Selling an online business is a complicated undertaking that requires careful consideration of a number of factors. It may be necessary for you to seek the services of a broker, an accountant, and/or an attorney as you go. The purpose of the sale, the time of the sale, the strength of the business’s operation, and the structure of the business will all influence whether or not you make a profit.
The sale of your online business will also consume a significant amount of your time, and once the business has been sold, you’ll need to figure out how to best manage the earnings. Reviewing these seven aspects can assist you in developing a sound strategy and ensuring that your talks are a success.
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1. The Reasons to Sell Your Online Business
You’ve made the decision to sell your online business. Why? The answer to this inquiry is one of the first questions a prospective buyer will ask. The following are the most prevalent reasons for which business owners sell their enterprises:
- Disagreements in a partnership
- Either illness or death.
- Being overburdened is a common occurrence.
When a firm is not successful, some owners consider selling it. However, this might make it more difficult to find purchasers for the business. Consider the ability of the company to sell, its readiness, and the timing of your decision. There are a variety of factors that might make your company appear more appealing, including the following:
- Profits are being increased.
- Income numbers that are consistent
- A large number of repeat customers
- A significant contract with a duration of several years.
2. When Will the Online Business Sale Take Place?
Prepare for the sale as far in advance as possible, ideally a year or two in advance of the actual sale. Preparation can help you to enhance the profitability of your business by enhancing your financial records, your corporate structure, and your clientele. These enhancements will also make the transfer easier for the buyer, as well as ensure that the business continues to run smoothly.
3. Evaluation of Your Online Business’ worth
Following that, you’ll want to figure out how much your company is worth so that you don’t overcharge or undercharge your customers. Determine the location of a company appraiser in order to obtain a valuation. The appraiser will prepare a detailed explanation of the value of the online business. The document will lend credibility to the asking price and can be used to determine the appropriate listing price for your property.
4. Should You Hire a Broker?
Buying and selling the online business yourself allows you to save money by avoiding the expense of a broker’s commission. Additionally, when selling to a trusted family member or current employee, this is the ideal route to take.
In other cases, a broker can assist you in freeing up time so that you can continue to manage your business, or in keeping the transaction confidential so that you receive the highest possible price (because the broker will want to maximize their commission). Discussions about expectations and advertisements should be held with the broker, and continual communication should be maintained.
5. Preparing documents
Gather your financial accounts and tax returns from the last three to four years and review them with a professional accounting firm. Develop an inventory of the items/websites that are being sold along with the online business as well. In addition, compile a list of contacts who are involved in sales transactions and supply purchases and gather any necessary papers, such as your current lease, from your files. Make copies of these documents to provide to prospective buyers who have met the financial qualification requirements.
In addition, your information packet should include a brief detailing how the business is operated as well as an up-to-date operating manual if applicable. You’ll also want to make certain that the company is well-presented.
6. Finding a Buyer
According to SCORE, a non-profit organization for businesses and a partner of the United States Small Business Administration, a business sale might take anywhere from six months to two years. Finding the right buyer for your business can be difficult. Avoid limiting your advertising, and you’ll be able to attract a greater number of potential buyers.
Once you have a list of potential purchasers, follow these steps to keep the process moving forward:
- Prepare a list of two to three possible buyers in case the initial transaction fails.
- Maintain communication with prospective purchasers.
- Before disclosing any information about your company, check to see if the prospective buyer has already been pre-qualified for financing.
- If you intend to finance the transaction, consult with an accountant or lawyer to iron out the specifics so that you and the buyer can come to an agreement.
- Allow for some wiggle space in the pricing, but be strong on a price that is realistic and takes into account the company’s long-term worth.
- Any agreements should be put in writing. A nondisclosure/confidentiality agreement should be signed by the prospective buyers in order to secure your information.
- Make every effort to get the signed purchase agreement placed in escrow.
Following the sale, you may be required to sign the following documents:
- The bill of sale, which transfers ownership of a company’s assets to a buyer,
- A lease assignment is a legal document that transfers ownership of a lease.
- A security arrangement, under which a seller retains a claim on the business
In addition, the buyer may want you to sign a non-compete agreement, which would require you to pledge not to start a new competitive firm or woo away consumers from your current business.
A business broker often charges an average of 10% of the sales price of a company with sales under $1 million. While this may seem steep, the broker may be able to negotiate a deal that is more favorable to you than the one you would have negotiated on your own, saving you time and money.
7. Taking Care of the Profits from Online Business
Before you spend the money, you made from the sale, give yourself some time—at the very least, a few months. Create a financial plan that outlines your financial objectives and learn about any tax implications that may arise as a result of your sudden financial success. Consult with a financial advisor to establish how you want to invest the funds and to keep an eye on the long-term rewards, such as debt reduction and retirement savings.