November 15, 2016
Are you thinking about selling your online business? Growing an eCommerce business up from scratch is tough, so selling it should be easy. When you have a business that you’ve put your blood, sweat, tears, and time into establishing and growing, selling it is always in the back of your mind. Not to mention that selling your business at the right time can help you sell at maximum value.
You’ve decided that you do want to sell your online business, and now you want to prepare for it. Here’s the checklist of what you need to do in order to sell your online business successfully.
Choosing How You’re Going to Sell
When it comes to selling your online business, you’re going to have to pick a path. This could be attempting to sell your business yourself, going through a broker, or operating through a third party.
Profit and Loss Statements
Creating a profit and loss income statement will provide a measure of the sales and expenses of your company over a certain period of time. Buyers like to have these statements in order to evaluate the company and see what their potential is to potentially increase their profit margin once they have acquired the business. The statement will include revenue, costs of business, net income, bottom line and more and will provide the buyer with an accurate, detailed look at the business’s inner workings.
Make Sure Documents Are Ready for Due Diligence
Due diligence should go smoothly — if you’ve prepared correctly. You’re going to need to have all the nitty gritty files on hand — paperwork, contracts, records and anything else on paper related to the business. Hopefully, you had an organized system for dealing with these things! If you have everything in one spot, relax. Much of the work is already done. If you don’t, it’s time to hunt down all those stray papers.
Outside sources will not be doing your due diligence for you, so this one’s on you. Buyers having the paperwork they need will help the sale flow smoothly. This is essential because, as the deal closure grows closer, the last thing that you want a buyer to feel is stress or pressure. Thus, greater organization and efficiency will help maintain the natural atmosphere of calm and momentum toward an inevitable sale. Due diligence will go a long way toward keeping the buyer from backing out.
For due diligence, make sure you have these things:
Tax returns – Three years in tax returns, sometimes up to five. Have everything on hand.
Detailed financial statements – Organized and presentable, financial statements are key. Three to five years for these too.
Leases – The exact terms of the lease, the rent, and time left on the least will all be things the buyer wants to see. This will also help them confirm that the lease can be moved to a new owner.
Paperwork for real estate – Real estate info such as deeds of trust, mortgages, liens and debt must all be disclosed in a sale that involves real estate.
Contracts – Buyers may well be interested in contracts with employees, suppliers and customers. After all, they’re buying the business.
Accounts receivable, Corporate/LLC records, licenses and permits – Buyers will often want to know about accounts receivable and the details to get a feel for the accounts and more. Corporate and LLC records really only apply to entity sales. They will also probably want to see licenses and permits that are needed for a business and discuss their renewal potential with you.
Intellectual property – Any patents, service marks, copyrights, or trademarks of your business would need to be disclosed. So would everything required to run your business (any secrets, procedures, trademarks, how you run things, supplier lists, customer lists). After all, they’re buying the whole shebang, and you’re not going to need to keep that information to yourself because you are selling your business.
Inventory – The degree to which they may want to evaluate your inventory may vary. Just know that they’ll likely be wanting to inspect and value everything very closely before bidding and buying.
Don’t let the process scare you; selling any online business can be a daunting process. However, once you get into the nuts and bolts of it, you’ll see that it’s really far easier than actually starting and growing a successful business. As you’ve already done that, selling it should be a breeze — especially if you get outside help from experienced professionals.
Other than that, get organized, stay focused, and be transparent. With a little confidence and luck, you’ll sell your business for the number you want and everyone will walk away happy.
Jock Purtle is the founder of Digital Exits, on online brokerage service that specializes in the buying/selling and appraisal of online businesses. He got into this work after many years as an internet entrepreneur. Throughout his career, he has run three different online companies, learning many valuable lessons along the way. He enjoys writing about his experiences to serve as a resource for other entrepreneurs.