Sell Your Website or E-Commerce Business

When it comes to valuing and selling your website or e-commerce business, it's essential to carefully consider all the nuances. The BizBuySell team has assembled this guide to walk you step-by-step through the process of determining the value of your business and preparing it for sale. From selecting the right valuation method to marketing the sale and finalizing the deal, we've got you covered.

1. Understand the Value of Your Business

E-commerce businesses sell products and services online and operate in a variety of market segments. Evaluating the value of your business, which is essential not only for operating a business but for when it comes time to put it on the market, can be challenging in this varied landscape. Determining the value of an e-commerce or web business is a blend of science and art, and will bring together quantitative metrics and financials with a qualitative assessment of future earning capacity.

There are many methods for valuing a business, with income, asset, and market-based valuations being the most common. The most appropriate valuation method to use will depend on the business' structure, age, financial history, and factors unique to the company. The majority of internet business owners and buyers use a market-based approach to determine the value of the business.

Market-Based Valuations and Pricing Multiples

Market-based valuations compare businesses to similar companies that have recently sold. By relying on industry-specific cash flow and revenue multiples, business owners, brokers, and buyers in the online and e-commerce sector can calculate what a business is worth relative to recent sale prices. This method of valuation is common among businesses that are reasonably profitable. The metrics used to calculate multiples are earnings (cash flow) and revenue (gross sales). For owner earnings under $1 million, seller's discretionary earnings (SDE) is the appropriate cash flow metric and discretionary expenses are added back, or recast, to the company's bottom-line profits.

Technology Business Valuation Multiples

Average earnings and revenue multiples for e-commerce and related technology businesses sold on BizBuySell from 2017-2024

Category	Avg. Earnings Multiple	Avg. Revenue Multiple
All Technology Businesses	3.13	1.05
Graphic and Web Design Businesses	2.74	0.89
IT and Software Service Businesses	3.01	0.80
Software and App Companies	3.12	1.44
Websites and E-Commerce Businesses	3.21	1.09
Other Technology Businesses	2.50	0.78

Source: BizBuySell Insight Data
Industry Report: Website & E-Commerce Business Valuation Metrics

Internet Business Earnings Multiples

While business valuations fall within a certain range, the value of each individual business is unique and depends on several factors, including the local market, specific financials, and business operations. For e-commerce businesses, the average cash flow multiple is 3.21.

So, using the average multiple, an e-commerce business with annual owner earnings of $200,000 could be worth just over $640,000 on the open market.

Valuations Based on Sales or Revenue

While many internet businesses, buyers and brokers will use cash flow or earnings multiples when evaluating a business' worth, there are occasions where it's helpful to calculate revenue-based valuations. Revenue-based valuations provide additional insight into how a company compares to industry standards. The average internet business revenue multiple hovers around 1.

Documents Needed to Value Your E-Commerce or Web Business

There are a variety of documents that you'll need to gather, and you'll want to have records going back three years. Providing potential buyers with comprehensive, organized documentation and solid bookkeeping will demonstrate the past performance of your business and future forecasts. Among the many documents you'll want to gather are:

• Profit and loss statements
• Current balance sheets
• Cash flow statements
• Statement of SDE
• Tax returns for the business
• Insurance policies
• Supplier and distributor contracts
• Employment agreements
• Note for seller financing, if applicable.

2. Engage The Right Professionals

In order to achieve the best possible outcome for your business sale, you'll want to consider assembling a team of experts. From valuing a business and preparing it for sale to negotiating and closing the deal, having a team of professionals with specific skill sets is beneficial and allows the business to run seamlessly while it's on the market. Accountants, appraisers, attorneys, business brokers, and consultants can help ensure the sale transaction goes smoothly.

An Accountant

An accountant will organize your financials to help demonstrate the value of your business based on its past performance. During the due diligence phase, buyers will scrutinize your financials, so it's important to have a CPA to verify their accuracy.

