There are many different options available to you when deciding to sell your small online business. Some of the most important and easily available include selling through a third party advisor such as a website broker or selling the business yourself.
Going It On Your Own
Thousands of sellers and buyers choose to work directly with an experienced business broker to ensure that they have considered all aspects of listing the company for sale and minimize the potential challenges. Listing a company for sale privately on your own can add a great deal of stress or even tasks to your to do list.
Many people are under the impression that they just need to gather some basic information about their website and then list it on a popular marketplace online. This concept of build and they will come, however, is not accurate because it requires a lot of work to list an online company for sale. Private sellers and buyers tend to prefer the services of a website broker because a broker has expertise about the entire process of selling a business, and can help to connect to a broad network of professional buyers.
Making it Simple with a Broker
For a broker, the compounding impact of 15 or 20 inquiries for each listing can add up over time. Working directly with a business broker means that you get to build on the trust that has already been established by a knowledgeable broker like those at Website Closers. It takes a long time to build up trust with a buyer, and many people who enquire on a listing could take well over a year to determine which of the online businesses for sale is right for them. If you’re in the process of selling businesses regularly, like a business broker, this can be economically viable.
But for private sellers who are looking for quick results, you might end up more frustrated than you expected. Selling your business to a strategic buyer or a competitor is another option that would still allow you to sell the company on your own. However, these deals tend to fall through all the time, and not having the proper preparation and work at the outset of this arrangement can prove problematic for truly selling the company.
Since the entire process of selling your online business can take well over a year and still might not lead to a strategic buyer, this is one reason why you might choose to sell your business with the help of a broker.
Another option available to you to sell your business yourself is to sell to an employee. However, it is very rare for employees in your company to have the cash themselves, so turning to the option to raise capital could be their only option. This can take significant time and if the owners is not willing to finance the deal on their own, then this can rarely amount to anything. You could also step away from the business entirely and ask for an internal employee to step up to the role of CEO.
Plenty of people decide to sell their businesses due to other commitments and lack of time, so this is an option that could work for you but is not necessarily guaranteed. Schedule a consultation with our experienced business brokers to discuss your next steps in listing your online business for sale to maximize your chances of success.
Many people choose to use the services of an online business broker for a variety of different reasons. Even if you are new to the concept of hiring a website broker to assist with the sale of your online business, scheduling a consultation today can help to clear up many of the most common misconceptions or questions that you might bring to the table. Two common issues presented by many sellers of an online business is how to keep the news of the sale confidential and deciding how long it might take to sell the business.
Let’s talk about the length of time it will take to sell your online business first. Small businesses that are appropriately priced can sometimes be sold in as few as three months. With proper pricing, it often takes a year longer to sell the business. One of the first questions is about how long it could take to sell your business. If your business is priced appropriately, and it’s smaller and doesn’t require as thorough due diligence, you could have your business sold in three months or less.
Sometimes, even with correct pricing, it can take as long as a year to sell the business. This might initially seem like a lot of time, but when you step back and look at all of the different stages of the transaction, including listing the company for sale, finding and interviewing potential buyers, drafting up contracts and agreements, getting the proper financing from the buyer, carrying out the due diligence process and closing, all can be time-consuming. If the buyer and seller are not willing to compromise without the assistance of a negotiation expert such as a business broker, this process could take even longer. More buyers will be interested if the seller is willing to accept a less than half percentage as a down payment.
One of the biggest reasons for using a business broker or using an intermediary is to keep the sale of the business confidential. Every person that enquires about the company will likely sign a confidentiality agreement. This is known as an NDA or non-disclosure agreement. Some buyers will also need to submit basic information about their background and financial details. This is to determine whether or not the buyer truly has the ability to buy the business. If there is a lot of atypical or unusual behavior, the business broker might still flag the transaction as questionable.
When you’re going through this process on your own, it can be overwhelming to evaluate the various types of sellers and to figure out whether or not someone is truly interested in purchasing your company. You can remove a lot of the guesswork by partnering with an experienced and knowledgeable business broker who has extensive experience with everything, from getting business valuations down to carrying your business through the closing process. Setting the value of the business is one of the most important and first stages in the steps involved. Business values are based on the ability of the company to generate cash flow, its reputation and traffic, assets and relative risk of the business. A valuation takes all of the various factors into account.
