People sell their ecommerce businesses for many reasons. Some online store owners feel that they’ve put their heart and soul into the business. They’re tired, want to spend more time with family, and are ready for a break.
Other entrepreneurs love starting new businesses more than running them for years on end. They’ll sell so they can do what they do best: build a new business from scratch. Whatever the reason, selling an ecommerce business can seem daunting—but not if you work with a broker from First Choice Business Brokers.
Crazy Egg’s Favorite Tools for Selling an Ecommerce Business
Our Golden Eggs can help you prepare your ecommerce shop for sale, take care of listing the business, and negotiate with buyers.
First Choice Business Brokers takes care of everything from business valuation to transactional guidance. Schedule an appointment with a First Choice Business Broker near you.
Transworld business advisors can help you walk through the pros and cons of selling before you even decide to sell. Get started with Transworld today.
VR Business Brokers has been around since 1979, and it claims to have sold the most businesses in the world. Reach out to a VR Business Broker associate to get selling.
More Top Ecommerce Selling Tools
Just like real estate agents know the ins and outs of selling homes, business brokers know everything you wish you knew about selling an ecommerce business. If you want to see more reasons why we love our Golden Eggs and explore additional business-selling tools, check out our list of the top business brokering services.
Step 1 – Getting Started With First Choice Business Brokers
The road between listing an ecommerce business for sale and accepting an offer from a buyer is often long and demanding. This is why it’s essential to get a business broker on board from the get-go. Enter First Choice Business Brokers.
This business brokering company has helped countless entrepreneurs sell their businesses. Like a trusted real estate agent, they’ll guide you through mountains of paperwork, legal requirements, and seller tips you’d never understand otherwise.
The first thing to do is schedule an appointment with a broker from First Choice. Let them know that you want to sell your ecommerce store.
The broker will ask you questions to better understand your situation. Then they’ll give you a list of documents to bring to your next meeting. Your broker may ask for some or all of the following, along with documents not included on this list:
- Business history and executive summary
- A narrative detailing why you’re selling
- An outline of opportunities for whoever buys the business
- Profit and loss statements going back 2-3 years
- Tax returns for the past 2-3 years
- A cash flow statement
- A current balance sheet
- A record of traffic sources
- Supplier and distributor contracts
- Information on the tech and software you use to run the business
- Employment agreements if applicable
Step 2 – Meet With Your Broker
Whether the initial meeting with your broker is virtual or in-person, bring all requested documents or have them readily available to share with your broker if you haven’t sent them already.
Your broker shouldn’t show this information to anyone just yet. Together, the two of you will decide which documents to include in your sales prospectus—the outline you’ll show potential buyers—and which information to hold back until an NDA is signed.
Or, if you’re feeling extra careful, you can wait to share the prospectus until you’ve secured an earnest money deposit (EMD). More on that in a moment.
If you work with First Choice Business Brokers, your broker will ask you in-depth questions about your business. This helps them decide how they’ll approach buyers in a way that’ll make your business stand out.
Step 3 – Determine the Value of Your Ecommerce Business
A broker with First Choice Business Brokers will analyze discretionary income and annual expenses to determine the value of your ecommerce company. The business valuation process can be complex, but we’ll give you a quick overview to help you stay informed as you work with your broker.
One of the most common ways to estimate the value of your business is to use a formula based either on the seller’s discretionary earnings (SDE) or earnings before interest, taxes, depreciation, and amortization (EBITDA):
- SDE x multiple = listing price
- EBITDA x multiple = listing price
These formulas are deceptively simple, mostly because the multiple—usually between four and six times the SDE or EBITDA—depends on a variety of factors. Let’s take a look at the factors most relevant for ecommerce businesses.
- Age of business: the younger your business, the lower your multiple. Older businesses have more history and therefore proof that they can ride the changing tides of the market—as long as they’re healthy.
- Customer reviews: every business gets good and bad reviews. But if there are more good ones than bad, you’ll be able to use a higher multiple than if the reverse is true.
- Diversity of traffic sources: does your website traffic come from more than one place—like PPC ads, social media, an email list, and your blog? Good! It’ll be seen as more reliable than a site that only has one major source of traffic.
- Email list: speaking of email lists, having a well-established, high-converting list with hundreds of customers can significantly drive up your value.
- Number of products: if you only have one product that generates most of your sales, potential buyers might see this as a risk. What if that product suddenly stops being popular? You’re better off if you’ve got four to eight reliable sellers.
