Sell Your Ecommerce Store for Top Dollar
Chapter 13 Table of Contents
- Reasons to Consider Selling
- How Much Will You Get?
- Selling Your Site on Your Own
- Selling Your Site Through a Broker
Chapter 13: Sell Your Store?This probably goes without saying, but selling your store is NOT a "required" step in the Store Coach process. There's no reason you can't continue to operate your store for years and years... or decades! In many (probably most) cases, your best option is to outsource the most time-consuming, low-level tasks you don't want to do (or don't have time to do) yourself. Outsourcing non-critical tasks (as we just discussed back in Chapter 12) and moving into a more passive ownership role is usually preferable to selling your store. While selling your store does give you a nice "pay day," it also means saying goodbye to your monthly recurring income (which you will have to replace). But since there are several scenarios where selling your store makes sense, we want to help you get as much money for it as you can. That's what this chapter is all about.
Reasons You May Decide to Sell Your StoreHere are some completely justifiable reasons you may decide it's time to sell your store:
- You need a large lump sum of money to make a big purchase or to pay off a debt
- You want to spend your limited amount of time on another store or a different opportunity
- You don't have any time to work on your site (and not enough profits to outsource tasks)
- The customers in your niche are particularly obnoxious, and you've run out of patience :)
- Your supplier is a pain to work with, and you can't find a better one
- Some other personal reason
How Much Do Online Stores Typically Sell For?
As a general rule of thumb, you can expect to get somewhere between 18-36x the monthly net profit for an eCommerce store. Obviously, this is a pretty big range. What determines where your store will fall in this range? There are several factors that will push the value up and several that will push the value down.
Factors that will Increase Your Store's ValueHere's a list of factors that will typically push your store's value into the higher end of the 18-36 month range:
- Well-established store (12+ months old) with lengthy earnings history
- Consistent sales pattern over a long period of time
- Good mix of traffic sources (not completely dependent on one type of traffic)
- Good organic rankings (with several keyword phrases ranking on Page 1-2 of Google)
- Positive organic traffic growth pattern
- Strong backlink profile (to reduce the risk that a Google algorithm update causes organic traffic to plummet)
- Barriers to entry (i.e. difficult/expensive to enter the market or to establish a supplier account)
- Manufacturer(s) have and enforce MAP pricing (which protects profit margins from "price wars")
- Bright future for the market (i.e. demand trending upward)
- Large mailing list with the potential for repeat customers
- Doesn't require much time to run the store
Factors that will Decrease Your Store's ValueThis isn't rocket science (since you can basically just take the opposite of each of the factors listed above), but here's a list of factors that will depress your store's value:
- Young store with only a couple/few months of sales history
- Inconsistent/sporadic traffic and sales
- Little or no established rankings (little or no Page 1-2 rankings)
- Declining traffic/sales in recent months (especially organic)
- Sketchy backlink profile (which may result in getting penalized by Google)
- Competitive market with little/no barriers to entry
- No MAP pricing to protect profit margins
- Dwindling market with downward-trending demand
- Small mailing list and/or the type of product that isn't conducive to repeat business from prior customers
- Lots of time required to run the store (relative to how much profit it generates)
Selling Your Site on Your Own
To be 100% honest with you, I wouldn't recommend selling your store on your own. You certainly can do it by yourself, but you almost for sure won't get "top dollar" for it. Unless you have an established track record of selling sites and a strong seller profile (with lots of positive feedback), you simply won't get as much for your store as it's worth. Buying a website isn't like buying a house. Prospective buyers can't walk through it and compare it to dozens of highly similar houses on the market in the same geographic area. Website properties are very unique, and there are a lot of inherent risks involved for the buyer. That's why buyers feel much more comfortable (and are therefore willing to pay more) buying web properties from a broker. Plus, a broker will simply prepare a much better sale listing than you will be able to put together and do a better job managing the auction and negotiating with potential buyers. So, all that being said, if you do decide to sell your store on your own, either on Flippa.com (10% final value fee) or on FreeMarket.com (5% final value fee, but far less traction & buyer activity than Flippa), read the Pro's Edge box below for advice on how to do it.
Pro's Edge: Advice for Selling Your Site on FlippaSelling your website is certainly NOT a required step in the Store Coach process. You may decide to hang on to your store forever! But if you do decide to sell it, we want to help you get as much money for your site as you possibly can. This tutorial is loaded with advice and tips on how to create and manage your Flippa listing to maximize your profit from selling it. (Note: Flippa frequently updates the listing process, so some of the specifics - i.e. names of sections, labels for fields, order of steps, etc. - may have changed since we wrote this tutorial. Please don't let that bother you. The advice and tips contained in this tutorial will still be very valuable to you.)
