How to Cash Out From Your Online Business
There comes a time for many entrepreneurs when they want to move on to something new.
Maybe the business no longer keeps their interest or running it has become very stressful.
Maybe it has reached its full potential and it’s time for a new challenge.
Whatever the reason for cashing out, getting the most out of the deal should be a priority.
Ensuring you’re not leaving money on the table, when you decide to sell is part art and part science.
Here are some important tips if you find yourself in the position of wanting to sell your online business:
Take the time you need.
When you’re making such a huge transition in your life, the last thing you want to do is rush through it.
Having increased emotional awareness, and making sure that you aren’t making bad decisions can save you a lot of heartache and turmoil.
You don’t want to wake up one day and decide to sell your business and that the business needs to be sold by the end of the week.
This will create a recipe for disaster and likely mean you won’t get the price you want.
Instead, give yourself 3, 6, or even 12 months to get the business sold.
Giving yourself plenty of time will allow you to fix any areas that need to be addressed so you can increase your final asking price, and help you mentally prepare for separating yourself from your business.
It will also give you time to gather all the documentation you’ll need to sell and start preparing the business for them to easily transition into it.
Learn how to evaluate your business.
In most cases, the value of your business is going to be based on your yearly net profits.
These are calculated based on the revenue you’ve generated, and then subtracting any expenses the business has incurred.
There are certain tools and calculators that can get you in the general ballpark and give you an idea of what your business may be worth, but placing a real-world value on the business is a far more intricate process than what a calculator can accurately do.
A general rough estimate for most online businesses is around 2.44 times their yearly net profits.
Again, this is just a rough estimate, because your business model plays a critical role in coming up with a final valuation and can raise or lower this metric significantly.
Never undermine your business’ value.
This tip ties into taking your time, both before and after the sale.
If you’ve listed the business for sale on one of the many different public marketplaces, low dollar offers are going to be rampant.
Many people will take a chance on a low offer, just to see if you are desperate to sell.
You can offset these low-value offers by contacting other larger companies that you think may be interested in acquiring your business.
For instance, there may be other larger stores and businesses that are either your direct competition or in the same industry as you.
Reaching out to these businesses and letting them know you’re selling can pay off big.
Most times, these businesses already know the value in your business and will make an offer that’s far higher than what buyers on public marketplaces are willing to offer.
Understanding the value of your business and not wavering from that understanding can mean big things for your wallet when you finally accept an offer.
Don’t hesitate to reach out to people you don’t know.
A well-written email to the right people can help you get your business sold substantially quicker, and for a good chunk of money.
If you know other businesses or investors that could take your business and turn it into a profitable venture for them, don’t hesitate to reach out to them and let them know that you’re thinking about selling.
This is especially true for offline businesses.
Many times, they will not have an online presence, and buying your business from you can help them instantly establish that presence and start turning a profit without having to wait years for their marketing efforts to take effect.
Have a lawyer go over your contract.
While most entrepreneurs will never need to hire an outside professional to help make the deal go through, there is one professional that you’ll want to expect to hire: a lawyer.
Having them go over the contracts between you and your buyer can ensure you’re not going to end up doing something you may regret.
Make sure that you get any agreements or verbal contracts between you and your buyer down on paper so they can be enforced later on, and the investor can’t back out of the deal or reduce the amount they’ll pay for the business at the last moment.
Be prepared, but stay firm.
If buyers think you’re desperate to get out of your business or that you need the money quickly, they won’t make fair offers. Why would they? You seem desperate after all.
Show them the statistics behind your business, how well it has grown, how you can bring in new customers daily, and that there is room for growth going into the future.
Using growth trends and projections can help you portray this, and make it easier for you to stick to your guns when it comes time to start negotiating the deal.
Take your time, be patient, be adequately prepared, and stay firm. You will find that serious buyers will readily submit offers at or near your asking price – if that price is realistic.
Use specifics in your communication.
Whenever you’re communicating with your buyer, make sure that you communicate well.
Show them that you have competence when it comes to getting the business sold, and it will instill confidence in them knowing you had the same competence while building the business.
Be honest about what you’ve done, how you’ve structured the business, how you generate revenue and the metrics of your website.
Being specific will go a long way toward helping you get the deal that you want. It will also reassure your buyer that they are making a good investment.
Be upfront and honest.
If a buyer believes you’re hiding something from them, they will do one of two things. They will dig deeper until they either figure it out or simply move on and never make an offer.
To avoid this, you need to be upfront and honest about the costs your business incurs and the way you’ve built the business.
Give them detailed reports on the cost of hosting your servers, any subscriptions that you maintain on a month-to-month basis, and other business expenses that may not be glaringly obvious.
Creating a detailed manual about what all is included or required can help reduce the back-and-forth between you and your buyer.
Set stipulations for how long you’re willing to provide assistance once they have taken over the business, if you’re willing to provide it at all.
Some time is expected, so that you can help them easily transition, but not creating a clear outline can mean you turn into an unpaid employee.
Make sure you’re honest about how long you will help them so that they know when it’s time for them to take the reins and start stepping into their role as the owner of the business.
Build a friendly relationship.
Building a friendly relationship with your buyer is a great way to ensure things are going to go your way, and that they’ll be more flexible during the negotiation stage.
Building up to your final asking price, especially when it’s at the higher end of the spectrum, is critical to avoiding “sticker shock”. Throwing large numbers around without having an established relationship can scare buyers away.
Having a relationship with them will also make it easier for you to show them the value in your business. This will help demonstrate why investing in the business is such a great move for them.
Thinking about selling?
Whether you want to sell and the route you take are entirely up to you. If you run an online business, it’s definitely worth considering even if it is just planning for the future.
By following the tips laid out here, you can successfully and profitably exit from the online business you’ve worked on for so long and start moving onto new adventures and challenges in your life.
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Category: Online Business