How To Sell Your eCommerce Business
Selling your eCommerce business is a significant step for any entrepreneur to take. You've spent time and money developing your idea, building a customer base, establishing relationships with suppliers, and creating a trusted brand. Now that you are finally in a place where you are thinking about a sale, there are a few things to consider before moving forward. We've put together this handy guide to give you a strong understanding of how to sell your eCommerce business.
Table of Contents
- Why sell your eCommerce business?
- How long will it take to sell an eCommerce company?
- Helpful tips for selling your eCommerce business
- Maintaining your eCommerce business and your reputation
- How do I find the value of my eCommerce business?
- Should you hire a broker to sell your eCommerce business?
- What to do once you've found a buyer for your eCommerce business
- Final Thoughts On Selling Your eCommerce Business
Why sell your eCommerce business?
There are some valid reasons to consider selling your eCommerce business that goes well beyond the need for a quick payout or the opportunity to profit from a sale. You may believe you've taken your online business as far as you can manage, or perhaps you're just ready to retire. It could also be the case that your e-commerce business is growing faster than anticipated, and a potential buyer may have the resources to maintain a steady level of growth.
How long will it take to sell an eCommerce company?
Selling an eCommerce company is often much quicker than selling a brick-and-mortar operation because the store doesn't have a physical location. When selling an e-commerce company, there is often less red tape or complications in transferring assets.
At Moonshot Brands, we pride ourselves on the idea that selling your eCommerce business doesn't have to be a drawn-out and stressful process. Instead, we believe selling your e-commerce business can be fast, simple, and seller friendly with a streamlined 15-day diligence process and 30 day closing period.
While selling your business doesn't have to take several months, it's a good idea to plan ahead to help the process go more smoothly. Well, discuss this in more detail below. It's also a good idea to remember that your reputation is on the line in any sale. You should continue to focus on maintaining your business through to the closing date.
Helpful tips for selling your eCommerce business
Update your website
Though it may seem counterintuitive to make changes to a company you're planning to sell, the webpage for your eCommerce site is your storefront. Making that storefront more appealing to potential customers is a great way to ensure a sale.
If your website is dated or cluttered, it's worth the time and money to create something a little more streamlined that will delight site visitors.
Updating your website is especially a good idea if you've eliminated specific inventory, find that some items are not selling, or you would like to highlight some of your best-selling products.
The updates you make don't have to be a complete overhaul, and you always want to leave room for the buyer to make their changes. However, a clean and easy-to-navigate website goes a long way to improving customer conversions.
Make sure your finances are in order
When selling your eCommerce business, one of the main things a buyer will look for is an organized operation. Let's face it, finances will be your most significant selling point, and a business that shows its potential buyers that it can keep its books in order will have an easier time convincing others to take over.
Putting your eCommerce business on the market without first making sure that your finances are in order could be a significant red flag to buyers. Not having the proper financial statements may make it seem like your business is disorganized or is hiding something.
Before you sell your eCommerce business, it's recommended that you at least have:
- A balance sheet
- An income statement
- A cash flow statement
- Your tax returns for the last three years
Hiring an out-of-house accountant to set your books in order and create a profit and loss statement (sometimes called a P&L) could also be a good idea. It is relatively standard practice for eCommerce businesses.
Other information you should provide
Your finances aren't the only thing prospective buyers will be looking at during due diligence. Buyers will be looking for additional information. You may add value to your company by knowing your customer base, having a streamlined operation, and ensuring a continued relationship with suppliers.
If your eCommerce business is changing hands, it may be good to notify your suppliers to ensure that the new owners will have a smooth transition and continue to provide the same products. It's also just good practice to not leave anyone hanging or blindside the partners you've been working with to build your company.
Buyers will also love to see established customer lists. Existing subscribers and mailing lists allow whoever is buying your eCommerce company to pick up right where you left off rather than having to build an entirely new operation from the ground up. Customer lists are precious, considering it is easier to sell to a previous customer than acquire a completely new customer.
Standard Operating Procedures
Another helpful thing to include would be a list of SOPs or Standard Operating Procedures. These are the company's day-to-day operations that may come as second nature to you but will come with a learning curve for the buyer. Providing an SOP will allow for a more streamlined transition in ownership, allowing you to spend less time assisting with the transition and reassuring your employees that your exit will be frictionless. It also offers the new owner a template to train new staff, making scaling significantly easier.
Much of the information discussed above might be included in something that's called a prospectus. A prospectus is a detailed report of your eCommerce company that outlines all the need-to-know info for potential buyers.
A prospectus should include the basic financial information mentioned above as well as:
- Your business history and why you are selling
- Team members
- Analytics and traffic information
- Revenue information
- Any new opportunities for the buyer
Maintaining your eCommerce business and your reputation
When selling an eCommerce business, or any business for that matter, it's important to remember that you can't just abandon the operation and sail off into the sunset. Once you've decided to sell, it's crucial to maintain your business's earnings. It might even be advisable to streamline some processes and product lines to ensure that your company is profitable and attractive to potential buyers throughout the selling process.