Listing Your Site on FlippaFlippa.com has established a strong reputation for being "the place" to buy and sell websites. To get started, just go to Flippa.com and select 'Established Sites > Sell Websites' in the main navigation bar. On the next page, you have 3 options: 1) Auction, 2) Classified Listing and 3) Deal Flow. In most cases, you'll want to select the 'Auction' format. (The small fee you'll pay for an auction will give you way more exposure than doing a classified listing. If you anticipate that your site will sell for $40,000+, you may want to strongly consider Deal Flow.) Next, enter your email address and the domain name of your website and click the Get Started button. This starts a 6-step auction wizard process, which walks you through the entire process. Let's go through each of the 6 steps to ensure that you set up your auction correctly. Step 1. Site Information Basic Listing Details. Enter the full URL of your domain name, and select the Established Website option since your store is a fully functional, well-established site. Site Age. Enter the date that the domain name was initially registered, either by you or the domain's former owner. We’re talking about the DOMAIN’S age here; not the age of the store as it currently exists. You can find the date your domain was registered by looking up your domain name at WhoIs.com. Content. Click the button that says Content is Unique. Design. Click the button that says Design is Unique. Revenue Details. You can choose to enter this information on a month-by-month basis by selecting the Monthly timeline revenue format. (This is preferred if your store has a long, well-established sales history.) Or you can enter Historical estimates if your sales history is shorter and less established. (This can be beneficial in some circumstances, but keep in mind that potential buyers will likely be a little more skeptical about the "estimates" you’ve chosen to present.) You may need to do a little research to find out what your monthly 'Gross Revenue' and 'Net Profit' has been. 'Gross Revenue' refers to the grand total of income collected each month (i.e. total collections from customers). 'Net Profit' refers to the amount that actually goes into your pocket after all expenses are paid. Expenses would include: cost of goods sold (charged by your supplier), shipping charges, merchant fees, paid advertising costs, your shopping cart subscription, toll-free phone service, and other required costs to operated your business. In our opinion, you do NOT need to include costs incurred for things like outsourced work, costs incurred for your logo or graphic designs, and other "optional" expenses you’ve chosen to incur to get your website to the point it is at today. The person who buys your website will not have to incur these expenses on an ongoing basis, which is why we feel they can be omitted when computing your monthly 'Net Income'. If your store generates income through affiliate income and/or on-site advertising (such as Google AdSense), check those boxes. Otherwise, just check the Sales of Products or Services box. Traffic Details. Enter the 'Average Uniques per month' (i.e. unique visitors) and the 'Average Page Views per month'. You can quickly and easily obtain this information from your Google Analytics account. As a check, make sure your average page views number is higher than your average uniques. Click to go to the Next Step after you have finished filling in all the information on this page. Step 2. Listing Details Private Sale or Auction. Just keep the Auction button checked. Listing Details. First, choose a 'Title' for your website auction listing. Yes, you want your title to be descriptive; but it’s more important to make it "catchy" so it grabs potential buyers' attention. You may want to take a quick look (make sure to open a separate web browser window) at what some of the titles of other current website listings. You’ve only got 79 charactersto work with here, so make them count! Typically, you’ll want to include as many of the following as you can:
- The market or niche you’re in
- Words like 'dropship site' that lets buyers know it's an ecommerce dropshipping-based website
- A monthly (or annual) gross revenue number
- A monthly (or annual) net profit number
- Catchy phrases such as 'easy to run', 'free traffic', 'great rankings', etc.
- About the business - Tell potential buyers about yourself and why you are selling the website. Be personable and truthful. Explain what your store sells, how and when you started the website, and give a brief history about how sales have grown from the opening month through today.
- Why this website is so successful - Emphasize that you use dropshippers (but do not disclose who your suppliers are except to the actual buyer) and how simple it is to process orders. Make it clear that you do NOT have to stock and ship products yourself. Explain how many sales you get per day/week/month and what your profit margins are. Explain that you rank well for specific phrases within this market, and provide a list of your top-ranking keyword phrases and your current Google rank for each phrase. Make sure to reference the screenshots that you will have posted in the upper-right corner of the screen (you will post these screenshots immediately after your auction goes live - see below).
- Potential of the website - Explain any and all opportunities and potential the website has for increasing monthly profits. If there are brands that could be added that you haven't yet, mention that. If there are similar product lines that could be added that you haven't yet, also mention that. If you have rankings on the verge of being on the top of page 1 in Google, definitely mention that. List anything you foresee as a viable way to grow the business.
- What’s included in the sale - Explain exactly what the buyer will get with the purchase. Generally this will include: the website and all content (explain that the store runs on X shopping cart platform and that the buyer will be taking over the subscription); the domain name; the hosting account (which is typically included with the shopping cart subscription); the toll-free number account; and the supplier(s) contact information. If you are willing to provide support to the buyer for a week or two (which we recommend doing, since you'll likely end up doing it anyway!), make sure to mention that as well.
- Terms of the sale - Tell everyone what the a) minimum bid, b) reserve price, and c) buy-it-now price (if applicable) are (see below for more information about each of these). Specify what payment methods you will accept and why (this is discussed below as well). Also discuss how and when you intend to transfer ownership to the buyer.
What to Do After You Create Your ListingUpload Screenshots. Immediately after your listing goes live, you should upload several screenshots in the top-right corner of the auction page. We strongly recommend putting the following screenshots up...
- Overview of sales/revenue for at least the past 30-90 days, preferably for the past year (make sure to black out sensitive customer info)
- Traffic statistics for at least the past 30-90 days, preferably for the past year (from Google Analytics)
- Overview of the top keyword phrases you've received traffic from during that same time frame
After You've Selected a BuyerConsider Creating a Contract. You should strongly consider creating an official contract after you come to an agreement with the buyer. Even if you have come to trust the person, it's always a good idea to put everything in writing. Use one of the following methods to create a contract (the sale price will probably be a determining factor in which method you choose to go with)...
- Create a basic contract yourself. Search for sales contract templates on Google, and you should be able to quickly put together a decent contract.
- Buy a boilerplate contract and edit it to work for you. There are hundreds of ready-made contracts available for purchase and immediate download. And in fact, Flippa also offers a contract that is probably better suited for your needs.
- Hire a lawyer to draft a contract. If you go this route, you may want to mention it in the auction listing and consider requiring the buyer to split the legal fees with you.
Selling Your Site Through a Broker
- We generally get at least 50% more for your online business than you could get selling it yourself
- Zero up-front fees (many brokers and marketplaces charge $299+ to "vet" your website before listing it)
- We handle everything, from up-front due diligence to creating the listing to corresponding/negotiating with potential buyers
- We handle escrow for you at zero cost (services like Escrow.com charge hundreds to thousands of dollars for this)