up with ease.
A business with streamlined daily operations – both big and small – is a much more attractive prospect to buyers. You might not know who your eventual buyer is going to be, but think of it from the point of view that it could be a someone like a former corporate executive (a common buyer these days) who wants to own a digital venture, but doesn’t have the knowledge to start one on their own. The easier it is for them to take the helm, the more likely you are to negotiate a better price.
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Document Everything
This includes all processes, who does what, when and how, as well as how much time you spend each day on running the business.
We encourage anyone who owns an online business to treat it as a genuine business (not just a hobby) from the beginning by keeping good records of everything. While owners are usually good with financial documentation, it’s often records of the day-to-day running of the business that are missing.
Process-mapping is a great tool for documenting your systems. For example, if you own an e-commerce store you can map out the entire system you have in place, including:
- Where and how is your stock sourced?
- How does it get from the supplier to warehousing? Or is it drop-shipped?
- Who fulfills orders and how?
- How does the fulfiller know when there is an order to fill?
- Who takes care of shipping and how?
- How do you know when to reorder and how is that done?
It may be helpful to create an overall process map for each process in your business, then outline in detail the standardized procedures for each in associated documents. It might sound time-consuming or irritating to a busy business owner, but it will save you time in the long run and potential buyers love to see good documentation.
How Replaceable Are You As The Owner?
It’s important that you are accurate and honest about your role and how much time you spend each day on your business. . In fact, it’s always a good idea to build a business as though you are going to be removed from it some day. This tends to force you to create better, more replicable processes.
For example, what happens in your business if there are any technical questions or if a customer has a complaint? If those responsibilities usually fall on you, then make sure you create documentation such as FAQs to take care of technical questions, and procedures that someone else (perhaps a team member), can use to resolve customer complaints.
One thing you should always keep in mind is that there are a number of buyers out there who are looking for a profitable business where they don’t have to do a lot of everyday work themselves. These buyers will want to be able to have staff take care of the everyday running of the business, including essential administrative tasks. They want to be assured that having you there is not a requisite for the successful operation of the business.
If you’re a business with a few staff onboard, it tends to be an easier and more attractive prospect for potential buyers if they’re able to come in and work with the existing team. This saves them from having to find and train others at a time when they’re learning the business themselves, and ensures that things can keep ticking over at the time of sale.
If you have a reliable team who follow your documented processes, know how your business works and are prepared to stick around in the business, this makes you a more buyer-friendly prospect.
Do You Have Reliable Suppliers?
No one wants to spend too much time managing suppliers—if new stock is needed then it’s needed now, and if you usually need to spend any time dealing with excuses or lack of reliability, now is the time to sort that out one way or another. Ideally your business should have good, efficient working relationships with all suppliers and no “flies in the ointment” holding up your processes.
Easy To Run Remotely
The businesses we sell through FE International are attractive to buyers because they can easily be run remotely. This means that you should not have reliance on any kind of physical premises to keep the business going.
What makes a business easy to run remotely? Definitely those documented, replicable processes we talked about earlier, but here are a few other thoughts:
- Communication systems – While a new buyer may have their own preferences, it’s always helpful for them to see how well remote communication has been working for you and what systems you use.
- Automation – Wherever possible, have systems that can run on autopilot. For example, recurring billing systems and how orders are placed and fulfilled. For everything else, as mentioned, make sure there is clear documentation.
- Easy file sharing – How do you share those systems and processes with team members? Email and hard-drive storage is inefficient, but documents stored on the cloud with easy access for all make it simple.
- The right hires – Not everyone is cut out for remote work, but it’s a good start to have self-motivated people on staff who are willing to take initiative.
Final Thoughts
The process of selling your online business should begin long before you’re actually ready to sell it. The most successful sales are those businesses that have prepared well in advance and ensured that all aspects, including their business operations, are in a transferable state.
If you’re thinking about selling your business and believe you could easily step aside and let a new owner take over, talk to an expert to be sure your operations are transferrable. We can help you sell your online business, from preparation to closing, and efficiently obtain the maximum value.