Selling an online business will always be an emotional process when you’ve been the one behind the scenes making sure you set everything up to be profitable and successful.
But what happens if you list your company without doing the proper homework or finding the right online business broker? You might end up with offers that don’t match what you were expecting. The timing of when you list your business for sale and for what is really important, which is why a broker should be involved from the beginning.
Knowing How to Get the Most for Your Company
Practically every business owner has the same question of “what will my online business sell for?” but it is difficult to know the answer before you are able to put your business on the market, or at least until you have considered the valuation process with the help of an experienced professional.
The most widely used benchmark across the industry is the financial value and an appraiser or valuation expert typically uses three approaches to calculate an online business’s financial value. These include the following.
The Market Approach
This approach will use sales information from databases incorporating data from your company and actual business sales to identify and estimate of your business selling price. The seller’s discretionary earnings and the revenue are multiplied by the sales multiples within the database. A business valuation to prospective clients who may need help with the market approach can be obtained from an online business broker.
The Asset Approach
Looking at the total value of company assets is one way to approach what would happen in an orderly liquidation. However, this is especially problematic with online companies because an equipment appraiser must be used and many of the assets inside a digital business are exactly that — digital.
Many profitable businesses that have a great deal of equipment may have an asset value that is much lower than the value arrived at by the other two approaches and this is why this is often not used to calculate a valuation.
The Income Approach
This general approach to valuing a business’s potential sale price comes from looking at the income that the business generates and determining the present value of a future income stream. This is the seller’s discretionary earnings minus the amount that is paid to a manager. An accredited business appraiser who works independently may be able to complete a financial valuation for you. However, another critical component of selling an online business is the strategic value of the company. To a certain buyer, the value of your company may be higher or lower based on the capabilities or assets of the selling business.
As online business brokers, we work hard to ensure that the strategic value is presented to the ideal candidates for purchasing the company. Since strategic value can vary, you will want to work with an experienced online business broker who has many years in this field and can help you find the right buyer for you.