The Guide to Selling Your eCommerce Business
Have you taken your eCommerce business as far as you can? For many successful sellers, there comes a time when your store has reached an inflection point and can no longer scale up. If so, it may be time to consider selling your business to a third-party vendor and reinvesting your profits into your next great idea.
Before you’re able to sell your business, there are several factors you should take into consideration, including:
- Valuing your store – Assessing how much your store is worth helps ensure you receive fair offers from potential buyers.
- Third-party buyers’ vetting process – Every potential buyer is likely to have a different vetting process when considering a business to purchase. Understanding what they’re looking for can help you assess the likelihood of making a successful sale.
- Preparing your business for sale – Are you not getting reasonable offers for your business? Here are several steps to help you attract new buyers.
Here, we’ll take a deep dive into the above points, providing you with a helpful guide as you get ready to sell your business.
Valuing Your eCommerce Business
Determining the value of your eCommerce store takes some work, with a variety of calculations needed before you can reach out to potential buyers. While there are many approaches to valuing your business, there are several universal factors that should be taken into account. These include:
- Revenue – The income generated by your store, before expenses.
- Net profits – Your store’s profits after all expenses, including shipping, manufacturing costs and taxes have been paid.
- Business trajectory – An increase/decrease in monthly net profits is an important determinant when calculating for how much your business should be sold.
- Age of your store – Buyers will typically look at the age of your store to determine if you have a sustainable business model. The longer your business has been active, the higher the price you’re likely to receive from a potential buyer.
While not as important as the points mentioned above, you’ll also want to consider the following:
- Business type – Do you sell your products exclusively, or do you resell existing items?
- Time needed to run your store – How many hours per week do you invest in operating your business?
- Number of active customers – Have you seen an increase in active customers since opening your store?
- Online presence – How visible are you on social media? Do you invest in paid marketing?
Once you’ve compiled the above details, it’s recommended to go to an independent accountant who will be able to assess your business and tell you how much it’s worth.
Third-Party Buyers’ Vetting Process
When approaching potential buyers, keep in mind that their qualifications for vetting a potential acquisition may differ. What they share, however, is a need to know how long it will take them to recoup their expenses and start earning a profit after buying your business.
For Empire Flippers, a dedicated marketplace for buying and selling online businesses, this means that your business, at a minimum:
- Must be at least one year old
- Cannot be an arbitrage business
- Has an average net profit of $1,000 per month
Additionally, Empire Flippers will factor into their calculations user reviews, Amazon Brand Registry 2.0 and patents, albeit to a lesser extent than the points listed above.
For Jimmy Hourin, Business Analyst at Empire Flippers, “a business that has high reviews and Brand Registry 2.0 but is not performing well and takes 20 hours per week to run, will receive a lower valuation than a passive business that is performing well without high reviews or Brand Registry 2.0. That being said, most buyers require Brand Registry 2.0 these days.”.
There are three things that we look for when evaluating a business:
1. Age – the older the store, the better
2. The time it takes to run the business – the shorter, the better
3. Business trajectory – I want to make sure that the business is on the right track
– Jimmy Hourin, Business Analyst, Empire Flippers
Thrasio, a leading acquirer of Amazon FBA businesses, uses their own proprietary system based on successful previous acquisitions to value a business. In addition, they’ll look at such things as Amazon page rank, the product being sold and user reviews.
When analyzing a potential business acquisition, we look at revenues, whether they’re a leader in one of their product categories, have solid user reviews and whether they sell a high-quality product.
– Ari Horowitz, SVP, Strategic Partnerships & Corporate Development, Thrasio
How to Prepare Your eCommerce Store for Sale
Preparing your business for sale can be an overwhelming experience, especially if this is the first time you’re planning an exit. If you find that you’re not getting the offers you feel that you should receive, there are a couple of steps you can take to improve your store’s position.
- Boost your marketing efforts – Investing in paid ad campaigns can help increase your store’s page ranking and attract new customers to your business.
- Improve your customer service – While user reviews don’t carry as much weight as net profits, they shouldn’t be ignored when preparing your business for sale. Investing in customer service can help improve user experience, leading to better reviews and positive word-of-mouth.
- Streamline your operations – Potential buyers want to make sure that they won’t need to invest too much time in running your store. By streamlining your operations, e.g., making sure your manufacturing, shipping, storage and deliveries run smoothly, you’ll help make your store more attractive.
In the words of Ari Horowitz at Thrasio, “when getting ready to sell a business, sellers should get their house in order. That means making sure your finances are organized, that you understand your supply chain and that you have the data needed for a potential buyer to understand your business”.
Getting Your eCommerce Store Ready for Sale with Payoneer
As the leading cross-border payments provider, Payoneer is in a unique position to help you organize your business’s financial stats and provide you with the data you need to get your store ready for sale.
Our platform allows you to handle all payments to your manufacturers, suppliers and shippers from a single location. Additionally, you’ll be able to withdraw your profits straight to your Payoneer account, providing you with easy access to all your store’s financial records ahead of a possible sale.
Selling My eCommerce Store – What Else Do I Need to Know?
Listing your eCommerce store for sale can be an intimidating process. To help get you started, here are several of the most commonly asked questions from sellers.
1. How should I search for potential buyers?
Working with a credible third-party vendor could make the difference between a smooth sale that is quickly completed, or one that is drawn-out, lasting many months. Specifically, you’ll want to make sure that the buyers have the capital on hand to complete the transaction, as oppose to those who must source capital first.
2. How long will it take to sell my business?
While there is no fixed time for how long it takes to sell an eCommerce business, certain vendors work faster than others. Thrasio, for example, typically completes a sale within 45 days. Before choosing a vendor to work with, it’s advised to check their average closing time.
3. Does it matter in which marketplace my eCommerce store is located?
Whether you’re interested in selling your Shopify store, Amazon business or any other marketplace store, you should be able to find potential buyers. Make sure to do your research, as there are vendors who primarily focus on one marketplace.
Do you have any additional questions? We’re here to help!