An Attorney

An attorney with experience in business acquisitions is essential for navigating the legal aspects of selling your business. Attorneys typically work on a flat fee basis and will offer advice on legal issues throughout the process. They'll also draft NDAs and buy-sell agreements, as well as reviewing incoming offers and letters of intent. Lawyers will provide you with assurance that your interests are protected and secure.

A Business Broker

Business brokers act as intermediaries throughout the process of selling your business. It's important to select a broker with experience and specialized knowledge of the web business space, as they can offer specific advice for maximizing value. Brokers work on commission, typically 10-15% of the final sale price, and offer a wide range of services. From valuation and determining an asking price to marketing the business for sale and closing the deal—business brokers are especially beneficial for hard-to-price businesses.

3. Plan Your Exit

The more lead-time you have to prepare your business for sale, the better off you will be come deal close. In an ideal world, business owners would begin working on their exit plan about three years in advance of listing the business for sale. The overarching goal is to get your day-to-day operations running without your intervention. Business buyers will always pay a premium for a business that requires a minimum of owner management.

Time Frame and Market Trends

Many factors influence the timeline for selling an e-commerce or website business—expect the process to last between six months to a year. For business sales on BizBuySell, 2024 saw about 505 websites and e-commerce businesses sold, with a median of 60 days on the market. Key factors to consider when assessing how long selling your business will take are purchase price, type of business, location (if applicable), structure and organization, among others.

Impacts on Business Multiples

In order to make your e-commerce or online business more appealing to a potential buyer, take some time to evaluate it and pinpoint any areas that need to be improved. Now's the time to identify individuals who can take on more responsibilities and provide training to team members, if necessary. Careful evaluation and implementation of modifications to your business can result in a boost in its market value.

4. Find Buyers

There are a variety of options available when it comes to thinking about potential buyers for your business. Consider whether or not you want to sell your business to family members, employees, private equity groups or place it on the open market. The goal is to get your business in front of enough interested parties to generate multiple offers.

Most business owners prefer to maintain confidentiality during this sale process. Keeping the sale confidential helps maintain value, and if you're working with a business broker, they are adept at fielding inquiries from would-be buyers without revealing the company name. They will market your business for sale and create a "blind listing" on business-for-sale marketplaces. They will also have an NDA prepared for anyone interested in reviewing the details of your business. There are instances, however, that publicly announcing the sale to a few trusted advisors and competitors may be beneficial to see if they are interested in an acquisition.

When creating a listing on business-for-sale marketplaces, the content you include will be what differentiates your web business from many others looking to sell. It may be the first impression for potential buyers, so it's important to take the time to create a comprehensive and compelling listing. The top five components of a successful listing are:

1. Include key financials: Along with the asking price and cash flow, include information on revenue, EBITDA, FF&E, inventory, and the year the business was established.
2. Provide geographic information: While maintaining confidentiality is important in most sales, include as much geographic information as possible and include at least the state and county details.
3. Write a headline: Create a headline that will pique interest and motivate buyers to learn more about the opportunity.
4. Select multiple categories: When listing a business for sale on sites like BizBuySell and BizQuest, sellers have the option of listing a business under more than one category. Take advantage of a secondary category option to maximize exposure.
5. Include photographs: Include descriptive photos of the business or use stock photography to keep the listing confidential.

5. Negotiate Terms & Close

The final steps when selling your e-commerce or online business come down to negotiating the terms and closing the deal. Depending on the complexity of the deal, the due diligence phase can take a few weeks to a few months. The buyer will want to review your financials, business structure, operations, contracts and liabilities, customer data, employee information, legal issues, physical assets, and intellectual property. It's not uncommon for issues to surface, so be prepared to negotiate. Modest adjustments to price or financing terms can alleviate many issues that arise.

Once final terms of the deal have been agreed upon, it's time to close the deal. At the closing, the business owner(s), buyers, attorneys, and brokers will gather to review and sign all necessary documentation to complete the transaction. After the sale is complete, it's time to transfer the business operations to the new owner. Your attorney and broker will assist in the final post-closing process.

By understanding the value of your business and the workings of the business-for-sale market, selling an e-commerce business can be a much simpler process. This will allow you to put a process into place that will attract the best opportunities.