Finance August 21, 2015 Last updated January 11th, 2022 1,916 Reads share

Time to Sell Your Baby? 5 Ways to Avoid Scaring Off Potential Buyers

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You know all of your website’s quirks, shortcuts, and shortcomings. It’s been a constant friend through the ups and downs of your startup’s early days, and now it basically runs itself — you’re so proud.

So what if you want to sell it?

Finding a buyer to invest in an online business you’ve created from scratch can be fraught with difficulty. It’s not like selling a secondhand car or an old office chair; you’ve left your mark on your website, and it’s a bit more serious than a couple of bum imprints in the leather.

When they’re not thinking about selling, business owners don’t consider selling points. But it pays to think like a buyer, even when you and your site are still honeymooning.

Here are the most important points to remember when trying to stabilize your online business:

#1. Think like a buyer

Look to understand the reasons a buyer may decide against your business as a serious purchase prospect. In your business’s early days, it’s common to invest and reinvest rapidly to continue growing. That said, if you’d like to sell down the line, show how your business operates without significant heavy investments.

Online businesses are valued primarily on their annual earnings, not their gross revenues, because earnings often provide a stronger baseline by which to judge ROI. In that case, halt major reinvestments for at least 12 months before trying to sell so buyers can see how profitable your business really is.

Lastly, business owners tend to have a slight bias when it comes to the hardiness of their businesses. If they haven’t encountered a problem or a risk hasn’t materialized, they start to forget the risk exists at all. However, just because it hasn’t become “real” doesn’t make it nonexistent, and a buyer will be wary of that possibility.

Thus, complete a risk assessment every so often. Look for areas of potential risk and single points of failure, including marketplace changes, legislative concerns, and competitive climates.

#2. Do your own due diligence

Potential buyers will have a twofold process of due diligence when surveying your online business: discovery and verification. Discovery will involve a buyer learning about your business while looking to answer the question “If everything I’m seeing is true, should I acquire this business?” This decision is based on many factors, including the financial longevity of the business, its opportunities for growth, and its number of loyal users.

If the answer is “Yes, I should acquire this business,” then verification begins. This is when the buyer looks more closely for anything that could spell trouble. He’ll want to ensure the information presented is accurate and complete. Further, he’ll probably ask for third-party documentation to aid his decision-making process.

Analyze your own online business through the lens of a potential buyer, practicing two-step due diligence just as he would. Do this often to spot any changes. Examine metrics like financial trends, conversion rates, and reorder rates. Ask yourself, “Would a buyer have any reason to say no to my business?”

#3. Keep your financials in professional order

Some small businesses make the easy mistake of choosing a handmade approach to accounting. I remember a particular owner-operator e-commerce store that operated smoothly using the handmade approach for years — until it tried to attract a buyer. Unfortunately, the business owner put personal purchases down as company expenses and hadn’t used proper accounting software.

Though this innocent lack of professionalism wasn’t drastic enough to put off the buyer, it did mean the owner earned a significantly lower price for her business than she’d planned on.

Hire a good bookkeeper or dedicate routine time to maintain immaculate accounts using professional software. You won’t regret the extra effort, even if you’re not thinking of selling any time soon.

#4. Keep a clean slate (or at least be honest about a dirty one)

Surprise! Buyers don’t like finding litigious skeletons in your closet. A few years ago, I worked with a client who, as far as I could tell, kept a very clean business, impeccable financial records, and years of great history with customers. A sale was in the cards.

But as we moved through the deal, the client confessed he’d kept quiet about a legal issue in his past. He hadn’t considered the lawsuit serious enough to mention it before the deal began; this proved costly. The buyer began to distrust the seller, thinking his omission of the lawsuit must have been intentional, and the deal eventually disintegrated.

Being upfront about all of your past issues and mistakes, however large or small, will prove you’re a trustworthy professional. It will also help you avoid inevitable delays and destruction when they resurface later.

#5. Kill the author

If your business is too closely linked to you as a person or as a personal brand, a potential buyer will question whether the business can survive without you. He will feel less ownership over the business idea and will be less likely to get excited about taking it on — especially if you have vendor relationships that won’t transfer or clients who have become personal friends.

Transferability can be a primary issue for a buyer. Just think of all the blogs you know of: How many of them rely on the voice, image, opinions, and values of their creator? Nearly all. And it’s not just blogs. E-commerce sites, online magazines, and SaaS businesses can all experience transferability issues. When buyers come looking at your site as a prospect but can’t see themselves in your ideas, this becomes a problem.

Occasionally browse your site, and if you notice the word “I” or “me” popping up a little too often, do a quick edit. Neutralize the voice and take out that series of selfies you posted. You don’t have to completely disappear, but make sure you’re giving a new owner the chance to transfer some of his own ideas to your template.

By thinking like a buyer, doing your own due diligence, and occasionally taking the “I” out of your website, you can keep your online business from becoming an unsalable friend.

Images: “business for sale text write on paper/


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Mark Daoust

Mark Daoust

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