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Part II: When or Should You Even Sell Your Business?

Guest PostGuest Post
April 10, 2018

Editor’s note: This is a guest post from Gregory Elfrink, Director of Marketing of Empire Flippers.

Selling your business, whether it is your first one or just one of dozens, is always an intimate process. The time to sell it always comes down more to an art than science. There is no one-size-fits-all for when you should sell your business; instead, you have to align that timing with what you are trying to accomplish.

One way to help you to do that is by examining some of the more common business and personal reasons why someone would sell their business.

Business Reasons to Sell

  • Investing Capital into Offline Investments: This often takes the form of real estate or stocks.
  • Tired of the Business: This is more common than you might think. If you’re sick of your business and want to do something else, that is eventually going to show up in your business revenue. Sell the asset before you start hurting it.
  • Need Bandwidth for Other Projects: Even if the business takes minimal time to run, it is still taking up space in your brain. If you have more lucrative projects going on, it might be worthwhile to offload some of your digital assets and get a nice payday while you’re at it.
  • Leveraging Yourself into a More Competitive Market: When you sell your business for six-figures-plus, you put yourself in a great situation to attack more competitive markets. A multiple six figure war chest for advertising can go a long way to breaking into whatever niche you’re looking to get into.

Personal Reasons to Sell

  • Adopting a Child: We’ve actually seen this happen; a seller sold a smaller business on our marketplace to raise the money to adopt a child.
  • Divorce: Sometimes a divorce requires selling off an asset — not the most happy reason to sell the business, but it does happen. This goes for both your significant other and for business partnership divorces.
  • Retiring: Looking to go into retirement is definitely a strong personal reason to sell off the asset.

These are just a few reasons why people sell their online businesses, and it is by no means an exhaustive list. A few of these reasons might resonate with you and where you’re at on your journey.

Outside of those reasons, another way to gauge whether you should sell your business is whether you’re excited by what you can get from selling it.

You can either use our valuation tool to get a ballpark estimate of what your business is worth, or do some quick napkin math by using a 23x multiple on your 12-month average net profit. Does that number excite you? Is that a big chunk of change for you that could seriously upgrade your life?

Or does it feel low?

A 23x multiple is a fairly conservative multiple, so if you’re excited by 23x it might be a good time to actually look at selling the business.

A quick note on selling — you really have two options before you:

  • Private Sale: The major benefit of doing a private sale is that you don’t pay any commission to the brokerage. However, that doesn’t always mean you get the most money. Since good brokerages will be established with a large list of buyers, they can often command a much higher valuation than if you went with a private sale — more than enough to make up for the commission they take.
  • Using a Broker: A broker provides a ton of benefits, the main one is that they’re doing the heavy lifting for you. They’ll handle the majority of the negotiations, source buyers, weed out tire-kickers, and bring you qualified offers. A good brokerage will also help you migrate the actual digital asset over to the new owner as well. The drawback with using a brokerage is that you will pay a commission to them when they successfully sell the business.

To Sell or Not to Sell?

Now that you have a pretty good grasp on what goes into valuing a business, you can decide whether or not it is the right time for you or if it will ever be the right time.

Whether you decide to sell a business or not, I strongly encourage you to keep building your business as if you are going to sell it. You will create a far more lean, efficient, profit-producing machine when you build to sell.

At the end of the day, isn’t that we all want as entrepreneurs?

Want to see how valuable your online business is?

Check out our free automated valuation tool

It uses REAL data from over $40 million worth of businesses sold on our marketplace.

Gregory Elfrink joined Empire Flippers in 2016 as their Content Manager and now acts as the Director of Marketing. He oversees the Empire Flippers brand and launches new collaborations, content, and campaigns to increase Empire Flipper’s presence as the leading M&A advisory firm when it comes to helping buy and sell online businesses. Gregory also participates in several industry conferences around the world as an attendee, sponsor and speaker from the mainstage.

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