It's a no-brainer that a successful business will attract more potential buyers. Still, a company that begins to slump after an owner has decided to sell could not only scare away buyers but undermine a current buyer's confidence in you as a seller. It could also cause panic among your staff and create a domino effect that erodes the company's value.
When selling your eCommerce business, another thing to consider is the timing of the sale. If your product lines and sales are seasonal, it may be a good idea to time your sale to line up with your most profitable quarters. That way, the buyer feels like the deal was worthwhile, and they've genuinely inherited a successful business. In addition, this will help your company maintain customers as they won't notice a change in the quality of service.
Being mindful of details like this could also help you establish and maintain a reputation as an honest seller and pleasant to work with, allowing future deals to go more smoothly.
How do I find the value of my eCommerce business?
Determining the value of your eCommerce business and how much to sell for can be a bit more complicated than simply throwing a number out and hoping a buyer bites. Business owners can sometimes overvalue their companies due to personal investment and emotional attachment, but they can also undervalue if they're in a hurry to sell.
When determining your company's value, it's a good idea to get an objective third-party appraisal of your business to make sure you haven't missed anything. Appraisers will properly identify and evaluate all of your company's assets and may even identify points of value that you might not have considered.
When determining the value of an eCommerce business, buyers and appraisers alike will usually look at things like:
- Website traffic
- Trademarks and patents
- Consistent suppliers
- Ownership of intellectual property
- Brand recognition
- Logistics and order fulfillment
- An established customer base and more
If you want to find out what your business is worth, check out Moonshot Brands' free publicly available valuation tool. Plugin your data and get a valuation in seconds.
For a formal valuation, Moonshot Brands can provide one in 48 hours.
Should you hire a broker to sell your eCommerce business?
There's no shortage of options when it comes to selling your eCommerce business, with services like Flippa and Digital Exits offering avenues to sell your business without the higher commission taken by a broker. These options may appear cheaper than a broker on the surface, but they also come with a lot of work for the seller. For a business owner, time is money.
Selling an eCommerce business privately means you will have to identify, vet and negotiate with potential buyers for your business and handle the company's transfer on your own.
On the other hand, a good broker will have a ready list of buyers for your business and may also be able to get a better price while also closing a deal quicker.
That being said, if you have a high-quality buyer already lined up, you may not need a broker at all.
Moonshot Brands offers a third way, with the option to sell the company quickly and hassle-free with a 15 day diligence period and 30-day closing. Beyond fast, lucrative exits, Moonshot Brands offers sellers equity so they can reap the benefits of their brand's growth long term as well as the growth of Moonshot Brand's portfolio as a whole. We also invite founders to become a part of Moonshot and grow their business with new resources alongside us.
What to do once you've found a buyer for your eCommerce business
Once you've found a buyer for your business, you should make sure to see the deal through to the end. Buyers will always request a due diligence period that usually lasts about two weeks if you've gotten your affairs in order and promptly provides all the information they request.
At this point in the sale, a buyer usually signs something called a Letter of Intent or an LOI which includes the various commitments made by both buyer and seller. These include the purchase price, the closing date, the agreed-upon diligence period, and the trademarks, URLs, and assets to be sold.
An LOI can also include conditions like an agreement that the seller will stay on to help with the transition to new ownership or payment terms.
It's recommended that the seller do a bit of their due diligence to ensure that the buyer can meet all of their financial obligations. Sales agreements can include cash-up-front deals, financing, or stock sales that come with their own set of legal obligations.
Since a letter of intent is not a guarantee that the deal will go through, it's also recommended that you include a Non-Disclosure Agreement or an NDA for the buyer who will be conducting a thorough investigation of your company before they buy.
Once the diligence phase is complete, finding a contract lawyer to complete the process is vital. Consulting with an attorney may even be a good idea throughout the process.
Final Thoughts On Selling Your eCommerce Business
Selling your eCommerce business is not an easy decision. If you've built your business right, it could be an excellent way to make a profit, but for many entrepreneurs, selling can also be a way to ensure the company they've worked so hard to create continues to thrive.
It's essential to look for a buyer who will be flexible with you in the purchase process and reliable for payouts. But it's also vital that you place your eCommerce company in the hands of someone who will grow the business and relationships you've worked to build.
At Moonshot Brands, we are a team of specialists in growth marketing, operations, supply chain management, and omnichannel distribution. As founders ourselves, we understand that when you sell your company, you place a lot of trust in the buyer. Beyond providing industry-leading payment terms, lucrative exits, and equity, we'll deliver your brand with the growth environment necessary to reach new markets, earn more customers and expand your legacy.