Just about everything today can be found online, and it’s certainly true that your online business is no exception when you choose to list it for sale. There are plenty of different resources available and many of them even promise to help connect you with prospective and willing buyers by doing most of the work for you.
But if you don’t have an experienced website broker at your side, you could find yourself in the midst of avoidable mistakes when it’s too late and you have already gone too far down the process of listing your company. The internet is a great resource but there are even some offline ways to find buyers, and it’s all about finding the right network of buyers.
Someone who might be potentially interested in purchasing your company but doesn’t have the confidence or ability to follow through on that sale is essentially useless to you as a buyer. It’s far better to tap into the services provided by an experienced website broker who can connect you with a network of qualified buyers. Whether you want to work with a casual platform or specialized site, never overlook the potential that could come from working with an individual broker.
What to Expect with Business Brokers?
If you chose to use a real estate agent to sell your home, you know the various types of support services and insight that they can provide over the duration of selling your home. Working with a broker, of course, comes with many benefits and even helps flag you to potential pitfalls you might not have seen on your own. This is particularly true for anyone selling their business for the first time.
A broker can evaluate and try to find the right buyer while maintaining confidentiality about your company. This is a huge benefit that you won’t be able to tap into if you choose to list your company for sale on public websites. Furthermore, experienced website brokers come with a great deal of knowledge about the resources and tools to market your business. This can make it that much easier to find the right buyer quickly.
Is It Going to Cost A Lot to Work with A Website Broker?
Much like your real estate transaction mentioned above, you will have to be prepared to pay a portion of your sale to a website broker.
However, this fee is only collected after the business has been successfully sold, and if you know that you could pay this commission once the business has been sold to an ideal buyer but know that you’ll have greatly reduced stress and requirements during the interim, wouldn’t it be worth it? It’s important to ask upfront your website broker the different types of fees that could be involved, and the average percentage of the asking price that your broker might get when they close a deal.
Working with Business Brokers Successfully
Business brokers online have become extremely popular today, but unfortunately this means that there are lots of people operating their company under the umbrella of the name of business broker, even if they don’t have all of the experience, skills and commitment to be able to follow through in a manner that is most effective for you. It’s a good idea to schedule a phone consultation with a website broker like those working at Website Closers. At Website Closers, we like to say that our testimonials speak for our work. That’s because our clients have been thrilled to rave about the results they’ve gotten in choosing to work with us.
Whether you’re thinking about selling your company so you can move into a different type of online business model, or you are a prospective buyer of an online business, it’s important to be knowledgeable about some of the different types of online business models out there and which ones might appeal to you specifically or even appeal to your prospective buyer. The term business model is a word that is used to describe a way in which a company generates revenue.
In addition to the services or goods that company might provide, you can think of the business model as an overall make up and blue print of a company’s operations. Business models influence a number of different factors necessary to run and grow an online business, like skills, experience and time commitment required.
Five Online Business Models
Online business models can generally be broken down into five different categories. These are transactional, services, e-commerce, content and software as a service. Transactional businesses are those in which revenue is created by making a transaction between two or more users on an online platform in exchange for the payment of a commission. Services involve revenue being generated from the sale of services to customers found online. E-commerce businesses generate sale from physical or digital products that are delivered to customers via the internet or, more traditionally, through the mail. A content business involves the generation of revenue by visitors being monetized through a website, through tools such as affiliate sales or advertising. Software as service involves selling software on a subscription basis, which enables the customer to access it as long as the subscription is active.
Many companies have what is known as a hybrid business model. This is because the company might be utilizing multiple forms of the business models mentioned above. The hybrid model is relatively rare, since there is usually always one single underlying model with some additional factors to consider.
One of the most popular types of online businesses sold today is software as a service because it has the potential for recurring revenue. When the subscription to the service expires, the customer’s access to the software is taken away. There is an important distinction to make between a software e-commerce model and the software service model. The SaaS model involves selling a software on a subscription basis, whereas a software e-commerce model gives the user lifetime access to the software. Many companies for a long time used the software e-commerce model, but today in the world of digital business, software as a service has become much more popular.
This is a big reason why it is one of the most common types of online businesses purchased today, because someone who has already done a great deal of the legwork to establish the company and generate plenty of traffic and prospective customers, can pass it on to another business owner and that business owner can continue to generate revenue and income from this particular business model.
