Five Essential Factors Investors Look for in an Ecommerce Business
The decision to sell your eCommerce business can feel monumental. But the truth is, it’s just the beginning of the process. You still need to find the right buyer for your needs, and you still need to convince them that your business is a great opportunity for them.
What do buyers look for in an eCommerce business? And how can you make yours more appealing to them? In this article, we explore the five biggest factors that go into a decision to buy or invest in an eCommerce brand.
1. Great products
The first thing any buyer wants to know is what your business sells. Are your products unique? How are they made? What is the markup? This is the foundation of any successful eCommerce brand, and you need to make a compelling argument as to why your offering is worth the investment.
To make your business more appealing, consider how you position your products. Telling the right story about a product can increase its value by nearly 3,000%. If your products are handmade or personalized, emphasize that in your website’s messaging; if your products are made of high-quality material, bring that to the fore.
Ultimately, buyers want something they can work with – and that means they need to believe that your products will sell.
2. Product-market fit
Great products are only profitable if there is demand for them. Do you have a strong sense of who your customers are? Can you make a case that demand will grow? What do you offer that consumers can’t elsewhere? Few buyers are willing to take a gamble purely based on the quality of the product.
Many eCommerce founders have never consciously considered their product-market fit. Things take off, and you’re too busy staying on top of things to worry about who is buying your stuff. But examining historical data – sales records, reviews – will help you understand what the market is.
Once you know, the challenge is to make a compelling case that the market is either reliable or actively growing. That is what buyers want when they acquire an eCommerce business: confidence that their investment will pay dividends.
3. Loyal customer base
The single best way to prove an eCommerce business works is through sales. Do you have strong historical turnover? What proportion of your customers repeat purchases? These are the questions that define not just your current effectiveness, but your potential for expansion.
Remember that gross revenue is not the sole determiner of value. A smaller business that can prove its customers are loyal presents an incredible opportunity for scaling. The kind of buyers you want are not interested in a quick win – they want something they can help grow to a new level.
4. Plenty of data
They say data is the new oil, but for someone buying an eCommerce business – it’s more like oxygen. Without plenty of reliable data, there is simply no way for a buyer to have confidence in their purchase. Founders therefore need to ensure they are generating and storing as much information as possible.
There are a wide range of potentially relevant metrics. Buyers will want access to historical traffic; revenue; return on ad spend; and various retail metrics, like average order size and items per order. While no single one is essential, few buyers will be willing to deal with a digital business that can’t back up its claims with data.
5. Brand reputation
The final piece of the puzzle is your brand. Is there positive sentiment towards it? Does it stand out? Have you invested in building it? While not every eCommerce business can be heavily brand-orientated, most buyers will want to feel they are investing in a business which is more than just a website.
The value of brands is by nature somewhat intangible. But there is data to measure some elements: ratings, reviews and social media mentions. And founders should consider how well their brand would fair if it changed hands.
If you want to learn how to boost your business’s brand, read our guide to the elements of an exceptional eCommerce brand.