In the coming weeks, we will be posting chapters from our new ebook, What to Expect When Selling Your Digital Business, to help business owners prepare for a sale. In this first chapter, we look at the differences between selling for-sale-by-owner and going through a business broker.
1. Broker or For-Sale-By-Owner?
How you engage with buyers will be an important determinant of your selling experience. If you elect to work with a broker, you will want to clearly understand your respective roles. If you elect to sell your digital business on your own, you will need to wear many hats and be well versed in the process. You may also want to lean on other professionals to help with elements of the transaction.
Working with a Business Broker
Engaging a business broker can be a great first step when considering a sale. Many business brokers will offer a complimentary valuation, even before you decide to hire them. This often includes taking steps to normalize your business’ income statement, then applying an appropriate multiple to the adjusted earnings – a process described below that requires some experience. Equally important, a broker will know whether your virtual business is a candidate for a strategic acquisition, and how to price it accordingly. A broker can also help you assess what you can expect to net from a sale after all fees and expenses, which can be helpful when making the decision of whether or not to sell.
Once engaged, a broker can help develop compelling marketing materials, leverage the firm’s resources and network to attract the right buyers, manage information exchange and negotiation, and work with you and your team to close the transaction and transition the business. Top brokers who specialize in digital businesses maintain websites with powerful domain authority and large networks of tech buyers – valuable assets to prospective sellers.
The cost of hiring a broker can vary with the specifics of the assignment, size of the business, and other factors. However, most brokers are primarily commission-based with back-end fees that can range from a few percentage points, to upwards of 15% of the transaction value. Some brokers also charge upfront for the valuation and development of marketing materials. There are a number of business brokers that focus mainly on digital businesses, including:
- Empire Flippers
- Website Properties
- Latona’s Brokerage
- QuietLight Brokerage
- App Business Brokers
- DragonFlip
- Digital Exits
- The Host Broker
- DealFlow Brokerage
- Acquisitions Direct
Some questions to ask a broker before engaging their services include:
- Who will manage my listing?
- Do they have experience in my niche?
- Have they sold businesses similar to mine?
- Where will my listing be marketed?
- What will they need from me?
- What is their fee?
- What timeline do they anticipate?
Keep in mind that brokers have their own vetting process. If a broker won’t take on your virtual business, find out why so that you can address the issue and be a better candidate in the future. Broker feedback may be an important litmus test for the salability of your digital business.
Selling For-Sale-By-Owner
If you have experience with business transactions, or can lean on other professionals such as your CPA, attorney, or financial advisor, you might choose to sell for-sale-by-owner. In addition to saving the brokerage fee, taking this route puts you in control of the process and perhaps enables you to more easily build rapport with prospective buyers.
That said, selling a business on your own can be a time-consuming and challenging task, particularly if you are simultaneously running the digital business. Be sure you have the skill set and bandwidth available to ensure a beneficial outcome. Additionally, without the benefit of a buyer network, you will likely need to invest in marketing your opportunity. There are a number of marketplaces available online that can help with this. These include:
- Hatchit.us
- Focus (>80% of listings): profitable virtual businesses <$2 mil in annual revenue (AR)
- $0 listing fee
- 0% success fee
- MicroAcquire.com
- Focus (>80%): SaaS startups <$500k in AR
- $0 listing fee
- 0% success fee
- Flippa.com
- Focus (>80%): auctions and fixed price sites & digital assets <$200k in AR
- $49 listing fee for online businesses
- 5%-15% success fee
- ExchangeMarketplace.com
- Focus (>80%): Shopify stores <$100k in AR
- $0 listing fee
- % service fee revealed when listing is approved
- MotionInvest.com
- Focus (>80%): micro sites <$50k in AR
- $0 listing fee
- 15%-20% success fee in marketplace
Regardless of whether you decide to sell through a broker or on your own, the process remains essentially the same. We hope you took away a few insights that will help you decide how to sell your virtual business. Email us with any comments, suggestions, or insights of your own.
To view brokered and non-brokered digital businesses on Hatchit, feel free to search our latest deals.