The owner of Coupons Plus Deals knew he wanted to sell his business, but he was skeptical. He had tried to sell his content website through a website broker before and the interest from potential investors – and the results – were underwhelming. He quickly realized that just because you know how to run a business, doesn’t mean you know how to present your business in the best possible light to buyers. When selling your online business, it is important to have the right information available to make your business stand out among the rest. Kim Ngoc, Coupons Plus Deals content manager, sat down with us for a virtual interview to discuss their exit and what she believes makes for a successful M&A process.
The Coupons Plus Deals Exit Journey
Coupons Plus Deals climbed its way to the top of the discount and voucher coupon niche and found its market fit early on. The website attracted hundreds of thousands of consumers each month who were looking to get the very best deals online. Not only did the site attract a substantial customer base, but Coupons Plus Deals also had strong site rankings, with a robust SEO foundation and traffic that was expanding. The business was at its all-time prime when he decided he wanted to go in a different direction and focus his efforts on another project.
In the fall of 2020, the owner decided that divesting of the business was the right next step. He and his team were ready to find a new owner who would care for the business. They wanted to pass the baton to someone who not only was interested in the day-to-day operations, but also in growing and scaling the business to build on its already-promising foundation.
He first considered selling the business a couple of years ago, but after not receiving the response he was looking for when partnering with a broker, he decided to pause, reflect and make some changes that would position the business better for a sale. He realized from his previous experience that his business needed be handed off to a buyer that would nurture it to the level it deserved.
It was this experience with the other brokerage that prompted him to realize that there is more to preparing an online business for sale than he initially thought. How does a business owner ensure that they are presenting their business in the most favorable manner, one that will appeal to buyers? Given the nature of his business, there were some key areas where showcasing verifiable metrics would provide immense value – such as those related to the website and business revenues.
Additionally, receiving an accurate valuation of the business would best position Coupons Plus Deals for a profitable sale. By providing potential investors with a comprehensive package of information on the business, prospective buyers would have the ability to make a more informed decision and feel more confident in their decision to acquire the business.
Once he ended the exclusive partnership with the broker he decided it was time to try again with an M&A firm, as the business was now around three years old. By this point, the business had grown. Traffic and revenue had increased and Coupons Plus Deals had secured more prominent business partners.
Preparing for the Acquisition Process
The next step was finding out what Coupons Plus Deals was worth after its recent growth. Valuation is a complex topic and is not as simple as “annual profit x 3.” An internet business’s lack of physical assets can often complicate valuations, but as long as you understand the pros and cons of the methods available and gather the right data on the relevant valuation drivers, you should feel confident that you will arrive at an appropriate valuation.
It is also worth noting that valuation methodologies can vary depending on the type of online business being valued. For this reason, working with a knowledgeable team is key. Calculating valuations is not based on theory, it is based on data from real sales completed.
For example, as part of the exit preparation process at FE International, an M&A advisor will prepare a Prospectus for buyers that covers everything they need to know to make an informed offer on a business. This is usually 25-35 pages depending on the size and complexity of the business. Sellers may be asked to provide the following information that will help inform the Prospectus:
- A detailed monthly profit and loss/income statement for at least the last 12 months
- Detailed answers to a custom questionnaire about your business
- Google Analytics access
- Access to any third-party metrics platforms you may use
- Supporting documentation for business and financial claim
Finding the Right Buyer
After the marketing materials are developed, they are shared with potential investors. Having access to vetted buyers with an interest in your business is key. The owner and Ngoc were pleased with the investors that FE International brought to the table. Ngoc explained, “It took the brokerage we worked with previously longer than it took FE to find potential buyers. Once we transitioned to partnering with FE, the Prospectus they put together documented every single detail imaginable. I was impressed by the thorough nature of the document, how it laid out every detail for the buyer. I knew the buyers would feel confident in the product because of how thorough the Prospectus was in laying out exactly what Coupons Plus Deals entailed.”
The owner thought the business would sell relatively quickly, seeing that Coupons Plus Deals was at its prime and had metrics to prove its worth, and he was right. The process from start to finish was smooth and efficient. While his company had sat unsold on the broker’s site for more than a year, it took a small fraction of that time for FE to find a suitable buyer who was ready to make an offer.
With an offer on the table, it was time to start the due diligence process, which is an essential part of every business sale and ensures the buyer is comfortable with the business and the claims made during the marketing period and throughout negotiations.
The due diligence process can be time-consuming and can create a bit of unease in new sellers if they do not know what they are about to step into. It can sound like an arduous process, but its purpose is actually very simple – to paint a complete picture of the business.
This process will vary depending on the buyer’s requirements (outlined in the letter of intent) and the complexity of the business but usually covers these six areas:
Although the process is extensive, the finished product is often a picture that illustrates the soundness of your business and in turn makes it more attractive and sellable to a potential buyer. Buyers can see that the proof is in the pudding, so to speak, and the numbers do not lie.
Ngoc explained, “We wanted to go with a reputable M&A advisor because we wanted to make sure the person who was selling our business was representing us well. We knew that if we had an M&A advisor on board, that would build more trust with potential buyers.”
She was positively surprised by her team’s experience working with an M&A advisor because the process was more professional compared to working with the brokerage that only took on smaller deals.
Ngoc explained, “It seemed that all of the right ingredients were put together on the table so the buyer could find our business interesting and attractive.” This led Coupons Plus Deals to be sold to a suitable new owner.
Transitioning Your Business to Capable Hands
Whenever an owner is looking to sell their business, they are often not only looking to make money off the sale, but they are also looking for someone who can take better care of the business and put in 100% more than the owner has the capacity to do. Because of this, a reputable M&A advisor will do everything they can, leaving no stone unturned, to find a buyer that will do right by the business and confidently accept all responsibilities.
Ngoc noted, “I’m thankful the process went smoothly. I am happy with the new owners of the business and am confident in their ability to pick up where we left off and continue to grow Coupons Plus Deals to its potential.”