Tue. May 28th, 2024
Tips For Negotiating The Purchase Price Of An Ecommerce Business To Maximize ROI

As a business owner, it is natural to contemplate selling it. With the ongoing boom in this segment, it is a great time to put your eCommerce business for sale. Unlike in the past, it is rapidly turning into a seller’s market with a great deal of interest in potential buyers and investors to grab a piece of the eCommerce action.
However, as appealing as it may sound, you should not dive into it without sufficiently thinking it through. There is a lot of groundwork that needs to be done beforehand. Here is a quick guide on the recommended best practices to successfully sell your ecommerce business and maximize your return on investment (ROI).

Prepare For The Sale

One of the key steps before listing your eCommerce business for sale is to get it properly evaluated. If you are seasoned in selling businesses, then you may do your own math that has worked for you in the past. However, those who are new to the process will benefit from using professional assistance here. There are several firms that will help you put a price tag on your eCommerce business for sale. 

The business valuation process takes into account several factors such as the business’s past and current revenue, online traffic, profit margins, liabilities, brand reputation, scalability, future projections, etc. The age of your business is a vital aspect as well. The older the business, the higher it is likely to get valued.

While a professional firm or consultancy will aid you in your endeavor, there are a few things that only you can get right. These include organizing your finances and consolidating valuable data together. Before you list your eCommerce business for sale, gather your income statements, cash flow projections, profit & loss reports, list of liabilities, expenses, and payments, etc. It is equally important to collect operational data and performance indicators such as online traffic, average order size, cart conversion rate, cost of goods sold (COGS), etc. You get the idea.

Prepare For The Listing

Having established your selling and walk away (floor) prices, it is time to list your eCommerce business for sale. The selling process can be conducted in a variety of ways and through one (or more) of several mediums. Here are some of the popular ones:

  • Selling directly – Simple and straightforward, you can choose to sell your business directly to people in your social or professional networks. You can also choose to sell to a competitor, but be cautious, especially if you wish to continue or re-enter the segment later on.
  • Selling on a marketplace – Online marketplaces offer access to a large pool of potential buyers that may be interested in your eCommerce business for sale. The listing is usually free, although you may be charged for some of the premium services.
  • Selling through a broker – First-time sellers may find it more convenient to use a broker. While it comes at a cost (that may be a fixed sum or a percentage of the proceeds of the sale), brokers can provide an end-to-end service holding your hand through the entire selling process, including the negotiations.
  • Selling to an acquirer – Acquiring platforms provide a seamless path to offloading your eCommerce business for sale. With a professional valuation and a smooth negotiation process, acquirers offer a fair price for your business while ensuring its prolonged continuity.

Prepare For The Negotiations

All of the aforementioned activities are more scientific and financial in nature. Now, we come to the creative part of the process.  Apart from selling you to reputed acquirers, all the other mediums will eventually lead to a hardened negotiation process. It is important to be mentally prepared for it. 

Naturally, the buyer will be looking to minimize their cost while you aim to maximize your returns. This can often lead to a stalemate. Be patient. Don’t let your emotions control your decisions. Getting flustered is a sure-shot way of either missing out on potential gains or putting off a prospective buyer. There is no set handbook or manual on how to conduct successful negotiations due to the high degree of subjectivity associated with the topic. The important thing, though, is to not let it turn into a bargaining exercise. The significant distinction in negotiations is to aim for a win-win for both parties involved. 

By laying the proper groundwork, as described earlier, you have already solidified your proposal and can be confident regarding the value and attractiveness of your eCommerce business for sale. While you may like to get as much money as you can, you already have a pragmatic price that you need to aim for and also a walk-away price that you should not settle for less than. These insights will bolster your conviction and add clarity to the negotiation process. Combine them with patience, a check on your emotions, and an eye on the bigger picture to get the most out of the undertaking. 

Know more about how to sell your eCommerce business and artfully conduct negotiations to maximize your gains.