In the coming weeks, we will be posting chapters from our upcoming ebook, How to Sell an Online Business, to help business owners prepare for a sale. Selling online businesses requires the right platform and assistance. In this first chapter, we look at the differences between selling for-sale-by-owner and going through a business broker. If you want a more professional looking and complete e-book with images and graphs, you can download the PDF.
1. Where to Sell an Online Business?
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 online 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 company’s income statement, then applying an appropriate multiple to the adjusted earnings – a process described below that requires some experience. Equally important, a website broker will know whether your Internet 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 brokerage firm can vary with the specifics of the assignment, size of the company, 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:
Quiet Light Brokerage
App Business Brokers
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 web-based 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 business.
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 (FSBO). 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, if you sell an online business on your own, it can be a time-consuming and challenging task, particularly if you are simultaneously running the 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 online marketplaces and platforms that can help market your listing:
- Focus (>80% of listings): profitable website businesses <$2 mil in annual revenue (AR)
- $0 listing fee
- 0% success fee
- Focus (>80%): SaaS startups <$500k in AR
- $0 listing fee
- 0% success fee
- Focus (>80%): auctions and fixed price sites & digital assets <$200k in AR
- $49 listing fee for online businesses
- 5%-15% success fee
- Focus (>80%): micro sites <$50k in AR
- $0 listing fee
- 15%-20% success fee in marketplace
Regardless of whether you decide to sell an online business through a broker or on your own, the process remains essentially the same. If you are still a few years out from selling, we suggest reading our article on preparing your business for a sale. We hope you took away a few insights that will help you decide how to sell your web-based business. Email us with any comments, suggestions, or insights of your own.
Quick Answer takeaways:
- A valuation is another important data point in deciding whether to sell your business.
- A broker can help prepare your business for sale.
- A broker can help market and sell your virtual business.
- Investigate business-for-sale marketplaces before listing your business.
- Make sure you have the time and professional experts on hand to help sell your business on your own.
Read the next chapter, 2 Ways to Value a Business, in the upcoming Seller's Guide.