Common Mistakes Sellers Make When Selling Their Online Businesses

Each year, hundreds of online businesses that are listed on the market are not sold. Sometimes external conditions such as the economy, an industry or access to capital are factors but most of the time the reason is that the seller is simply not properly prepared by his or her advisor. When a seller is not properly prepared by his broker, fatal errors can occur, which can easily destroy the transaction process.  Some of the most common mistakes are listed below, in no particular order.

  • The owner either has or is given unrealistic expectations in terms of the valuation of their internet business. Some online business owners believe that their business is worth more than it truly is and find a rookie business broker that is eager for a listing and will therefore agree to list it at an unreasonable multiple. A more seasoned broker will provide a rough valuation upfront and advise the potential client that their expectations are unreasonable and unachievable, and that it would simply be a waste of everybody’s valuable time to proceed with the listing at an unobtainable price.
  • When an internet business owner does not have a proper website broker advising them in the process, they will likely not be properly educated about the different sort of buyers that are out there. For instance, private equity buyers might just be looking for a strong ROI and might be seeking to improve margins by eliminating employees. A strategic buyer or competitor would be a great suitor but sometimes they do not offer an attractive enough multiple to entice a seller. Other buyers may only be looking to put down 20% and finance the acquisition with an SBA loan. There are intangibles with each type of buyer and it is important that the seller is properly educated on such. Some sellers believe that they are saving themselves money by not hiring an online business broker to begin with. Unfortunately, they have no idea of how time-consuming and intensive the process is and the inevitable mistakes that will be made and the subsequent fallout either. An online business sale is extremely nuanced and complex. Additionally, an educated and experienced website business advisory service such as W3 Business Brokers will ensure that you’re reaching the right buyers and receiving the highest possible price for your business along with the best terms. We would provide you with the proper guidance during each step of the process and protect you and your business while making it as stress free as possible for you.
  • Owners sometimes believe that the best buyer for their business is a local competitor, customer, supplier, friend, or family member. However, those buyers may not be interested or financially qualified to consummate the deal. In today’s global environment, the buyer of your online business does not need to be local. The majority of our website sales are to buyers in other states. It is a fairly simple process to transfer the business with its tangible and intangible assets to another state or country. The ideal internet business broker will have a database and Rolodex of institutional and individual buyers who are actively seeking profitable private website businesses. It is crucial for a broker to identify the ideal buyer pool to market the business to. For that reason, when interviewing a prospective broker, it would be prudent to inquire about their buyer data base. We know the types of online businesses and price-points that our buyers are looking for and the types that our competitors’ buyers are as well. There are some website brokers that mainly represent businesses with cash flows of $50,000-$100,000, while our listings begin at the $100,000 level. We simply know that our buyers are looking for higher priced businesses and would therefore refer a potential seller of a smaller business to one of our competitors if we did not believe that we could properly serve them.
  • It is also important to present the business in the best possible light. Some brokers spend very little time on their presentations, while we spend dozens of hours on our prospectuses, highlighting the key aspects and highlights of the business, such as growth opportunities, reputation, industry position and overall analysis, supplier relationships, valuable intangible assets and other factors which buyers will certainly need to be made aware of. We make it appoint to be as transparent as possible, knowing from being one of the oldest website brokerages in the country, what questions prospective buyers might have and certainly what they should know. Unfortunately, not all online brokers understand this, nor do they put in the ample time necessary to prepare a professional and inducing CIM.
  • An experienced and financially educated internet broker also knows what financials, documents and data will be requested and necessary during the due diligence process. Based on the 100+ deals that we have closed, we can easily advise you in advance so you can prepare and organize all the necessary documents ahead of time, which will make the due diligence process more seamless and quicker, leading to a smooth and prompt close. We can assure you that not all brokers will do this, and this very well might hamper the due diligence phase, which many times may kill a deal.

The bottom line is that if you’re considering selling your profitable online business, you want to work with an experienced internet business broker, who will educate you and prepare you for the transaction as it will eliminate key errors during this important process.