Five Key Signs You Are Ready to Sell Your Ecommerce Business
With reports of online brands like Chewy.com being acquired for multiple billions, it’s no wonder eCommerce owners are lining up to sell their businesses. But founders should proceed with caution.
Timing your sale right is an artform; just a few short weeks could be the difference between a perfect sale and a major disappointment.
Here are five signs that you are ready to take the plunge:
1. You have a reason to sell
The biggest question when selling any business is simple: “why now?” There’s no harm in selling a business just to make a profit, but the most successful and satisfying sales are generally in service of some other goal.
Perhaps you want to spend more time with your family, or need the funds to start a new venture. Perhaps you’ve realized the founder lifestyle isn’t for you, or discovered a creative passion that you’d rather spend your time pursuing.
There’s no right answer here; the point is simply to be honest about what the sale will help you achieve. Even if it’s simply buying you time to think about what you do next.
2. You’ve exhausted every “easy win”
There are always changes to be made to an eCommerce site – whether it’s adding new products or changing the website design. But if you’re looking to sell, it’s important to consider the cost-benefit of any given action.
A full rebrand could cost six figures without making a material difference to your valuation; but a few small changes to your site UX could cost hundreds while doing wonders for your site’s price tag.
These are your site’s “easy wins”, and you should make sure you’ve exhausted them before selling. Once you have, the business will likely require a serious injection of capital and expertise to scale – so it might be time to consider selling up.
3. Your metrics point in the right direction
The best time to sell is always going to be at the peak of a positive trajectory. You need to be able to convincingly show how a buyer will make a return, and that’s all about future growth.
From historical traffic and revenue to Return on Ad Sales (ROAS) and the quality of online reviews, a serious buyer will want to see every performance metrics you have when assessing the deal.
The more positive indicators you can show, the lower the risk to the buyer – and therefore the stronger your negotiating position. So if you don’t have enough measurements in place – or have good reason to think your metrics will dramatically improve in six months’ time – you might be better off waiting.
4. The market is on your side
However much you believe in what you’re selling, the market needs to agree with you. A buyer will always be willing to pay more for something they expect to grow in popularity,
Imagine selling a profitable, well developed online plant shop just before lockdowns gave that market an enormous boost. Catching trends – either cultural or economic – is vitally important when selling a business.
Of course, plenty of businesses are largely immune to trends. But if yours isn’t, and you happen to catch a moment when what you sell is ‘hot’, it might be worth asking yourself: “is there ever going to be a better time to sell?”
5. Your finances are in order
The final piece of the puzzle is your financial situation. Do you have the necessary liquidity? Are your business accounts in proper order? And are you confident there are no legal questions that might get in the way of a deal?
These are questions which will come up during the sale process, and could bring an otherwise solid deal to a halt. Any financial or accounting problems will weaken your position when negotiating with a buyer, likely leading you to be undervalued.
Given the liquidity problems many founders face in today’s climate, there may not be a great number of opportunities to sell. So if a solid option does present itself, this financial aspect should certainly give you pause to consider it.
Conclusion: making the choice that’s right for you
Ultimately, selling your eCommerce business is a personal decision. It means letting go of something you’ve built, and you might care more that the site is bought by someone who will take care of it properly than whether you’ve juiced every last possible dollar out of the thing.
But if you decide the time is right, read our guide to finding the right buyer for your eCommerce business.