One important factor that a software as a service buyer will look at is the number of people who cancel their subscription during a given time period. This is known as a customer churn rate. If you have more questions on how to approach the purchase or sale of a software as a service business, consider speaking to our business brokers today.
There are many different reasons why you might choose to work with an experienced and knowledgeable business broker. Business brokers can make the process of selling your online company, e-commerce website or software as a service business, much more effective.
Business brokers can assist with many aspects of the process of selling and buying business, including providing ideas on marketing, the best valuation methods, pricing, assistance with negotiation, documentation for closing and other consulting as obstacles arise.
The four main reasons that someone chooses to partner with a business broker like those working at Website Closers include, confidentiality, saving significant time in the process of selling the business and waiting through prospective buyers, getting access to the network of a large potential buyer pool, and the broker’s objective view and ability to help negotiate if challenges arise. This means that someone selling a business should be prepared to sign a listing agreement.
What is a Listing Agreement?
A listing agreement is usually the first step for the business broker to begin formally searching for a buyer. All of the terms of the relationship are clearly laid out in this agreement, and an exclusive listing enables brokers to use greater resources to identify the right buyer for the business. Furthermore, the fees will also be outlined in the listing agreement.
These are usually based on the sales price and payable only if and when the company is sold. This can give you a lot of peace of mind as the seller of a company and knowing that you are working with experienced and professional business brokers who understand this process and are motivated to not only sell your company but to sell it to the right buyer.
Listing agreements usually have a minimum time period, which could be altered based on your individual circumstances and the business broker’s background. The listing agreement is a legally binding document.
What is a Tail Provision?
It’s a good idea to have your business lawyer review this before you choose to sign the agreement to formally work with the business broker. One of the most confusing aspects for a new business seller of a listing agreement is a tail provision.
A tail-on agreement means that after the agreement has ended, there might still be a clause stating that if you sell to anyone else within up to 24 months that the intermediary business broker introduced you to, you still would be responsible for paying a successor commission fee. You’ll want to read the fine print of any listing agreement to make sure that you thoroughly understand what you are signing on to and so that you have a chance for your attorney to review it in full.
In some cases, your business broker might even share commissions or cooperate with other intermediaries under their pre-arranged terms. The decisions about splitting that success fee is negotiated at the time of the arrangement. It can be hard to figure out what in your best interests when retaining the services of a business broker, but thankfully, hiring the right lawyer and business broker can make it easier for you to approach the process of establishing a sale schedule for your business and getting maximum revenue upon the time you sell.
You’ve begun to see positive numbers in your company and have stable and profitable growth over time. This can be a clear sign that it’s time to list your company for sale.
If you attempt to undertake this process on your own, however, you could find yourself facing many different challenges and it might end up being too late for you to take the appropriate action steps to correct them. Far too many business owners who try to handle the sale on their own underestimate the time and effort that is truly required to accomplish a sale of a business online.
Resources, time and effort are all must be expended in order to sell an online business successfully. Trying to sell your business and run it at the same time might seem like a monumental task and it is one of the leading reasons that some people who list their company for sale too quickly without doing their homework or hiring a business broker don’t achieve the sale price they were looking for.
These challenges occur because owners fail to account for the amount of time required to dedicate to the sale, which means that dips in performance could occur that could impact your business valuation or the way that outside prospective buyers view the company. Juggling business operations along with the sale demands could be serious recipe for disaster; sometimes ending with a suffering business and a failed exit.
The average life cycle for a sale might be as short as a couple of months, depending who you hire as your online business broker. This covers the various aspects of selling the company like valuation, listing, preparation, soliciting interest from potential buyers, managing inquiries, negotiating the terms of the deal in contract, pulling together the legal documents to sell your online business, transferring the assets of the business and closing an escrow.
This also assumes that no other issues or obstacles pop up during the process of sale. It is very rare for an online business sale to proceed without any hiccups. This means that if you are already quagmired by managing the operations of your business and then decide to take selling your company on by yourself, you might have to answer dozens or even hundreds of questions from prospective buyers.
You will have to carve out time in your schedule to be available for conference calls and this means you’ll also need to leverage evaluating contracts and negotiating deal terms. All of this can take time and could require as many as several weeks or even months to wade through. This is why exit planning as well hiring an experienced and knowledgeable business broker are strongly recommended.
