Perhaps you're a born e-commerce seller. But when the time comes to sell your business, it's as if you're starting from scratch.
Many e-commerce entrepreneurs dream of selling their thriving businesses for a hefty sum. However, not all businesses are created equal when it comes to exits.
If you want to sell your e-commerce business for a huge payout, you need to know what makes a business sellable, and the steps you can take to improve your operations and finances.
At Ecom Brokers, we created the Seven Foundations of Value. Growing a business involves considering many factors. To position your e-commerce business for a huge exit, keep in mind these seven key elements:
By focusing on these key areas, you can grow your business in a way that will make it sellable and valuable when your exit time finally comes.
Let's take a look at each foundation, shall we?
When it comes to selling your business, timing is everything. But when is the best time to sell?
Without a doubt, one of the most essential criteria here is age. If your business is less than two years old, it's too soon to sell. This is because you will be unable to show prospective buyers a clear path to regular profitability and income. However, some buyers choose to invest in a growing company so that they can get the full benefits.
A business that is three or more years old is ready to sell.
A business that is at least 5 years old, established, and has already demonstrated that it can create consistent profits is even better.
Key Takeaway: You want to sell when your business is still growing, but not maxed out. Have you pulled all the growth levers? Then there’s not that much of an incentive left for a buyer. People buy businesses for the potential of what they can become, so it's important to have those inbuilt paths to growth.
Is your business already stable, or is it still shaky?
A sellable and valuable business has low-risk characteristics. Are you selling in a favourable niche, such as baby, home, garden, or sports? How transferable are your systems? Do you engage with black-hat techniques, quick hacks, and band-aid fixes?
As an entrepreneur, I like to think of it as vegetables and burgers.
Vegetables are principles and solid foundations for building a sustainable business, whereas burgers are the sexier marketing tricks we get excited about.
Sure, juicy burgers are great, but the thing is… we can't eat them all day long! First, we need to make sure we eat our vegetables, even if they can be a bit boring.
Key Takeaway: It can be tempting to cut corners when starting an e-commerce business, but those risks can come back to get you when it comes time to sell. Before resorting to burgers or tactics, it's important to focus on eating your vegetables and set up your business with timeless principles for long-term success.
If you decide to sell your business, you must provide the buyer with financial records, tax returns, and any intellectual property certifications. The buyer will also want to see the company's standard operating procedures to make sure it is well-run.
This helps buyers see the risks of buying your business through clear information. They want proof of successful operations, and detailed documentation shows good management. Doing this builds trust with potential buyers.
Key Takeaway: Having all the documentation in order will make the sale process go smoothly and quickly, and the business will sell for more money.
Is your business able to withstand criticism and attack? Have you built a strong brand presence? Here's an example:
Imagine a business that sells handmade swimwear. It's in a favourable niche. To increase the business's defensibility, the seller:
- Establishes a strong brand presence and creates a unique identity for the brand. Apart from having logos and brand colours, the seller also invests in creating a memorable customer experience.
- Applies for trademark protection and gets all intellectual property in place.
- Develops a social media presence on Instagram and Facebook. The seller builds relationships with their audience and shares helpful content.
- Leverages email marketing to increase sales. The seller sends their customers targeted promotions, discounts, and new product launches.
- Gains an active community of loyal customers and increases the visibility of their brand.
When the seller decides to sell the business, the value has increased exponentially.
Key Takeaway: Don't be 'just another ecom business'. A real brand is a brand that has real assets, including a strong brand and following.
You could have a presence on different marketplaces such as Amazon and eBay to diversify your revenue sources. You can also use Facebook, Instagram, and Twitter to drive traffic and further expand your reach.
Doing this will reduce the risk of losing business if one platform or channel goes down. If you rely on just a few SKUs, say three products, you have a higher risk of a hit if one gets suspended.
By adding more SKUs and offering a wider range of products, you will reduce your reliance on any one product.
Key Takeaway: "Don't put all your eggs in one basket" holds true in business just as much as in everyday life. Diversification is the key to reducing risks, especially when it comes to selling an e-commerce business. This strategy makes your business more attractive to potential buyers and increases your chances of closing a deal.
Finding a reliable and trusted supplier can be the key to the long-term success of your business. They will help you maintain the quality of your products and ensure timely delivery. Both factors are key to customer loyalty.
A great supplier can help you stay ahead of the competition and attract more customers. As a result, your business becomes more sellable because it shows that you have strong supply chain management. This will help you get the most out of your exit strategy.
Key Takeaway: Trust is a fundamental element that fosters strong relationships. Choosing a great supplier is not just about the quality of the products they provide, but also about building a long-term relationship based on trust, mutual respect, and a shared vision.
The more efficient your business, the more attractive it is to potential buyers. How can this be accomplished? Your business will become more efficient from automating:
- PPC (pay-per-click) to save time and reduce human error.
- Inventory management to keep track of your stock levels and avoid the risk of overstocking.
- Email flows and reviews to improve customer engagement.
Finally, outsourcing certain tasks that can be accomplished out-of-house, such as customer service, can save you tons of manhours.
Key Takeaway: When you invest in making your business more efficient, it allows you to work on your business, and not in your business. As a result, you can focus on your core growth activities.
Bonus Gold Nugget: Why Building A Strong Brand Matters?
A brand is a suite of products that solves related problems for a particular group of people. It’s what sets you apart from your competitors and creates a unique identity in the marketplace.
A strong brand establishes credibility and creates an emotional connection with your customers. It also contributes to your business's defensibility, making it difficult for competitors to copy or take down your business.
A well-established brand is a valuable asset that can significantly increase the value of your business when it comes time to sell. Without a strong brand, there's no sustainability.
Establishing a comprehensive marketing strategy tailored to your brand needs will help generate huge momentum for your business. By working with experts who are equipped with the tools and knowledge to execute personalized strategies with precision, you can make your business more attractive to potential buyers. So, if you're not already focused on developing a longterm marketing strategy, now's the time to start.
Most entrepreneurs will only have one exit in their lifetime. And as we’ve mentioned at the beginning of this blog, selling a business is like starting again from scratch.
So, don't miss out on a huge payday! Planning your exit strategy with the help of experts can make all the difference when it comes to earning a moderate payout or a massive windfall. Go beyond these key tips and ensure you're getting the most out of your e-commerce business with professional guidance.
About the Author
Best known as the founder of Beast Gear, Ben Leonard is the classic millennial entrepreneur. He built a business on a laptop, in a cupboard, in his spare time.
The difference? Ben grew an international 7-figure business and successfully exited after 3 years; the business holy grail. Ben is Ecom Broker’s brand ambassador and digital marketer. He’s busy building the network, creating relationships and banging the drum!
In addition to Ecom Brokers, Ben is busy building brands, and helping others follow in his footsteps with his consultancy, courses, and mentorship programme. He’s also launching a book about e-commerce and entrepreneurship this year, so stay tuned!
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