Ready To Sell Your Company? Get Your Sheet Together
The Power is in the Paperwork
So you’ve spent months, maybe years, positioning your business for sale. You’ve worked diligently to create a valuable enterprise that’s growing. Potential buyers will be see an easy path to scaling the business.
You’ve decided to hire a business broker or M&A firm to value, market and sell your digital baby. (We might recommend eBiz Advisers to help.) How exactly do you get ready?
Imagine you were considering buying a restaurant. What would you do? You’d go in, have lunch or dinner, bring others, get their opinions about the service, check out the bar, investigate the parking, traffic, location, see what other retailers are nearby. All those factors might get you interested in buying the place. But ultimately, what will convince you to buy, is what’s in print. The buyer will need to feel comfortable about many aspects of the business before putting his money down, starting with whether it’s profitable or not.
Here’s the key to preparation – you’ll need to present verifiable evidence for most of your numbers and facts. A good intermediary is not going to put verbal statements or generalities into the marketing package.
Start with Financials & Operating
There’s no excuse for bad books. Hire an outside bookkeeper or accountant if needed. At minimum, you’ll be asked for 3 years’ worth of Profit & Loss Statements, Balance Sheets and business tax returns, as well as year-to-date. Because the online business universe moves so quickly, digital buyers are especially interested in your most recent months of performance. As your qualified intermediary, we will spend a good deal of time examining the revenue and earnings for the trailing 12 months (TTM).
You’ll also need to put together operational details. How many employees and their job titles? How many hours does the owner work on the business? How much is monthly payroll and how is it handled? Who is your best customer? What are the strengths and weaknesses of the company? What’s the lease situation? Who are the strongest competitors? Why is the business for sale?
As a digital business, you’ll need to assemble a wide variety of information related to traffic, monetization, sales performance, plus many others:
· Primary traffic sources? Paid vs. organic? Level of SEO spending? Social media marketing initiatives? Email list depth and marketing frequency? Monthly advertising spending?
· Monetization methods? Sales marketplaces and locations? Number of SKU’s? Number of products? Transferability of revenues?
· Monthly Sales? Profit Margins? Revenue breakdowns by channel? Inventory cost analysis? Software/back office methods? Inventory tracking?
· Methods to scale the business? Competition profiles? Sourcing and supplier relationships? Transferability of contracts?
Because this list could stretch out for pages, eBiz Advisers will help you synthesize the information and consolidate your thoughts.
Does it take a good deal of time to prepare your business for sale. Absolutely, yes. But you don’t have a choice, really. The online business sales market is hot right now. Lots of competition. Tons of offerings. If you don’t put the effort into it, buyers will see that you’re not serious about the value and integrity of your business.
These are the basics of getting your heart and head ready for selling. It will help to develop a thick skin and a pound of patience. Though many online businesses sell quickly (in 90 days or less), others take some time. But the chances are good that the more time you spend in preparation, the less time you’ll need for selling.