All entrepreneurs dream of making their business a success. Some do it for pride, some do it to establish a family business to pass on to future generations, but most do it to turn a huge return on investment when the sell their online business. It’s not as easy as some think to sell an online business. The reality is that many small online business owners make huge, often costly, mistakes when trying to sell their online business.
Even in a good economy, it can be very difficult to sell an online business. Education on the buying and selling process is the key to selling a business and avoid all the hassles and obstacles that come with the task. With information, business owners can evade the mistakes many novice entrepreneurs make.
There are a multitude of mistakes that can be made during this time, but we’d like to highlight two particular problems to avoid at all costs.
1. Lack Of Planning or Delaying The Sale
If you’re going to sell your online business, there are a few things you have to do to ensure it is market ready. It’s a delicate balance between putting it on the market prematurely, and waiting too long. You don’t want to sell the business too soon because you won’t have all the data you would need to sell it for what it “could” be worth. Most investors won’t buy a startup business with limited financial history.
Since you need to start planning months, even years, in advance to sell your business, you should develop a long-term plan. What should your long-term plan entail?
- Profit & loss statements for the current and past 3 years
- Business tax returns for the past 2-3 years
- Copy of the current lease
- Supplier and distributor contracts
- Staffing List with Hire Dates and Salaries; Employment Agreements
- Inventory List with Value Detail
- Copies Proving Ownership of Patents, Trademarks and Other Intellectual Property
- Product/Service Descriptions and Price Lists
Another problem when selling an online business is waiting too long to sell it. Many times, business owners will delay the sale because they feel they could get more from the business if they wait. However, delaying a sale because you want to get more money out of it could lead to a host of potential problems:
- More competition in the market
- Economic decline
- Health problems
- Family responsibilities
Simply put, delaying the sale may mean losing out on money.
So, if you want to sell your business, you must pay careful mind to the economy and your industry’s state of health. Watch for signs that demonstrate when the best time to sell is. The more history the business has, the better off you’re going to be. Since you don’t know when the right buyer for your online business will come around, you need to have two or more years’ worth of in-depth business history and up-to-date records available.
If you need a little help here, it’s always best to find a professional online business broker to help assist you with a business valuation. They can tell you when your business has been readied for sale and what you need to do to ensure it will receive the full market potential.
2. Asking An Unrealistic Amount
Even when you’re ready to sell the business, you should take some time to evaluate what the business is worth. Setting a price just to get the word out that you’re selling could undermine its real value. Too high and you turn off prospective buyers. Too little and prospective buyers will think the business needs a lot of work, time and additional investments.
It’s not uncommon for online business owners to sell their business for less than what is it worth. There is a lot of pressure in running a successful online business. A seller may want to cash out quickly. Some of the top contributing factors to this are lack of motivation, industry burn out, personal health concerns and cash flow issues.
When setting a price for your online business, there are things to look at – financial history with the business, the industry you’re in, similar style businesses, the state of the economy and the market itself. Before you price your business, look back at your long-term plan. Use the information supplied on it to help you set a price.
It is imperative that you avoid emotions when coming up with a selling price. Yes, you put in years of hard work into your online business and think the price you are asking for is fair, but take a step away from the “emotional” aspect. Look at it from a business perspective. A potential buyer is not going to see your business as you see it. They’re going to base their price on the records you show them and the amount of time it will take to get their initial investment back.
If you can’t get past the emotional aspect, online business brokers can assist you. Reputable online website brokers will help you with the art of negotiating, finding qualified buyers, help you price your online business based on the market and reaching out to prospective buyers. Be sure to seek their advice to ensure that your business is priced right and that the right time to sell is now.
Above all else, always do your homework and look at the options you have before you. You may have a specific price in mind, but the company’s history and current trending will be the determining factors of what you get from selling your online business. All trends are reversible and by focusing on a plan and creating an exit strategy ahead of the date in which you want to sell your business will help you maximize profit and hand off a successful business that will in turn get a high demand from prospective buyers.
Having helped hundreds of business owners like you successfully sell their online businesses, we can help to guide you through the preparation process, so that you can get the best possible valuation and enjoy a smooth transaction. Contact us today to learn more about how we can help you prepare today to sell your online business tomorrow.