Factors Explained: To Sell Or Not To Sell Your eCommerce Business

As any entrepreneur would agree, the process of building and running an eCommerce business is akin to raising a child. There is a lot of planning and nurturing that goes in. There is also constant anxiety regarding growth and the future. And then, there comes a time to let go. People put their eCommerce business for sale for a variety of reasons. They may range from personal reasons like early retirement, significant life changes, added responsibilities to focus on, to professional reasons like setting up a new venture, generating capital to diversify, etc. Regardless of your particular reason, the important thing is to be clear about it.  This clarity will come in very handy during the eventual selling process and associated sale negotiations. 

Once you have established your reasons to put your eCommerce business for sale, you should evaluate whether it is the right time and/or the situation to put your eCommerce business for sale. Will it get the most value? Will it help you meet your desired goals? These are just some of the questions to ponder over. Let us help you out by sharing some critical factors that you consider before finalizing your decision to put your eCommerce business for sale.

When Not To Sell

You may have some compelling personal reasons for selling where the due process may not be possible to follow. Well, for the sake of a wider discussion, let us ignore such exceptional circumstances and talk about regular scenarios. Here are some factors regarding when you should not put your eCommerce business for sale.

  • Selling Due To A Dip – If your decision to sell is purely based on poor current performance, then hold on. Keep in mind that your current figures will be foremost on your potential buyer’s mind. It is likely to create a high level of risk and uncertainty in the mind of buyers. Which, in turn, is going to significantly reduce the valuation of your business. 
  • Scattered Financials – By this, we don’t mean the performance eCommerce business for sale, but its report card. This is in the form of income and P&L statements, up-to-date inventory list, detailed list of all payables and receivables, complete track of the supply chain system including vendor details, business ratings, reviews, BSR for Amazon FBA businesses, Seller Discretionary Earnings (SDE) report and so on. If you do not have all this well organized, then it might be better to hold on till you can get your house in order, so to speak.
  • Lack Of An Exit Strategy – Your exit plan needs to be both at a macro and a micro-level. The macro-level may include aspects such as, what you intend to do with the proceeds of the sale, any legal partnerships or disinvestment that needs to be considered, while the micro-level factors can be current suppliers and vendors (especially in case you intend to conduct business with them again in the future), cost of operations, walkaway price for negotiations and so on. It may prove beneficial if you pause to plan a proper exit strategy before putting your eCommerce business for sale.

When To Sell

As it is important to know when not to sell, it is equally important to understand the factors that suggest it is the right time to monetize your efforts. You should consider putting your eCommerce business for sale when:

  • Performance Is On The Up – Well, of course. If your business has done well, profits are up, all financial obligations have been cleared, financials are strong, then several potential buyers are likely to queue up to take over this well-oiled machine. This may be an ideal time to set up your eCommerce business for sale for maximum valuation and reap the benefits.
  • Business Is In Stagnation Mode – You may remember we had advised against selling your business purely on the basis of a drop in current performance. This point, however, is regarding slow or negligible growth over a period of time. This may not be directly due to your own performance; it can be a result of a global pandemic, socio-economic recession, or cheaper and faster competitors. This may be a time to consider the sale of your business and consult the experts to help you go through the options. During this stage, most entrepreneurs admit to having clouded judgment regarding selling before performance further dips or hold on to ride the wave. Professional consultants and acquirers may be able to help you decide, in such a case.

Other Factors To Be Considered

The decision to sell is never an easy one. But the end result needs to be as much in your favour as possible. To achieve this, there are some other tangible and intangible pointers that should be considered before deciding on the sale.

  • Age Of The Business – It is usually observed that businesses with less than 1 year of live operations tend to fetch lower prices. On the other hand, those that have been around for 3 years and more are considered as low risk and high potential opportunities by buyers and acquirers.
  • Nature Of The Business – If your business is seasonal in nature or heavily dependent on a single product, you are not likely to generate much excitement in the buyer’s mind. Before you decide to sell such a business, you may want to invest in certain areas that can help you significantly increase your valuation in the market. These may include:
    • Diversify the products in your inventory
    • Usual social media to gain market traction
    • Open up new sources for increasing traffic
    • Focus on online reviews and other performance indicators

Stage Of The Business

Businesses are much like organisms, and there are several noticeable stages in their lifecycle. Being mindful of these stages – from infancy to maturity — and offering the appropriate patience and due attention is the prudent thing to do. This will also help you avoid the regrettable act of selling too soon or the rueful loss of selling your eCommerce business too late.

Originally posted 2022-01-20 23:38:05.