Whether you see trouble brewing on the horizon for your industry, feel like your business has reached its maximum value and you want to cash out, or you simply want to stop running your online business, selling it could be a good idea. But one thing you have to know is that selling an internet business is different from selling a brick-and-mortar business in many ways.
Online businesses often have no physical assets and are not always easy to value. They are sold through different channels as well and are sought after by different types of buyers.
Let’s take a look at a few things you should think about before selling an internet business.
4 Things to Consider Before Selling an Internet Business
1. How Much is it Worth?
The first thing you must do is set the price for your website. Settling on a valuation can be tricky with this type of business, however. You can use an earnings multiple, but you and your buyer may not agree on what this multiple should be.
Using a DCF analysis is much less subjective and will consider future earnings, but it comes with a few issues as well.
The problem with a DCF analysis is that it usually works better for long-established businesses with a steady cash flow, which tends to be very rare for online businesses. So, you’ll most likely have to go with a multiplier and go higher or lower based on how transferable, scalable, and sustainable the business model is.
2. The Age of the Business
The age of a website and its domain are very important when selling a website. Even if your business is doing great right now, a lot of people will be reluctant to buy a business that was only established a year or a few months ago.
This is true for any type of business, but especially so in a volatile and unpredictable sector like eCommerce. If your site is under two years old, it would be a good idea to wait at least until it’s three years old to sell.
3. Increasing its Value
You should always check if you could boost your online business’s value just before you sell it, and there are many ways that you could do so.
You could start adding content to your blog or beef up your client database by going after subscribers more aggressively. Or you could invest in SEO and tighten up your site’s design and navigation.
What you shouldn’t do, however, is try to artificially increase the site’s value by sending paid traffic, or even worse, using black or gray hat tactics like bots. People will eventually find out and you may get in trouble. So, try everything in your power to grow your site’s traffic organically and it will pay dividends.
4. Should You Sell Independently or Through a Broker?
Another thing you have to think about is how you’re going to sell the website. You could sell it on your own, but that would be risky. You can also use a website marketplace but selling your site could take a lot more time than you think, and you may have to sell it at a discount.
Going with a broker is the simplest option and it could work if you have a well-established website with real value. A good broker will connect you with people who are interested in your type of business, accelerate the sale, and make sure that payment and transfer go as smoothly as possible.
These are all factors you have to keep in mind when selling a piece of online real estate. Gather as much information on the business as you can so you can come up with a realistic and favorable valuation and try to see what you can do to extract as much value as you can from it before the sale.
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Author: Joniel Suezo