Business > Merchant Voice

What to consider when selling an ecommerce business

In light of recent industry upheavals, some retail businesses may soon close down. Sooner or later, owners of private businesses usually retire or move on. Whilst some will pass the business to family or, perhaps, employees, others will not.

This is an area in which there is no replacement for expert advice. An experienced broker can advise the best way to market and sell your business. Indeed there is much to be said by taking such advice years in advance, to prepare your business and maximize its selling price.

For example, many owners use every tax loophole and accounting measure to maximize what they claim as expenses and minimize what they report as taxable income. But for for sellers, the proper advise may be to do the opposite — maximize taxable income to raise the company’s selling price.

Hidden value

Some businesses may be barely profitable — just scraping by. It is easy to believe that such a company is not worth trying to sell. But that could be wrong. What one owner considers worthless could have a value to someone else.

For example, if you have been selling on Amazon or Ebay for a number of years and have built up a history of positive feedback, this can be worth a lot of money. Even if you made little or no money on the sales — so there is little point in continuing selling the specific stock — it is the established feedback history that has a value. A new business selling on Amazon would have to wait months to have a chance of winning the Buy Box. Acquiring a company with an established history could help.

Sometimes even the most nonobvious things have value. For example, some time ago one of my companies recorded a huge loss over a few years. I was going to close it when my accountant pointed out that I could sell it. It never occurred to me that a company with a negative net worth could be worth anything. I was wrong.

My accountant pointed out that the company’s losses could be used to offset tax due on future profits. This meant that a competitor in exactly the same business could buy the company and then use the losses to offset its tax bill. Thus a company with, say, a £25,000 cumulative loss and no outstanding debts could be bought for, perhaps, £10,000. The buyer could save £25,000 straight off its tax bill.

Again, this is an area where an expert is definitely valuable. And finding the right buyer is crucial. But it shows that money can be made in unexpected ways.

Many types of assets

Consider, too, the company’s assets. There are many types of assets. A domain name and website are assets with a value. Established ecommerce sites can be worth a lot of money if they have sufficient traffic. Then there is your customer list, including customers’ order history, contact info, physical mailing address, and email addresses. To a competitor, these could have value. If you sell the company to someone who wants to leave it intact and continue trading, these items will probably be included. But if the buyer only wants the cumulative tax losses, you can make more money by selling these other items separately.

These are just a few ideas. Again, an expert can review your company’s unique circumstance and likely come up with other strategies.

But there is one huge catch in all this. How do you find the right expert? Unfortunately I cannot answer that — I wish I knew. If you have experiences or suggestions, please let us know in the comments, below.

Richard Stubbings
Richard Stubbings
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