Taking an honest look at your ecommerce business can help you figure out how much it’s worth. Your business broker can give your company an even more objective look, using their expertise to provide a fair and accurate valuation.
Step 4 – Get Legal
If you’ve completed Steps 1 through 3 and you still want to sell your business, it’s time to make it official. You’ll sign an agreement authorizing your broker to represent you in the sale. The broker will put together a listing, along with advertisements and a marketing plan, and request your approval.
This is also the perfect time to decide the terms of a sale. For example, what will the buyer receive when they purchase your ecommerce business? Will they get your supplier and distributor lists, email lists, inventory, logos, branding and marketing assets, website domain, social media accounts, and product images?
And what about post-sale support? Many buyers appreciate a training period to help them learn the ropes of an ecommerce business they didn’t build themselves. If you aren’t sure what to include in the sale, ask your broker for advice.
Remember: the brokers are the experts. They know the market inside and out and have facilitated the sale of ecommerce businesses before.
Once you’ve decided on the terms of the sale and have approved the listing, the broker will put the listing in front of potential buyers. They’ll make sure buyers sign NDAs before receiving any sensitive information about your business.
But remember, if there’s anything you want to hold back, you can decide to withhold that information until a buyer shows intent to buy your business by providing an earnest money deposit.
Step 5 – Meet With Potential Buyers
Once your broker takes your listing to the market, you can focus on continuing to run your business. Remember, it can take a while for a sale to go through, and you’ll have a higher chance of selling for a fair price when you keep the site healthy.
In the meantime, your broker will manage your listing, fielding buyer inquiries and making sure buyers pre-qualify to buy a business.
This is one of the best things about working with a broker. You won’t have to field endless inquiries and spend hours vetting buyers—only to discover that many of them can’t actually afford to buy your business or are wasting your time in other ways.
With a little bit of luck, it won’t be long before your broker lets you know that someone wants to buy your business and has the means to do it. You and your broker will meet with the buyer and their broker to discuss the business, hammer out the terms of the sale, agree on a sale price, and go over financing.
If everything checks out, your team and the buyer’s team will put together a letter of intent (LOI). This should include:
- Contingencies: when, why, and how a buyer or seller can terminate the deal
- Financials: the sale price and financing details
- Earnest money: how much you’ll require the buyer to give to the third-party escrow service and under what circumstances it could be refunded
- Timeline: how much time the buyer has to do due diligence and finalize the deal
- What’s being offered: what’s included in the sale, from inventory to email lists to logos
Keep in mind that an LOI isn’t a closing document. It’s more of a document that shows that the buyer and seller are on the road to a deal—but there’s more work to be done before they get there. Earnest money is deposited into a First Choice Business Brokers-affiliated escrow service after signing an LOI.
Step 6 – Due Diligence
Remember when we said that if you wanted to hold sensitive information back until after an earnest money deposit was made, you could? When you and the buyer have completed Step 5 and earnest money is in the escrow account, it’s time to disclose everything the buyer asks for.
This is the buyer’s time to dig deep into your business and make sure they like everything they see.
Your broker will help you walk through this process, which can take upwards of 30 days. If the buyer decides not to proceed with the sale based on what they find during due diligence, they’re free to walk away. As long as they follow the terms set out in the LOI, that is.
And then it’s time for your broker to put the listing back out there, starting Steps 5 and 6 over again.
If this happens to you, take a deep breath. It happens all the time. You’ll get there.
Step 7 – Close the Deal
Once you’ve moved through the due diligence phase with a buyer and they like what they see, it’s time to draft and sign an asset purchase agreement. Your First Choice broker will help you do this and answer any questions you have along the way.
This document will probably go back and forth between you and the buyer a few times as you both hammer out every minute detail of the deal. This is normal.
When you and your brokers are both happy with the asset purchase agreement, both you and the buyer will sign it. The seller will transfer the money to escrow, where it’ll sit until you’ve successfully transferred all the assets outlined in the legal documents.
Your broker will get their well-earned cut of the sale and you’ll break out the champagne—and start planning your first vacation in who-knows-how-many years. But don’t fly off to Puerto Vallarta just yet—you’ll need to be on call for the agreed-upon time when you’ll help train the ecommerce business’s new owner.
Whether or not you choose to continue to offer support as needed beyond this time frame is up to you.
You’ll also want to change subscription information for any SaaS services or apps you pay for, as well as close business bank accounts you won’t need anymore.
Now it’s time to shake the stress out of your shoulders and pack your suitcase. Your beach vacation is waiting.