If you own an Ecommerce business, or want to acquire one, Flippa CEO, Blake Hutchison has a few tips for you on how to succeed in your quest…
Blake recently sat down with Nathan Bush from Add to Cart Podcast, to chat about investability, valuations and democracy of the exit in the Ecommerce industry.
While you can listen to the full conversation here, you can also find (and print off for the future?) Blake’s top tips on how to succeed with Ecommerce below.
- Purchasing a Business: An Alternative to Starting from Scratch
Imagine you have a burning passion for candles or food, and you decide to turn your passion into an Ecommerce business, or maybe a content blog. This is incredibly common, but the reality is that passion alone can only take you so far.
Eventually, you will need to monetize your efforts and commercialize your business. However, commercializing a business is not an easy task: it is time-consuming and can be quite costly.
When you do the math, the cost of acquiring customers to reach a significant scale can be quite high, and the risk of not reaching that scale before running out of steam and money is also high.
So why risk it? Consider buying an existing business with an established customer base, cash flow, and brand recognition, which can cost you less than trying to build one from scratch.
- Prepare Your Business for Success: Optimize its Potential
Even if you have no immediate plans to sell your business, it’s still essential to structure and position it for success right from the start.
Start focusing on how to best optimize your business: concentrate on financial performance, operational efficiency, and growth potential. Streamlining your business processes, improving cash flow, and diversifying your customer base can all contribute to making your business more appealing to potential buyers, and more functional if you don’t want to exit just yet.
Taking a proactive approach to optimizing your business can help you position it for a successful sale, while improving its performance at present.
- Stop Comparing Your Business to Ecommerce Giants
It is crucial to have a clear understanding of the actual value of your business. The most effective way to achieve this? Stop comparing your business to dominant players in the E-commerce industry or huge FBA aggregators that are sitting on the cover of Forbes Magazine, and start comparing it with others of similar size.
In order to accurately value your business, stay clear of public markets or any buy side negotiation strategies, and focus on identifying businesses that are comparable in size.
- Diversify Your Sales Channels, and Watch the Results
If you already own an Ecommerce business, diversifying your sales channels can help to boost your revenue and expand your customer base. And setting up an FBA storefront might just be the perfect idea.
FBA businesses have lower customer acquisition costs, streamlined shipping process, and simplified operations. Blake’s idea? A/B test your core business against this business model and see what happens.
- Sell a Product You Can Call Your Own
Owning a product can make a huge difference when it comes to successful Ecommerce businesses. Everyone can start a business by buying something that’s already made, but if you create a high-quality product that meets the needs of your target market, is uniquely branded and has its own story… Well that’s a winning trifecta.
While it may not always be the fastest path to growth, owning a product that you manufacture and brand will be more sustainable over the long run.
- Shine a Light on Transparency
Whether you are preparing for an exit or simply setting up your business for success, it’s crucial to prioritize transparency to avoid potential setbacks.
Transparency is key, and what this means is you need to have your finances under control, plan and map out your strategies and processes in detail, and more importantly, never rely on guesswork or make up numbers.
And if you have any skeletons in the closet and are negotiating an exit… you better get them out straight away.
Inspired by these tips? Read up on those who have successfully bought and sold their Ecommerce businesses here.
If you’re ready to sell, check out our First Time Seller’s Guide.
