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Once you’ve determined the value of your company, which we discussed in our recent post Do You Know the Value of your eCommerce Business?, it’s time to put on your strategic-thinking hat. You want your business to be worth more right? Whether you are looking to sell up or not, this is important information for any business owner.
- Maintain updated, detailed financials. You are always going to want to show potential buyers a complete picture of your cashflow through your income and cashflow statements. Also keep in mind that a buyer won’t necessarily want to sift through months of records to get the big picture, so be ready to make trends and growth patterns apparent. You could also keep an updated Prospectus, which is a 20-30 page document that describes your business to potential buyers.
- Create a separate company. If you are thinking of selling your business at some point, or you at least want to leave that option open, set up a separate LLC or Corp and create a separate bank account.
- Diversify your product offering. A company that receives 80% of it’s profit from one product carries significantly more risk than a company that has a diversified offering. Good things to have are multiple SKU’s, multiple suppliers, multiple traffic and sales channels, and targeting multiple keywords. Potential buyers could see risk if you only have a single SKU’s, one supplier, or are only selling in one marketplace.
- Document all of your systems and processes, and update these files as your business grows. This can help save an incredible amount of time later on if you actually decide you want to sell. You will have to train your buyer as you hand over the business, so be sure to keep detailed records of how to keep your well-oiled machine purring along smoothly. Luckily for online sellers, eCommerce businesses are some of the easiest businesses to understand and train a new buyer on.
- Sharpen your brand. You don’t necessarily need a widely known brand in order to maximize value, but having a very clear representation of who you are reflected in your website – including design, copy, blog and all media (images, video, etc) – can be a huge bonus for a buyer. The more you can show that there’s been work put into finding out who your target customer is and appealing to them, the less work a new owner will have to do.
Who Will Buy Your Amazon Business?
There are many different types of investors interested in buying eCommerce companies, but research from industry experts have show there are three main classifications of buyers:
The Corporate Guru: this is someone looking to buy his or her first business. They usually are a high paid employee or C-level executive with disposable cash, IRA, savings or access to an SBA loan.
The Internet Entrepreneur: these are typically individuals who have been in the industry for a while and have a good understanding as to what it takes to run a digital business. They are either fresh off the sale of their last business or looking to add a business to their portfolio.
The Brick and Mortar Entrepreneur: these are brick-and-mortar store owners who are looking for a move into the digital world. Because they’ve already started a retail business, they are looking to acquire something that they don’t have to start from scratch again.
Even if selling your company isn’t a part of your big picture plan right now, you never know where life will take you. Being mindful of what makes a business valuable can only help you as you move forward!
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