A Beginner’s Guide To Selling Your Online Business

Whenever you begin a brand new firm, you most likely aren’t fascinated with handing it off to another person. It’s your child!

However over time, some entrepreneurs “outgrow” their enterprise, attributable to a shift in path, priorities, or alternatives.

When that occurs, the best choice could possibly be to discover a purchaser.

Alexis Grant is aware of all about that. After two profitable exits, she began a brand new firm, They Bought Acquired, to assist on-line companies, nicely, get acquired.

Supply: Simon Owens

From Getting Acqui-Employed to Serving to Others

In 2010, Alexis began a content material advertising company that ran blogs for different companies. The Penny Hoarder, a private finance weblog, was one in all her purchasers.

The weblog’s founder, Kyle Taylor, was assembly Alexis for a method weekend when he popped the query:

“What if I purchased what you are promoting?”

The Penny Hoarder was crushing it on the time, however Kyle did it alone. Seeing the good match on this alternative, Alexis joined as Worker No.2, bringing alongside a few of her teammates.

The location was acquired for $102.5m in 2020, and earns 4.4m month-to-month site visitors at present. Supply: The Penny Hoarder

That was an acqui-hire — when somebody brings your complete staff in-house to run a sure side at their firm.

She wasn’t planning to promote, but it surely made sense

“I favored his imaginative and prescient for the enterprise, and knew how we’d work by issues collectively,” Alexis stated. “Understanding the client undoubtedly gave us a bonus.”

She offered one other web site after that, this time through a multiple-buyer bidding course of that she needed to be taught from scratch.

“There are many sources and other people that can assist you if you happen to’re promoting for tens or tons of of tens of millions — these are the sorts of tales we hear about most frequently,” Alexis stated. “However when you have a six- or seven-figure sale, how do you discover the assist and individuals who may aid you by that?”

And that’s how They Bought Acquired was born.

Why You Ought to Care

It’s by no means too early to consider promoting a enterprise, even if you happen to’re not planning to.

Issues are wanting rocky for the VC-backed startup world — Carta reported extra closures on its platform in Q1 2024, and plenty of founders thought of calling it quits this 12 months.

Supply: Carta

However there’s loads of hope for indie corporations and bootstrappers which can be fixing actual issues and specializing in revenue.

So if you happen to’re contemplating constructing a small on-line enterprise, or have already got, Alexis’ bought ideas galore on getting your payday.

4 Frequent Methods to Promote A Enterprise

However first, let’s take a look at how a enterprise acquisition normally takes place.

1. You get a proposal from a purchaser: It may be nice when somebody comes knocking in your door, however you ideally need to have a couple of provide, so you’ve some leverage to barter a greater deal.

2. You pitch patrons: It may be heat or chilly pitching. If chilly pitching, be direct about your ask — Alexis has seen a whole lot of sellers do that efficiently.

3. Work with a dealer or advisor: They may help you place the enterprise, and discover the patrons for you. However attempt to discover ones focusing on your form of enterprise (e.g. on-line vs. brick and mortar).

4. Market: If you happen to’re making beneath $250k in income, it could be onerous to get a dealer as a result of they make fee like actual property brokers. Marketplaces are a great, reasonably priced choice to broaden your purchaser pool.

5 Tricks to Put together Your Enterprise for Sale

A serious problem in promoting a enterprise is getting a lower-than-expected valuation.

The explanations fluctuate relying on the enterprise. It is usually tied again to your income and revenue in some type, however as a rule, it’s a results of not fascinated with promoting earlier than you need to promote, Alexis stated.

“There are specific issues you are able to do to optimize a enterprise to promote,” she stated. “Understanding the levers you may pull to extend the valuation of what you are promoting helps you construct with that in thoughts.”

And guess what? All the following pointers would assist what you are promoting run higher even when a sale is just not within the playing cards.

1. Construct Relationships Early

Early on in what you are promoting, make a spreadsheet with info on:

• Your opponents
• Individuals who do issues such as you
• Individuals who may benefit from including your providers

It’s good to construct these relationships in order that by the point you’re able to promote, you realize who to strategy.

Get on their radar, construct a partnership — perhaps sooner or later they’ll resolve to deliver you in home. That is what number of acqui-hiring occurs, Alexis stated.

2. Clear Up Your Books

Earlier than promoting, that you must ensure that your funds are buttoned up in a approach that is smart to a purchaser.

Relying on the scale of what you are promoting, you may must work with a CFO or a bookkeeping firm with expertise prepping books for M&A.

Clear books allow you to make higher selections since you’ll have extra transparency in your funds.

It additionally avoids surprises in the course of the sale course of — if it comes out in later phases of promoting that your books aren’t clear, your valuation may undergo, and also you could be too invested to stroll away at that time.

3. Focus On Profitability

That is easy, however price emphasizing: Income numbers don’t imply a lot if there’s nothing left for the client to take residence (additionally not nice for you as a founder).

Firms are normally valued by “multiples.” As a reference, six-figure content material companies usually promote for round 3x their income, Alexis stated. E-commerce is normally decrease than that.

However it doesn’t matter what enterprise, the extra money you may take residence, the upper multiples you’re prone to get.

If two companies each have $100k in income every year, however one founder takes residence solely $20k however the different $85k, you may guess that the one with greater profitability goes to promote for lots extra.

4. Make The Enterprise A Effectively-Oiled Machine

In case your presence is crucial to the enterprise, you’ll have a tough time handing it off to another person.

So have the proper staff in place, and attempt to go as a lot as potential off to your staff so that you simply’re not an important piece of this puzzle. Construct processes to verify your organization runs effectively.  

“Any purchaser who’s a enterprise principally desires a machine — one thing they’ll purchase that’ll maintain working itself and making them cash,” Alexis stated.

5. Negotiate The Earn-out

Many founders, when promoting their enterprise, have an earn-out element to their compensation.

It signifies that they receives a commission a portion up entrance, however need to earn the remainder of their compensation over time, primarily based on sure deliverables.

It’s dangerous to comply with an earn-out as a result of it may tie the founder to the corporate years after closing the deal. Alexis advised that founders attempt to negotiate themselves out of it.

Jody Cook dinner, a social media company founder Alexis labored with, did it efficiently as a result of she had a system in place for the corporate to run with out her nicely earlier than the seven-figure sale.

⭐ Bonus Tip

If you happen to want a touch on what companies you may construct to promote, there’s an enormous marketplace for content material websites and on-line communities, stated Alexis.

Buying an viewers is a well-liked guess as a result of patrons can get built-in belief for the model as a substitute of doing it from scratch, which may take years. 

What Occurs After You Promote

It’s normal for founders to have a “misplaced interval” after they promote, Alexis stated.

In case your id is tied to the enterprise, and also you don’t but have a subsequent challenge lined up, it may really feel very disorienting.

Her recommendation is to remind your self of what you loved from constructing that enterprise.

Supply: Giphy

There are founders who promote a number of companies as a result of they like beginning. They promote it as a result of they need to begin a brand new one. And there are others who really feel like they’re higher at scaling, folks managing, or working a a lot larger enterprise.

Ask your self what’s most satisfying to you within the course of, and concentrate on that for the following section of your profession.

Imagine You Can Promote

Surprisingly, many founders do not realize their small companies are even sellable till somebody tells them.

After seeing (and facilitating) many six, seven, and even low eight-figure offers, Alexis believes that the majority companies are sellable.

Don’t be discouraged by a “dangerous market.” For smaller offers, your particular enterprise efficiency trump macro developments.

Even in downturns, nice companies discover patrons. So do not let a possibility slip away.