03 Jul Sell an eCommerce Business
Internet entrepreneurs make the bulk of upcoming and growing business people who are revolutionizing the eCommerce scene thanks to their innovation, passion and skills. When it comes to selling these businesses though, more often you will find them making common mistakes, which turn out to be costly. They casually do their bookkeeping with incomplete financial statements. This is in part due to their rapid growth and in part due to their lack of financial prowess. In as much as it may not affect the day to day running of the business, it clearly undermines efforts to sell it when the time comes. Experts warn that it may be the undoing of the business when owners and management start looking to sell since it is those figures that reveal the past performance of the business and give a picture of future prospects.
A good place to start would be to have a separate bank account for the business and document all bank statements, merchant account statements and transaction histories. Online businesses have the advantage of structured and customized systems that can be programmed to do that. The lack of business acumen is perhaps what explains the poor bookkeeping but with the above documents and details, the business can get an expert to come and obtain the necessary financial statements; if there aren’t any already.
Having done the financials, and performed an eCommerce business valuation, the business is ready for sale and the next thing is putting the advertisement up in the market for buyers to see. The seller can use listing sites which are sites where brokers/ agents or owners post their businesses in form of classified listings. The ideal method is to work with a company who knows the space of eCommerce and can find the right strategic buyer for their eCommerce business.
However, listings do have two major advantages, first they are cheap or even free in some cases and secondly some offer search filtering to refine a business search to a buyer’s specification. Some listings are even programmed to send notifications to prospective buyers via email whenever new listings in their category ID entered appear. The problem with listings is that the buyers have not been pre-qualified and you can therefore get massive responses from people only interested in knowing nosy details about the sale. Without taking anything away from them, they are great for as long as you get serious bids for the business. Software merger firms are even more important as they present the seller a completely packaged service, from line experts, an attorney, relevant contract templates and other paperwork, market information and most importantly pre-qualified buyers. As they proactively look for a buyer, they give the seller ample time to continue running the business as they take care of the sale confidentially.
The only reason why merger and acquisition firms will not be ideal is because they cost a whole lot of money. They charge commissions that usually range between 5%- 10% of the selling price with some quoting a 10% commission on the first million and a lesser percentage on the amount above that. In conclusion, selling a business is a tricky affair and apart from the paperwork there are other dynamics that need to be considered e.g. confidentiality to avoid panic among staff in particular and legal advice through the selling process.