Every entrepreneur that builds a business is doing it because they want to build a sustainable lifestyle for themselves, with the potential of making big bucks down the road.
Whether they dream about becoming the next massive Silicon Valley success story or they’re trying to build a small business that can help them replace their demanding office job, the allure of having more money and becoming “successful” helps keep entrepreneurs focused.
For many entrepreneurs, experiencing that “big win” is going to happen when they finally sell the business that they’ve built.
If you’re looking for that big win, and are moving towards selling the successful business that you’ve built, I’m going to give you a few different tips to help make the process easier for you.
Regardless why you have personally decided to sell the business, you’re going to need to work through a proven process that makes selling it significantly easier, and more profitable.
Most investors are learning that buying online businesses can be incredibly lucrative. However, you must be aware that they are not looking to purchase another job for themselves. If the business you’ve built can’t run without you personally, buyers will not be interested.
Ensure you’ve put in personnel or key systems so that the new owner can step in and the business can continue. No investor will be interested in buying a business that will implode once you’re no longer working on it.
Each of the steps below will help ensure you’re prepared for the end result, and that there will be minimal hiccups along the way.
Your business is worth more than you think.
New entrepreneurs, or those that started their business as a passion project, may not realize the true value of their business.
When you’re trying to figure out the value of your business, you can typically start around 2 times the yearly net profits. This is considered to be the industry standard, and will go up or down based on the strength of the business you’re selling.
Gather your statistics and history.
Before you’re able to start listing the business for sale, you’ll need to make sure you aren’t creating the potential for problems when you begin the negotiation process.
Investors are going to dig through your business to find out if there’s any risks, how the business has been grown, and whether they can continue growing it once they take it over from you.
This means they’re going to be looking through the traffic sources that you’re utilizing, your conversion rates, your average monthly revenues and profits, and the income sources you’re using to generate that revenue.
You’ll also need to provide the traffic’s demographics so that your investor can figure out areas that can be improved, and see new products that they can sell to your audience after they have acquired the business.
The number and quality of the traffic coming into your website directly translates into revenue for your investor. The more sources for that traffic, the higher your asking price can be.
If you haven’t already figured this information out, use a tracking software like Google Analytics. You’re going to want to have at least a few months’ worth of information that you can present to your investor.
Start looking for an investor.
After you’ve gathered the information investors want to see, you can finally start looking for buyers. There are a few different routes you can take when it comes to finding an investor.
The first one is to list the business for sale on a public marketplace. With public marketplaces, you’re able to receive new offers relatively quickly, but those offers will typically be lower than what you could get through a private sale.
The best way to get the business sold privately, and increase your asking price, is to work through a reputable broker. They already have lists of investors in place and can help you address potential risks in your business so it’s easier for you to justify a higher asking price.
Brush up on your negotiation skills.
When investors approach you, they will be ready to acquire the business. If you feel the offers are in an acceptable range, you’ll start the negotiation process.
During negotiations, you will present your wants and desires for the deal, and your investor will come back with their own wants and desires. The final price will likely end up somewhere between what the two of you originally proposed.
Unless the investor that you’re working with just wants to make a purchase to take over the business as soon as they can, they’re typically going to want to discuss any potential flaws or risks that exist in your business model.
The key takeaway here is that you need to be identifying these issues before you get to the negotiation process, and attempting to fix them to the best of your abilities.
Additionally, you don’t want to appear desperate for a quick sale, because investors tend to be great negotiators and they will use your desperation against you to get an even lower price.
Be ready to transfer accounts and assets.
You should take a look at all the things you use to run your business. Any accounts you have with suppliers or service providers should be easily transferrable to the new owner.
Does your business have any outstanding debts or special agreements that could affect the new owner? You’ll want to address these as best you can and be upfront about them during the negotiation process.
What about product inventory? Does your business house products for sale, or have you pre-paid for any inventory? These questions will need to be addressed during negotiation as well. You might include the inventory in the sale price, or you might ask the buyer to pay for the products separately, over and above your asking price.
Expect to provide support.
After the deal is done, your job isn’t necessarily over with. You’re still going to need to help your investor transition into their new role as the owner of your business.
Typically, they will include this in their list of demands during the negotiation process, so you can expect phone calls and emails for a set period of time while they take the reins and learn how to sustain what you’ve built.
If the level of support isn’t clearly outlined during the negotiation process, and agreed upon by both your investor and yourself, you could end up in a situation where the investor is going to expect endless support. That means you’ll end up being an unpaid employee.
Selling a successful web venture can be a very exciting time for an entrepreneur, but also one that requires very specific approaches to each part of the process.
You’ll need to look at each phase of your business and see that it is properly prepared for the sale. Everything from your role, to your financial records, to your marketing strategies will need to be viewed objectively. If you find weak areas, fix them before you list the business.
If you do not have experience selling a business, or are concerned that investors may be able to get more than their fair end of the deal, you may want to think about working with a professional.
Professional brokers have done countless deals and know what to look out for, while also making sure your business is positioned to get the highest offers possible.
At the end of the day, though, selling your successful business for the highest price comes down to the level of effort you want to devote to making the deal happen.