20 Apr Selling A Website Business
Selling a website business through business broker has some very unique advantages. If all of your customer base is directed through your website and the retailing simply consists of you sending the orders via United Parcel Service, then your business is extremely mobile.
Mobility: This essentially means that you can decide that you want to move, you could pick up the operations over a weekend and relocate to a different state without ever missing a day of business. This is one of the major advantages of living in the informational age.
Scalability: In most cases, selling a website business also means that your business is predominantly scalable. Once you have a product line that is selling and you have done well with search engine optimization plus you are making a profit, what is stopping you from adding a new product line? As you have the infrastructure in place the majority of the work is just adding it to your website and getting the product in stock and doing a little more advertising, of course.
Low Overhead Costs: One of the great advantages of a website business is that most website businesses can be operated right out of the home of the owner or in a small warehouse. This means that the business may have relatively low overhead costs and be extremely profitable. If also means that the majority of the costs will be variable costs only applying when a sale occurs.
Benefits To Buyers: The reason I am pointing these benefits out is because all of these benefits are not only transferred to the seller thus making your business more attractive in comparison to other opportunities that are available. If the buyer wants to relocate the business to Bellevue, WA or to some remote town in the Midwest he or she can do it without any problems occurring. Many of the people who have started a website business—and have been successful—have sold those businesses and then enjoyed a short break from the workforce. Now they are looking to start another business but they have run out of ideas. If you have developed a system that works then there are many investors all over the US that are qualified and highly interested in acquiring your business to apply their skills as they take the reins in the operations of your business.
The Process: The process of selling a business is not anything like selling a car. When you sell a car it is typically because it is getting old, you need a bigger or smaller car, the car is starting to give you troubles, or you just want something newer and shinier. Selling a business is almost the opposite with a few exceptions. You have developed a business that you have put your blood, sweat, and tears into. You have worked long and hard to develop it into what it is today and you think that it is worth way more than when you bought it or started it from the ground up, not less. The process is usually completed in about six basic steps:
- Evaluating the company to determine an estimated selling price and the most likely buyers thus developing realistic expectations.
- Creating the appropriate marketing materials including a Confidential Marketing Memorandum and a Teaser Letter.
- Campaigning the company to interested buyers and having them sign a Non-Disclosure Agreement for your company’s protection
- Finding the right buyers who are interested in building and expanding your business after acquisition rather than a vulture capitalist who will flip it for a profit without caring about your employees.
- Creating an auction between numerous investors that will, through placing bids, increase the selling price of your business.
- Foregoing due diligence
- Negotiating with the buyer that you chose to structure the deal in a way that will satisfy both parties in the long term.
As this process can be extremely difficult and emotionally challenging we recommend that each different seller finds a representative to lead him or her through the M&A process.
Business Brokers vs. Investment Bankers: Investment bankers will work harder to ensure that you are successfully walked through each of the steps listed above while a business broker is more interested in just advertising your business through a few different websites and letting you answer all of the questions the acquiring party may have, they are not as active in the process; however, they are much cheaper in relation to price, so if your business is doing less than $750,000 in adjusted EBITDA than you may be better off engaging a business broker. If your business is producing over $750,000 then you will probably get more value out of an investment banker.