Like many business owners, you might have found yourself at a crossroads lately. It might have been brought about because you’ve decided that you want to venture into a new business, or you’ve decided to retire altogether. In another case, it might have been brought about by a sudden need for a cash influx, or because you feel like you’ve already maximized all growth potential possible.
Whatever your reason, you might find yourself wondering, “How can I sell my business?”
Selling an online business is no different from selling a brick-and-mortar business. In order for it to be successful and profitable, you need to devote substantial time and effort in planning and executing the sale process. However, this period is where many online business owners make several common mistakes that can either make the selling process difficult or cause issues that can affect the final value of the sale. In worst-case scenarios, it can even be both, making the business owner shoulder a heavy loss.
Here are five of the most common exit mistakes that first-time business owners make when trying to sell their company online, and how to avoid them.
1. Overestimating the Value of Their Business
This is perhaps the most common, yet the most understandable mistake that business owners make when it comes to valuing their business. Aside from the tangible financial data that can be backed up by the track record of their business, they are also placing value on their “sweat equity”. The problem here is that buyers don’t really care about how much time and effort you put into making your company grow; they only care about the objective facts about your company and how they will be able to make a profit from it. Your story about all the hardships and trials you overcame while growing your company might sound great, but that’s all it is: a story.
Instead of trying to play on your buyer’s emotions, appeal to their business sense. Present your company’s financial track record for at least a period of a year. Go into detail about your profit, your existing supply chain, and your ready customer base. These are the assets that your buyer will be interested in.
2. Confusing Company Growth with Company Value
Many business owners mistakenly believe that company growth is directly proportional to company value, citing figures such as the number of employees, a high amount of traffic, or a huge following on social media. However, on their own, these figures don’t really mean anything. A high number of employees, for example, can just mean that you are overstaffed. A high amount of traffic to your website means nothing if most of the traffic bounces or your conversion rate is low. Even a social media following is worthless if there is no meaningful customer engagement!
3. Underestimating their Value in the Business
Here’s one important question that you need to ask yourself: “is my business going to survive without me?”
Many businesses directly derive their value from the owner, whether it’s the owner’s professional connections, their creativity, or simply their charisma. If your business is heavily dependent on your personality, there is no guarantee that the next owner will be able to succeed in running your business when you are gone.
4. Poor Documentation Process
You need to have all the proper documentation about your business ready before you put it up for sale. This is the main reason why you should prepare for an exit a least 18 months before actually going through with the process. This period will give you enough time to get all the necessary paperwork about all aspects of your business.
You need to have all the financial records ready, such as your profit and loss records, inventory and stock, balance sheets, and tax returns. You should also have documentation on any negative information about your business, if there are any, such as any legal cases or liability issues you might have.
5. Not Understanding What a Buyer Wants
You must always keep in mind that you and your potential buyer will always be coming from diametrically opposite sides. You are looking to sell your business at the highest possible profit. The buyer will be looking to purchase a business with high potential but at the lowest possible price. This business doesn’t necessarily have to be the one you are selling!
Vetting your buyer to find the best possible match is a crucial step. You can look at their experience with your particular industry, or whether they have the same goals for your business as you do. Do they have the business temperament, contacts, or acumen to run your business and make it successful?