The support of a business broker removes many of these problems from your individual plate and helps you to bring in an experienced professional to help you navigate these challenging situations. You deserve to have someone at your side who can help you with these obstacles and take as much of the work as possible off of your individual plate. The challenges of running an online business, much less selling it, can be overwhelming for a person who is confused about what all is required. Don’t find this lesson out too late, instead hire a business broker now.
Leaving your company without the appropriate exit plan in place can expose you to so many problems through the process of selling. What might have otherwise been a seamless sale or something where you could have maximized your profit on the sale of your online business, can quickly go downhill if make a variety of mistakes such as selling too soon, overstating the benefits of the company and the truth being revealed during due diligence, or failing to exit plan.
A strategic buyer is someone who is interested in purchasing your company and being able to replicate or even exceed your own results. This means that if the entire business is dependent on you as an individual, you could be facing significant problems as you try to sell. A savvy buyer will be able to tell how much of the work you’ve already done to put systems, operations and plans in place.
What Is Exit Planning?
Exit planning refers to the methodical process of preparing a company for sale to maximize the potential for profits when sold in the future. When done appropriately, the exit planning process eliminates many of the what if concerns brought by sellers who would otherwise try to enter into a sale without preparing the right way. This is a process that involves numerous different activities to enhance the transferability, audit ability and scalability of your business, as well as maximizing profits and eliminating risks whenever these items can be identified.
The primary goal of engaging in exit planning is to remove yourself from the business as much as possible and to assist you with selling your company for the best deals, terms and at the top price. You don’t ever want to leave hard earned money on the table, but unfortunately, this can become a common issue for people who have not engaged in the business exit planning process. The more you can remove yourself from the company in the years and months leading up to the sale of the business, the easier it will be for you to show that your exit plan is already clearly established. This illustrates to the new buyer that he or she can step in with some training and hand-holding on your part and be able to continue the success of the business.
Common exit planning strategies include;
What Should Be Included Inside an Exit Plan?
Every exit plan should begin with a comprehensive business valuation, which will give you a clear start for what the company is worth today. From this point on you can identify a target exit price and begin to look at different exit scenarios. This is your opportunity to review what deal terms and acquisition structures are most appealing to you individually. Set realistic and simple exit goals, look at the key value drivers for your business, generate action items that can improve the business over time and work with an advisor or business partner to hold you accountable.
Unfortunately, mistakes made in selling your online business can haunt you throughout the duration of the sale. One major mistake could be trying to sell a company on your own and not retaining the services of an experienced website broker.
Some people might be uncomfortable with the idea of a broker helping them with the sale of a company they have such a personal connection with. But a broker is also more familiar with the market and probably has a network of interested buyers at the ready. This means that a broker can help you navigate this process much more effectively and avoid mistakes.
Is A Dip in Performance the Right Time to Sell?
If you notice a decrease in your company’s performance or revenue, you might be thinking that this is the perfect time to sell. However, choosing to list your online business for sale on the back of a big drop in performance is a very poor strategy and one that is unlikely to draw in ideal buyers. This is because buyers are always going to do their research and be interested in exploring what happened in the due diligence process.
A major drop in your company’s success could lead to problems with risk and uncertainty in the eyes of someone who might have otherwise bought it. For a business that has been slowly dropping over the course of many years but otherwise appears stable, this could be a great opportunity to pursue a sale. Things might be unlikely to improve under your ownership if these conditions are true.
This means that the company has been consistently successful with slow and steady declines. Investors will still be able to point out this stable trend and adjust valuations in accordance with the diminishing returns. A poor time to choose to list your online company for sale, with or without the help of a business broker however, is if your company experiences a sharp decline over a short period of time and then is promptly listed for sale online.
Investors won’t be able to look at the long term picture or adjust their valuations logically because there will be too many layers of uncertainty. This means that the investor will then have answered questions and have to devalue your company in a big way to account for the increased problems with risk, and the potential challenges they might face. It can be difficult for an investor to see the reasons why a company might have decreased in value so suddenly, and you won’t really have an opportunity to position your company the right way if this has happened to you.
An online listing should be as compelling as possible and only put up after you’ve done some careful consideration about whether this is the right time. If you find yourself in the situation of trying to figure out how to navigate an unexpected decline in your company’s performance, it’s far better to consider holding off on listing your company for sale so you can stabilize that performance and identify what might have caused the decline. There are several different things you can do to help avoid the challenges of putting a company up for sale include:
Schedule a consultation with the experienced online business brokers at Website Closers.
