Seven Vital Steps To Find The Right Buyer For Your Ecommerce Business
Selling your eCommerce business can be hard, even if you know it’s the right decision for you. That’s why it’s so important to find a buyer that understands the business and will take proper care of it.
But where do you find that buyer? And how can you be sure that you have? In this article, we lay out seven clear steps eCommerce founders can take to discover, scrutinize and ultimately do business with their ideal buyer.
Outline your needs
The first step is simply to outline what you need from a buyer. This could be an emotional need, such as reassurance that they will treat the business right; it could be a financial need, such as a specific amount of capital your business requires; or a logistical need, such as wanting to sell to someone in the same country as you.
It’s important to be honest with yourself, both in terms of what you want and what you can reasonably demand. Many founders want a capital injection without any input from their investor, or to sell the company entirely but retain some level of control. While some buyers may be willing to accept these terms, many won’t – and you need to be realistic about the position you are negotiating from.
Determine the type of buyer you want
There are a number of options here. If you need an injection of capital but want to stay on the board, you could sell to a Private Equity or Venture Capital firm; if you want a quick sale, you could sell to a larger brand that will either absorb your brand or strip it for parts.
Equally, you could opt for an independent buyer that wants to take your brand and grow it. It is harder to find buyers of this kind, of course – especially ones that have the right expertise and resources to realize your business’s potential. But if you can find one, they are likely to give the fairest valuation.
Get an independent valuation
This leads us to the important question of valuation. It’s important that you know what your business should be worth before entering into any formal discussions with a buyer; otherwise they may be able to anchor you to a lower price.
While there are third-parties that will professionally value your eCommerce business, it is fairly straightforward to do for yourself. Simply multiply your average net profit by a reasonable number of years – ideally based on a fair assessment of future market trends.
While this is not an exact method, it should give you a good sense of what to expect. It will help you know if a potential buyer tries to low-ball you, and give you a confident position to negotiate from.
Generate a shortlist
It’s important to know your options before approaching a buyer, and that means creating a shortlist of individuals and organizations that fit your criteria. This will require a fair bit of research, but will save you a huge amount of time in the end.
Try to narrow your search down to no more than a handful of prospects; this will allow you to research each one in more detail. The process will also help you understand the landscape of eCommerce acquisitions better and make a more informed decision.
Check their Credentials
Does each buyer have a legitimate background in eCommerce? Do they have the capital required to take on your business? And are they trustworthy, based either on publically available feedback or their official credentials.
The world of eCommerce acquisitions can be very murky; you will likely find plenty of buyers that appear legitimate but have questionable backgrounds. This is something to investigate immediately, to avoid wasting your time – or ending up with a very bad deal.
Consider their value-add
Beyond mere capital, what does each buyer bring to the table? Can they help your business scale? Do you have expertise in digital marketing, logistics or sales? Can they help you scale in a way otherwise impossible? Do they understand the specific niche you operate in? Can they help you connect with more customers?
This is a major consideration, as plenty of buyers offer little beyond their cheque book. Selling to them is purely a financial transaction, and may put your business at risk of losing what made it special.
Once you have decided on a prospective buyer, it’s time to reach out. While you can garner a great deal of information online, there is no substitute for direct engagement. It’s only really through direct communication that you can be sure there is a proper culture fit between you.
A good buyer will be receptive to any questions you have and enthusiastic about the opportunity. They will want to know about your business, and have ideas about how it could evolve. That is ultimately how you will know they are the right buyer for your site.
If you want to learn how to make your business more appealing to buyers, read our guide to what buyers look for in an eCommerce website.