I recently helped a friend sell one of his eCommerce websites in Shopify’s Marketplace. It all went well, for both the seller and the buyer, and after the transaction completed, I thought about all other investors who contemplate on selling their businesses and don’t know how. So, I decided to write a short guide that may be of help to everybody and ease your decision on how and where to sell an eCommerce website.
A few decades ago, in order to start a commerce business, you needed to have not only a business plan but also a location, a place where to set up your store physically. This meant that you had access to a restricted local audience and if you needed to go national or maybe international, you needed to spend more money in renting local stores all over the country, the continent, and the world. Not to mention, that you had to worry about logistics, employees, different legal requirements and so on.
Now, things are relatively simple. You need a minimum budget to buy your products, acquire the services of a hosting company and maybe a website designer to set up your eCommerce website. You can get from local to international in just a few seconds, with minimum investments and efforts.
There may be times, however, when investors of eCommerce websites want to sell their businesses and start new ones. Or, they may want to sell them due to the fact that they have too many businesses to worry about and they want to focus on just a few.
If you are one of them, I am sure you are thinking about selling at the best price, quick and easy. While this may not always be possible, you can make your best and try not to lose money and even make the deal profitable. In order to do so, however, you need to know what are you doing and what selling your eCommerce business means.
First, evaluate your business
What is your eCommerce website worth?
If you are selling a Shopify store and list it on their Exchange market, the online app will automatically generate a listing price based on several factors such as monthly sales and traffic. However, you can adjust that price based on your own estimations and for this part, you need to know how much your business is worth.
One of the best ways to evaluate your business is through the “Seller’s Discretionary Cash Flow,” also known as SDCF. Basically, your selling price would be a multiplier of this factor.
According to the definition posted by valueadder.com, SDCF refers to “the pre-tax earnings of the business before non-cash expenses, one owner’s compensation, interest expense or income, as well as one-time and non-business related income and expense items.” Seller’s discretionary cash flows, they added, “is a common cash flow based measure of business earnings for owner-operator managed businesses.”
How can you determine this SDCF? Well, I always used feinternational.com’s formula as a basic calculus for cash flow. According to them, it should look something like this:
Revenue – Cost of sold goods – Operating expenses + Owner compensation
The same source writes about some of the other factors that should be taken into account when you assess your business’ worth. In their terms, it is called the “valuation scorecard” and looks something like this:
In conclusion, what makes an eCommerce website valuable?
The answer is “profit.” Every new buyer will expect to have a positive return on investment in a couple of months, a year or more, depending on how big the business is. Therefore, as long as the store is able to generate profits constantly, it is considered to be valuable. The buyer can then invest in expanding the business or keep it at the actual level and keep the margins of profit unchanged.
Then, list your eCommerce store in a marketplace
As I already told you in the intro section of this article, my experience, in this case, is strongly related to Shopify. Therefore, this is the marketplace I will talk about in this chapter.
So, how do you sell a Shopify store on their marketplace?
I guess if you paid attention to what we’ve talked about so far, you already made an accurate assessment of how much your website is worth. This is your personal value, however, which you will have to confront with how the marketplace evaluates it as well.
The first thing to do at this point is to go to the Marketplace and start your listing procedure. All you need is your Shopify store login username and password.
Now, you can access the Exchange app which is also available from your Shopify admin panel. From here, you can finally list the store as being available for sale on the exchange market. Things you need to do here:
- Add a title and a description of your listing. The better they are, the more likely it will be for it to be noticed by prospective buyers. Don’t forget to include a brief description of your products along with the title.
- Select your industry/niche. What are you selling? What kinds/types of products are in your store? This is also important information that may help buyers select the business they want to buy easier and better.
- Now it’s time to also add a detailed description to your store. Talk about your motives to open it, provide information about the products you sell, your shop’s history, sales, evolution through time and so on. Also, it would be best if you can add details about all social media accounts associated with the store as well. The prospective buyers need to see exactly what they are buying and how the store is settled on the market, how can it be marketed and possibilities to further advertise it. The more thorough and truthful you are, the bigger the chances to sell your store are.
- After you input all the data required here, the Exchange app will generate a selling price based on your traffic and your general revenue. You can review this price and update it if you consider it too low. Keep in mind however that there should be a balance between their estimated price and your estimated price. If you want to sell, you need to be realistic and don’t overprice your listing.
- Next, the system will automatically generate some screenshots of your store. You can review them and upload your own if you are not satisfied with the results. Also, the system will generate your “store performance” data based on revenue and traffic. This information cannot be modified and it is updated on a monthly basis, as traffic and income changes. It’s quite important therefore to keep your store alive during this time until you manage to sell it because if your stats go down, it may affect your marketability.
- Finally, you get to review and update your contact information, verify the data is correct, save your work and publish your listing.
Other marketplaces where you can sell your eCommerce website
There are several options for those who do not have Shopify based stores or, for those who want to try other marketplaces for more exposure. Here is a list of some of the most popular websites you can try if you want to sell your business:
- Flippa. This is one of the oldest places where entrepreneurs sell and buy online businesses. According to their own stats, more than 5,000 new businesses and domains are listed here every day. Every month, more than $5 million of businesses are being sold on Flippa.
- Empire Flippers. This is a curated marketplace where every new listing is thoroughly verified before being cleared for integration into their database. Empire Flippers lists websites based on their traffic, earnings and history. The recommended prices are calculated by multiplying the average income of the last 3 to 12 months by a factor of 20 to 40. The platform handles all the communication between seller and buyers. As of January 2018, their total overall sales are $41,185,220.
- Freemarket.com is yet another broker that may help you sell your website on their online platform. Here, you can also sell only your domain if you don’t want to sell your entire eCommerce store. What’s great about this service is that the listings are free. There are no fees until you successfully make a sale, at which point they will take only 5% of the selling price.
Nobody thinks about the possibility to sell their business at the beginning, but sometimes, you decide that this option is the best option you can take due to several factors. If you own an eCommerce store, things are easier than with local physical based businesses. All you need is a marketplace, a good description of your store and a correct price.
Did you ever buy or sell websites online? Are you considering doing it in the near future? What is your experience with different marketplaces?