When Should You Sell Your eCommerce Business?
Launching an eCommerce business is really exciting. But selling it can be just as exciting.
The big question, though, isn’t necessarily whether or not you should sell your eCommerce business. It’s when should you sell it?
To be honest, a lot of this comes down to personal choice. If you think the time is right to sell your online store, the time is probably right.
However, it always helps to get a bit of insight into how to time your sale so that you can make a better decision. In this article, I’ll be taking a look at everything you need to know about when is the best time to sell your eCommerce business.
Before we get into the nitty gritty of timing, it’s really important that you define why you want to sell your business.
For example, some entrepreneurs decide to sell their eCommerce business because they’ve got another project in the works which they need to raise capital for. If they don’t sell now, both their eCommerce business and their new project will suffer. For instance, they will be dividing their cash between the two, which means the eCommerce business will suffer from low cash flow. This could actually shrink its value, which essentially means you’re shooting yourself in the foot. So, if you need to raise capital, selling your eCommerce business is a good idea.
Other entrepreneurs, on the other hand, decide to sell for personal reasons. If you’re bored and need a change after running your business for a few years, now is probably the right time to sell. That said, you need to make sure your business is in good health. If apathy has taken over, it might be the case that profits have gone down, too. If so, it’s important to do some work on your business before you sell so that you’re able to bump its value up.
A third reason why entrepreneurs sell their eCommerce business is because they always planned to right from the start. These are usually experienced entrepreneurs who buy and sell online stores for a living.
When we talk of selling an eCommerce business, it’s important to reiterate that timing is everything.
But is there truly a right and a wrong time to sell? Can’t we just sell our business at any time?
Let’s take a look at the five key stages of eCommerce business growth as this will help us to understand more about timing, and whether or not now is a good time to sell for you.
During the creation stage, you’ll be figuring things out. You’ll be working hard to understand what products to sell, what eCommerce platform to use, how to allocate your budget, who your target audience is etc. Sometimes you’ll just throw something out there and it might work but it might not. You’re just working things out.
It’s during the second stage that you understand whether or not you’re selling the right products.
However, it’s also at this stage that you might find the cash is running a bit dry.
Not just that, but it’s the stage where many first-time entrepreneurs find the going is too tough. Perhaps they’ve ended up with an overstock, or they’ve got an understock.
That all said, there are still sellers who would be interested in an eCommerce business that has reached this stage. You’ll typically find that these buyers are looking for a starter store that will help them expand their own offerings.
If you’ve got past the second stage, know this – you’ve made it this far and you’ve survived. This means you’re a success.
However, it’s often at the third stage where an eCommerce hits a performance plateau. In order to continue with the store, the owner needs to invest more time, cash and effort.
For that reason, it’s often at this point that eCommerce business owners decide to sell their store. They’re able to demonstrate to potential buyers that they’ve made a success of things so far – they’ve achieved stable growth, their revenues are good, and they’re selling a good mix of products. Moreover, they’ve been around now for a few years and their store is working.
As such, it makes sense for a seller to sell and a buyer to buy. The seller decides they don’t want to invest more cash, effort and time into their store. Instead, they want to move onto another venture.
Who buys an eCommerce store at this stage in its development? Usually, it’s portfolio investors and large retailers who are willing to take the time that is required to buy a store that has reached this stage.
If you’ve decided to keep hold of your store until this point, you’ve reached the take-off stage. This is when expansion is rapid, and is usually only made possible either by an investment of cash or a change of hands.
The problem entrepreneurs face at this juncture is managing the balance between expanding the business and keeping track of the resources needed to expand the business. For that reason alone, it’s often seen as a good time to sell, especially if you’ve no cash left of your own to pump into the business.
It’s during the fifth stage that an eCommerce business has reached maturity thanks to achieving a strong market share. Now, the biggest risks to your company are changes in consumer buying habits, as well as new technologies. As such, some owners see this as the perfect time to sell.
Who buys a company that’s in the fifth stage? You’ll typically find that portfolio investors and bigger retailers will be interested, typically because of your vendor contacts and customer base.
Another good indicator of whether or not now is the right time to sell your eCommerce business is its current strengths and weaknesses. When you understand what your strengths and weaknesses are, you’ll be in a better position to decide whether you should sell now, or whether you need to invest more time and energy into making your eCommerce business more attractive to buyers.
Selling a business isn’t easy, and we’ve written an in-depth guide all about selling your business here.
But while you can totally sell it yourself, I strongly recommend that you use a broker.
Because readying your business for sale takes a lot of time and effort, and it can often overwhelm a first-time seller. You have to value your business, find a buyer, carry out the negotiations, handle their objections, organise your books, draw up the legal contracts and close the sale.
And all this comes before you transfer ownership of your business.
The problem with doing it yourself is that you might find that you invest so much time, money and effort into the sale that your business actually suffers – and as a result loses value.
There are lots of professional web-based brokers who charge a commission for selling your business. You can find them online, but it’s really important that you read reviews before making your final decision.
The next step is to use the advice in this article to decide whether or not it’s time to sell your eCommerce business. I personally can’t give you a straight Yes or No answer to that. It’s down to you and your situation, but I hope you’re in a better position to know now what you need to do next.
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