Whatever your online business model is– ecommerce, content/advertising, Marketplace, SaaS, services, applications, or social– buyers are looking for healthy, lucrative online businesses that can make money.
As is standard practice, before purchasing an online business, a buyer will perform their due diligence to ensure that the digital asset is worth taking the risk.
First, let’s break down the kind of buyers that are looking to purchase your online business.
Aggregators
FBA Aggregators search for thriving, profitable, successful businesses on Amazon and acquire them to scale for revenue. They have the expertise, focus, and resources to unlock the untapped potential of FBA stores that only a large umbrella brand can achieve.
These aggregators are made up of top, professional experts in the industry who have the knowledge and proven playbook to turn brands they acquire into global companies. They possess lucrative skills like SEO and Amazon knowledge, and know what kind of businesses and categories will have a potential to successfully scale.
Aggregators are looking for the following characteristics in an Amazon business:
- Businesses with a solid sales history
- 3rd party fulfillment
- Strong ratings, reviews, and rankings
- Long-term growth potential
- Registered brands
- Fulfillment by Amazon businesses
- Market niche
- Fewer SKUs
- Revenue of >$1 M within the last twelve months (EBITDA)
However, not only huge aggregators like Thrasio are purchasing these big businesses.
Whereas before, funds and acquisition firms solely had the keys to uncover the world of online businesses, the average person– a corporate worker, stay-at-home dad, or graduate student– now has access to unlocking a path to financial freedom by acquiring an online business.
This is the investment bank for the 99%, not only limited to aggregators, but first-time buyers like this entrepreneur who purchased an Amazon FBA store on Flippa’s marketplace for $100,000.
Entrepreneurs/Side Hustlers
Let’s take the example of a successful entrepreneur, John Chen, who purchased “Blush and Bar”, an ecommerce jewelry business, in 2017 for $7,500 and later sold it on Flippa in 2019 for $555,000. Chen has used different avenues like Facebook ads and paid social media marketing to expand his business. Prior to becoming a full-time entrepreneur, Chen worked at a private equity firm with $200M under management. After selling his first company, he purchased a plus-size clothing business for $60,000 and is well on its way to making 2 million in revenue.
Like Chen, many entrepreneurs across the globe are looking for ways to take financial control of their lives. For them, leaving the confines of their 9-5 jobs means more stability and flexibility, working from anywhere in the world, often times making money in their sleep.
Stacy Caprio, the creator of Her.CEO, a website that inspires entrepreneurs and shares website buying and selling experiences of her own. While still in her 9-5 job, Stacy got her start buying websites on Flippa, which allowed her to gain financial independence and break free from her corporate job.
“Many people spend their whole lives working toward financial independence so they can retire, but they don’t really think about how they can structure their current lives, so they can have the independence of time and independence of finances,” says Stacy. “Not necessarily not working, but choosing how to focus your work– for me, it’s made me so much happier.”
For the average working person, acquiring an online business is the ultimate way to own their future.
Ready to sell your online business?
So, you want to sell your online business. Let’s step into the mind of a buyer and understand what they’re looking for.
Let’s bring in Mike Finger, our 2021 Own Your Future guest.
Mike has successfully sold 4 businesses and works with other small business owners who are interested in preparing to exit their business to ensure their business is in the best position for sale.
Ninety percent of businesses that exist are small businesses, and Mike reminds all small business owners that because the big business sales are the most publicized, it doesn’t mean you can’t sell at a great price and optimal multiple.
According to Mike, in order to ensure that a business is in the best position to attract buyers, there are a few simple rules to follow.
1. Let go of your unicorn dream and unrealistic expectations. It’s important to understand that small business exits are completely different from big business exits.
2. Set Aside the Complexity. Most small businesses that fail to sell are because of some small element of the business. Our ability to sell isn’t about some “mystical” number, but it’s about a simple approach. To sell your small business you must have a buyer. The buyer is most likely an individual. It’s important to think about yourself as the one buying the business and that the buyer wants a long list of wants when buying a business.
There are two primary needs that are going to dominate a buyer’s decision:
- They need to make a living and be compensated for their time.
- They’re going to have to make loan payments and service the debt from the loan they took out to purchase your business.
If you can do both of these things, you have increased your chances of successfully selling your business.
There are three key questions to ask yourself when selling your business. We like to call it “The Three Ds of Selling”.
- Are my results desirable? Look at your seller’s discretionary earnings and the financial benefit you receive from owning your business. The higher your seller’s discretionary earnings, the higher your purchase price for the business.
- Can a buyer duplicate my results? You should be able to transfer a business with the understanding that it does not need to depend on the owner to grow. Your results should exist elsewhere besides the original business owner. If you create a team and systems, it’s easier d’or someone to duplicate.
- Can I document my results? Is the traffic what you said it was? Do you have the necessary documentation? It’s important to keep clean records to ensure that your business is staying whole throughout the entire process.
If you can answer yes to all those three questions, you are much closer to a place where a small business exit can be successfully exited.
