Selling your online business is a serious decision for any owner and the process of seeing a sale through to completion can be intimidating for first-time and experienced sellers alike. Hiring a broker a good step in helping to ease the effort but as with any major endeavor, it pays to be well prepared from the outset. Having successfully sold hundreds of online businesses, we’ve put together some guidance below on how sellers should best prepare for the sale process.
Know your numbers
Understanding the financials of your business from the outset is vital to transaction success. Before you initiate a sale process you should be clear on every aspect of your site including all sources of revenue, cost(s) of sales and operating expenses. You need to be in a position to compile an accurate profit and loss statement for your business as this will form the basis of prospective buyers’ valuation. Here are some things to think about (not all may be relevant to your site):
- Sources of revenue – Direct sales, AdSense, Affiliate programs, Direct ads, etc.
- Cost of sales – Advertising & promotion, COGS, Credit card processing fees, Outside services, Shipping & delivery, etc.
- Operating expenses – Refunds/Chargebacks, Hosting, Outsourcing, Subscriptions, Web Design, Employees, etc.
As part of the above you should be looking to collate all the financial and supporting documentation to prove the financial performance of your business. Not only will this verify the numbers you provide at the outset but later down the process during due diligence, the prospective buyer will want access to all of the documents. As part of the preparation for sale, pull these files together in one place.
Reason for selling
One of the most important pieces of information for any transaction process is the seller’s reason for sale. Know your reason for selling – it is one of the first questions a buyer will ask, so you need to be able to articulate your motivation. Your answer needs to be honest and, ideally, shouldn’t express any urgency. Buyers expect to hear reasons such as selling to move into another niche, financing an offline endeavour or paying down debt etc. Red flags are raised if the sale rationale seems ambiguous, unsure or connected to the underlying performance of the business.
Run the business
Don’t forget to run the business – the sale process usually takes several weeks by which time you will likely have another reportable period of numbers. Time and again buyers ask for these during marketing or due diligence and it’s a far superior message to report stable or improved numbers than ones which have slumped from seller neglect. It’s an unfortunate fact that a good month of numbers won’t improve the sale price but a bad month will open the door for renegotiation.
Integrity is important
The common thread running through all of these steps is credibility. If you want buyers to move forward, you must show respect by being open, honest and accurate about all things, both good and bad. This starts with the information that is shared to summarise your business, but is imperative with all documentation and dialogue exchanged and will be critical in due diligence through closing to ensure the transfer stays on track. Misrepresentations and conflicting statements will always be found out (we’ve never seen it otherwise) so it’s best to be completely open and honest from the outset.
If you want to know more about the sale process, please read our overview here or watch the video here. If you have further questions or would like to get in touch with a broker, please email us at firstname.lastname@example.org.