Ask any web-based entrepreneur what one of the most challenging aspects of building their business was, and their answer might surprise you. Most entrepreneurs live for the endless days and nights spent building their business, but what comes as a challenge to them is the process of actually selling that web-based business.
eCommerce business owners, who used to not be taken as seriously as their brick-and-mortar counterparts, are now reaping the rewards of taking advantage of a burgeoning marketplace. Digital commerce has exploded over the past few years, and it shows absolutely no signs of slowing down.
Are you thinking of selling your eCommerce business? Are you prepared for the long, and sometimes difficult journey of getting your business valued, finding a buyer, coming to an agreement, etc.? Most business owners don’t have the time (nor energy) to fully commit 100% to the sales process, which is why most opt to hire an eCommerce investment banking firm/brokerage (to handle the sales process for them).
With that being said, don’t think that you can simply hire a brokerage/firm and forget about everything. You should approach the sale of your business very seriously, which means arming yourself with as much information as possible (before even hiring a brokerage). Knowledge is power, especially when it comes to the business world.
Wondering what to keep in mind when hunting for an eCommerce brokerage to hire? We got you covered. Below are three of the top things to keep in mind during your search (as well as a few extra tips thrown in for good measure).
Know Exactly What You’re Looking For
Lots of eCommerce business owners don’t even realize what they’re looking for. Maybe they read that they need to hire a broker (and trust me, that part is at least true), or maybe a friend recommended they “go with a firm.” But, do they truly know what to look for in a brokerage? Probably not.
Website brokers/firms help arrange the sale of websites and eCommerce businesses between two consenting parties (i.e. you and a buyer). Selling businesses is quite a complicated task, and just because you’re in eCommerce doesn’t mean that process becomes any simpler (in fact, some might argue that it’s inherently more complex).
The main thing that you should look for in a firm is experience, but not just general experience (although that certainly doesn’t hurt). Ideally, you should go with a firm that has direct (and recent) experience in the industry/niche you operate in. You should also look for a firm that’s pretty well established (and not one that started brokering last month).
Understanding the Finer Points of Choosing a Broker
We already touched on how important it is for your broker to have experience in your industry/niche, but what we didn’t touch on (that’s equally as important) is choosing a broker that has experience selling similarly-sized businesses (as well as companies using similar models/structures).
For example, it wouldn’t be wise to go with a large broker that mainly deals in websites doing $10 million-plus per year in revenue if your business is only pulling in $250,000. Make sure that you choose a brokerage that operates in a similar sphere as yours, otherwise, you might not get the best result.
USPs are another thing to consider here. USPs, short for unique selling points, are the aspects of your business that set you apart from the competition. Essentially, they’re the defining points of your business. The main thing here is to look for a brokerage that knows how to highlight and market one (or all) of your business’s USPs (e.g. a very strong social media following, a very large email marketing list, etc.).
Broker Fees
Just like with most things in life, there’s no such thing as a free lunch. Brokerages charge fees for their services, and these fees can vary from reasonable to downright predatory. Always ask about a broker’s fees upfront, and ask to take a look at past sales fees for your records (most brokers will allow this as long as the business-related details are redacted).
It’s normal for most brokers to charge anywhere from 9% to 16% of the final sale price, and that’s a generally reasonable range. Anything more than that should be viewed as highly suspect. Always have your attorney look at the final contract and inspect it for any hidden costs and/or fees.
