Selling Online Businesses At The Highest Valuation Possible
If you’re considering the sale of your online business, it’s likely because you’ve amassed a monthly income substantial enough to profitably hand over the reins and shift your attention to other ventures. Typically, you’d need to generate a net profit exceeding $1,000 USD per month, averaged over a 6-12 month period. Whether selling an online business is a future plan or simply a subject of curiosity, understanding how the process works is crucial.
What Does Mike Swigunski Know About Online Businesses?
Since 2016, I’ve played a crucial role in one of the globe’s most prominent online business brokerages, facilitating the successful sale of online businesses totaling over $120,000,000. Additionally, since 2014, I’ve been growing my personal collection of online businesses and websites. I regularly share my expertise on buying and selling websites and online businesses through articles for esteemed platforms such as Forbes and Entrepreneur.com
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Two Main Groups Of People Selling Online Businesses
If you’re aiming to sell an online business, you likely belong to one of two distinct groups. Identifying which group you’re part of can provide useful insights when it’s time to evaluate and sell your enterprise.
Many people swoop up and buy an online business so that they can invest in it, improve it, and then sell it for a profit. People who start businesses themselves and them build them up to a profitable level also fall into this category. If you have built a business up to a point where you have consistent monthly income, you can then sell the online business for profits that you would otherwise anticipate coming in for the next three years. Essentially, you can get 3-4 years of monthly net profit paid out at once!
Those Looking to Exit & Invest In Other Projects
Sometimes, you just need to pack up and move on in life. Exiting a business venture is never easy for somebody who is strong-willed and passionate about what they were doing, especially when it is something they created from scratch. However, if it reaches a point where you simply cannot profitably continue with the business, it might be better off to exit and take the capital to invest in a larger project with even more room for scaling. There are many people selling online businesses that have numerous reasons to sell like:
- Lost interest or passion in the business
- Need capital for another investment (offline or online)
- Medical or Family emergency that requires cash
- Want to retire and this is their exit plan
How to Price Your Online Business
If you are convinced that selling online businesses is the best way to move forward, then you are probably interested in how you can price your business. There is a very simple way to calculate your valuation.
Free Business Valuation Calculator
If you want to find out how much your business might be worth in a matter of seconds, make sure to try out our free business valuation calculator below. This calculator is extremely accurate, but it’s only as accurate as your input data. Make sure to put in your data carefully and feel free to use the calculator as much as needed.
Pull Up All Sources of Monthly Net Income
The first step in pricing your online business is to determine how much money it is making. Anybody seeking to buy your online business will first want to know how much money it is making. You cannot fool your way into selling a business. Buyers will want proof of any income. Start by pulling up all the data for your online business’ income sources and make sure you have your numbers well organized and complete. Any expense that a new buyer would have to incur, must be included.
Calculate Your Average Monthly Profit the Past 12 Months
In order to determine the value of your company, you will need to come up with an average monthly net profit over the course of the last 12 months. For example, imagine that you are paying $10/month for website hosting and making an average $10,000 a month when you add up the previous 12 months of profit and divide it by 12. This means that your average monthly net profit is $9,990.
Multiply Your Average Monthly Profit by 35-60x
Once you know how much money you are making on average, the next step for you is to multiply that number by 35. This is an industry-standard procedure to sell an online business. In the example above, the website making an average monthly profit of $9,990 should sell their business for about $349,650-449,550. The variance depends on a lot of factors such as; niche, business history, growth trends, “moat” around the business, etc.
Consider Pricing Even Higher
Although multiplying your average monthly profit by 35x-60x is a standard means of pricing your online business, it is plausible for your business to expect increasingly more profits over the incoming months. In these cases, you have two options. One, hold onto the business a little longer in order to increase your average monthly profit (or reduce expenses).
Wait for Offers to Determine Future Actions
At the end of the day, the market is going to determine what the fair price of your online business is. Therefore, what you will need to do is wait for your initial offers. In any case, don’t jump on and accept any lowball offers. Patience is a virtue in many aspects of life, including when it comes time to selling an online business.
Online Business Exit Strategy
Tips for Selling Online Businesses Quickly
Selling anything can be a bit of a hassle. The rewards that you get at the end of the sale is what makes sellers okay with putting up with the stress and work involved in selling an online business. To make this process as quick and smooth as possible, there are some strategies for you to consider.
Be a Little Flexible
Once you have a price target for your website, you will need to consider being flexible if it means that you can make a quick sale. For example, let’s imagine that you are selling an online business for an asking price of $1,255,000. You get an offer from a buyer asking to purchase the business for $950,500 upfront and the rest paid out over a period of 6 months for a total amount of $1,100,000. Although this isn’t quite your target price, this is still a very realistic and decent offer. This deal structure is called an “earn-out” and essentially any business over seven-figures needs to be open to accepting some type of offer like this with “seller financing.”
Be Honest & Transparent
The best way to ruin your chances of selling a website is to be deceptive during the selling process. These sorts of people will falsify documents such as their monthly income so that they can try to trick a buyer into a bad deal. Not only will this set you up for potential legal issues, but also will make it much more difficult for you to sell to vetted buyers who know how to check facts and sense when they are being lied to.
Use a Vetted Broker
The worst mistake that you can make while trying to sell an online business is to try and navigate things on your own if you aren’t familiar with the buying/selling online business industry. Unfortunately, there are platforms and ways that new sellers can get scammed and I want to make sure that never happens.
Looking for Help to Sell Your Online Business?
If you have been searching around for help and want a 100% Free Exit Planning Consultation, then you can book a call right after completing this application. I have helped broker more than $120,000,000 in online businesses and have extensive experience in the online business broker industry.
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Looking to Buy An Online Business?
Are you wanting to save years of time and buy an already established online business? If you have more than $100,000 in liquidity and ready to acquire a profitable online asset in the next 3-6 months, click the button to learn more and schedule a free buyer consultation call today!