There are too many mistakes that can be easily made if you don’t have the support of an online business broker to help you navigate the process of a sale. You might only get one shot at being able to list your online business for sale and to begin to network with prospective buyers. Trying to handle things on your own could mean that small mistakes made early on in the process could block you from being able to effectively get the most money for your purchase. Getting the valuation wrong can have significant consequences.
What’s the Big Problem with Getting the Valuation Wrong?
Many people who are thinking about selling their business have a primary concern of under-valuing the company. Under-valuing the business and leaving money on the table is a top concern for plenty of people, but entrepreneurs who over-value their business because they haven’t done a proper business valuation could be in just as much trouble.
Allowing emotions to affect your ability to arrive at a more reasonable business valuation backed by logical factors such as comparable sales, industry averages, financial performance, and the insight of an online business broker can impede your ability to list the company for a fair price and to draw in the right kind of buyers.
While it is good to be passionate about your business, and your emotions have probably helped your company be as successful as it is, of course, you still want to work towards a highest possible valuation. However, buyers will want to know that you have the details and data to back this up.
This will all be uncovered during the due diligence process, so it’s important that your business valuation reflect the true reality of the company. A valuation should always be grounded in reality and it can help to remove yourself from the process slightly by using an online business broker who is familiar with selling companies like yours in industries like yours and carrying out the business valuation process. A website broker is far more likely to capture details that could be important in valuing your online company. Your business broker will sit down with you at the outset of the sale to discuss your multiple. The multiple will start with your annual net income and then varying factors will apply to increase this.
If you arrive at a valuation that is far beyond a standard multiple range, it is likely that your business has been over-valued or that it appeals to strategic buyers. Figuring out which one of these applies could be difficult on your own, but when you have a knowledgeable business broker at your side to help you, you’re much more likely to be successful.
What Is A Strategic Buyer?
Strategic buyers are those investors who acquire companies in order to build them into an existing venture. Those strategic buyers see some benefit in adding to the existing venture and will be more comfortable with valuing the business much higher than the underlying value. This is because the acquisition is viewed as bringing substantially more value to their existing company. These strategic buyers don’t look at just the value of your business alone. You can speak directly with your business broker about whether or not something like this might apply in your case and how to prepare for it effectively.
A person who is contemplating selling their online business is likely thinking about what they can get out the deal, but if you choose to partner with an experienced team like those working at Website Closers, you’ll learn that it’s far better to think from the perspective of the person who might buy your company.
The practical steps involved in buying a profitable online business will give you a great eagle eye view of what a prospective buyer is looking for and some of the challenges they might experience in evaluating your online company or website.
Many people are familiar that starting their own online business and scaling it from the ground up is very difficult. In fact, this is one of the leading reasons that people turn to establish businesses to identify a turn-key model that works. From figuring out a niche to building an email list, to setting up a website, to driving traffic and creating other content, all of these can be challenging for a brand new business owner. Since you’ve already done most of the legwork for a person who may be contemplating buying your online business, they can effectively skip many of these phases.
What Buyers Look For
Buyers are looking for a turn-key opportunity that they can take over. Therefore, these buyers want to see that the company is making revenue and profits. The person who purchases the company might choose to let it run as it has been or try to make changes to increase profits. This means that new online business buyers are looking for companies that have a track record of sales and profits that are well established before they attempt to buy the business. This is clarified during the financial or due diligence phase of the sale. None of these online business buyers will rely on what you tell them alone. In fact, they’ll engage in their own research process to verify that you’ve given an accurate picture of what the company looks like.
Online business buyers are also looking for the systems, strategies and team members already in place to help the business run effectively. If the entire company is built on the success of you as the individual owner and a prospective buyer can sense this, they might be hesitant about stepping in due to concerns that they will not be able to continue the success. This means that it’s a good idea as a business owner thinking about selling your company in the future to remove yourself from the process as much as possible. This can show to prospective buyers that the success of the company is not built on you alone, which can be very important for helping an online business buyer to believe that they can step in and continue to run it successfully.
Online business buyers are also looking for companies that are growing, have traffic from a variety of different sources, have minimum revenues and meaningful growth that occurs from month to month, has marketing systems in place and has multiple streams of income. Knowing all of these things in advance can give you an opportunity to tweak and adjust your online business approach for maximum success.