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Ecommerce businesses have increased exponentially in popularity over the past decade as technology has become more accessible. Not surprisingly, much of the hype surrounding ecommerce is the profit potential in ultimately selling the business.
If you own an online store and are considering selling it, it’s essential to understand the process so you can value it correctly and get the right amount of money back for your efforts.
Thankfully, you’ve come to the right place if you are looking to value and sell your ecommerce business. For starters, you can check out this valuation guide. Or keep reading this article to learn more about how to value your ecommerce business and sell it fast.
Consider These Factors to Understand the Value of Your Ecommerce Business
Before you can sell your ecommerce business, you’ll need to know how to value it properly. To do this, you need to consider a few factors.
While each ecommerce business valuation will be unique, there are some important factors to consider in the process, including your business’s revenue, margins, and profitability.
The first factor to consider will always be your revenue. Your store’s revenue is usually the most crucial metric when valuing an ecommerce business. This is because it is a good indicator of the company’s future growth potential.
Margins and Profitability
Additionally, you need to take into account your margins and profitability. A company with higher operating margins and profitability is usually more valuable than a company with low margins and profitability.
Other vital factors to consider when valuing include your customer acquisition costs, lifetime value of a customer, and churn rate.
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Calculate the Value of Your Ecommerce Business Using a Revenue Multiple
The most common method for calculating the value of an ecommerce business is using a multiple of revenue. This is referred to as the times–revenue method. This means that a company can be valued at a multiple of its revenue. The industry average is usually around two to five times, but this multiple can vary depending on the specific industry and other factors.
For example, if your ecommerce business has a revenue of $1 million and the industry average multiple is four times, your business would be valued at $4 million. However, if your company has a lower margin or profitability, your multiple could be closer to two times or even less.
How to Sell Your Ecommerce Business
Once you have valued your online store, you can sell it. The first step in this phase is finding a buyer. There are a few different ways you can do this.
Find a Buyer with the Help of a Broker
You can use a broker or an investment bank specializing in ecommerce businesses. These firms will usually have a database of potential buyers. They will help you with the process of negotiating and selling your business. However, their fees can be large.
Utilize an Online Marketplace
Another option is to use an online marketplace. These platforms allow you to list your business for sale for a small fee. Then you can receive bids from interested buyers.
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If you are looking to value and sell your ecommerce business, there are a few things you need to keep in mind. First, you need to consider your revenue, margins, and profitability. Other key factors include your customer acquisition costs, lifetime value of a customer, and churn rate. You can then value your business using the revenue multiple method outlined above.
You may be thinking, “But what do I do if my business isn’t turning a profit?” There’s still a good chance you’ll be able to sell it. Check out this guide on selling a failing business and sell your business even with your current turnover.
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