A Beginner's Guide To Selling Your Online Business

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When you start a new company, you probably aren't thinking about handing it off to someone else. It's your baby!

But over time, some entrepreneurs "outgrow" their business, due to a shift in direction, priorities, or opportunities.

When that happens, your best option could be to find a buyer.

Alexis Grant knows all about that. After two successful exits, she started a new company, They Got Acquired, to help online businesses, well, get acquired.

Source: Simon Owens

From Getting Acqui-Hired to Helping Others

In 2010, Alexis started a content marketing agency that ran blogs for other businesses. The Penny Hoarder, a personal finance blog, was one of her clients.

The blog's founder, Kyle Taylor, was meeting Alexis for a strategy weekend when he popped the question:

"What if I bought your business?"

The Penny Hoarder was crushing it at the time, but Kyle did it alone. Seeing the great fit in this opportunity, Alexis joined as Employee No.2, bringing along some of her teammates.

The site was acquired for $102.5m in 2020, and earns 4.4m monthly traffic today. Source:The Penny Hoarder

That was an acqui-hire - when someone brings your entire team in-house to run a certain aspect at their company.

She wasn't planning to sell, but it made sense

"I liked his vision for the business, and knew how we would work through things together," Alexis said. "Knowing the buyer definitely gave us an advantage."

She sold another site after that, this time via a multiple-buyer bidding process that she had to learn from scratch.

"There are lots of resources and people to help you if you're selling for tens or hundreds of millions - those are the kinds of stories we hear about most often," Alexis said. "But if you have a six- or seven-figure sale, how do you find the support and people who could help you through that?"

And that's how They Got Acquired was born.

Why You Should Care

It's never too early to think about selling a business, even if you're not planning to.

Things are looking rocky for the VC-backed startup world - Carta reported more closures on its platform in Q1 2024, and many founders thought about calling it quits this year.

Source: Carta

But there's plenty of hope for indie firms and bootstrappers that are solving real problems and focusing on profit.

So if you're considering building a small online business, or already have, Alexis' got tips galore on getting your payday.

4 Common Ways to Sell A Business

But first, let's look at how a business acquisition usually takes place.

1. You get an offer from a buyer: It can be great when someone comes knocking on your door, but you ideally want to have more than one offer, so you have some leverage to negotiate a better deal.

2. You pitch buyers: It can be warm or cold pitching. If cold pitching, be direct about your ask - Alexis has seen a lot of sellers do this successfully.

3. Work with a broker or advisor: They can help you position the business, and find the buyers for you. But try to find ones that specialize in your kind of business (e.g. online vs. brick and mortar).

4. Marketplace: If you're making under $250k in revenue, it might be hard to get a broker interested because they make commission like real estate agents. Marketplaces are a good, affordable option to broaden your buyer pool.

5 Tips to Prepare Your Business for Sale

A major challenge in selling a business is getting a lower-than-expected valuation.

The reasons vary depending on the business. It's typically tied back to your revenue and profit in some form, but more often than not, it's a result of not thinking about selling before you want to sell, Alexis said.

"There are certain things you can do to optimize a business to sell," she said. "Understanding the levers you can pull to increase the valuation of your business helps you build with that in mind."

And guess what? All these tips would help your business run better even if a sale is not in the cards.

1. Build Relationships Early

Early on in your business, make a spreadsheet with information on:

• Your competitors
• People who do things like you
• People who could benefit from adding your services

It's good to build those relationships so that by the time you're ready to sell, you know who to approach.

Get on their radar, build a partnership - maybe one day they'll decide to bring you in house. This is how many acqui-hiring happens, Alexis said.

2. Clean Up Your Books

Before selling, you need to make sure that your finances are buttoned up in a way that makes sense to a buyer.

Depending on the size of your business, you might need to work with a CFO or a bookkeeping company with experience prepping books for M&A.

Clean books let you make better decisions because you'll have more transparency on your finances.

It also avoids surprises during the sale process - if it comes out in later stages of selling that your books aren't clean, your valuation could suffer, and you might be too invested to walk away at that point.

3. Focus On Profitability

This is simple, but worth emphasizing: Revenue numbers don't mean much if there's nothing left for the buyer to take home (also not great for you as a founder).

Companies are usually valued through "multiples." As a reference, six-figure content businesses typically sell for around 3x their revenue, Alexis said. E-commerce is usually lower than that.

But no matter what business, the more money you can take home, the higher multiples you're likely to get.

If two businesses both have $100k in revenue each year, but one founder takes home only $20k but the other $85k, you can bet that the one with higher profitability is going to sell for a lot more.

4. Make The Business A Well-Oiled Machine

If your presence is essential to the business, you'll have a hard time handing it off to someone else.

So have the right team in place, and try to pass as much as possible off to your team so that you're not an essential piece of this puzzle. Build processes to make sure your company runs efficiently.

"Any buyer who's looking at a business basically wants a machine - something they can buy that'll keep running itself and making them money," Alexis said.

5. Negotiate The Earn-out

Many founders, when selling their business, have an earn-out component to their compensation.

It means that they get paid a portion up front, but have to earn the rest of their compensation over time, based on certain deliverables.

It's risky to agree to an earn-out because it could tie the founder to the company years after closing the deal. Alexis suggested that founders try to negotiate themselves out of it.

Jody Cook, a social media agency founder Alexis worked with, did it successfully because she had a system in place for the company to run without her well before the seven-figure sale.

⭐ Bonus Tip

If you need a hint on what businesses you can build to sell, there's a huge market for content sites and online communities,said Alexis.

Acquiring an audience is a popular bet because buyers can get built-in trust for the brand instead of doing it from scratch, which could take years.

What Happens After You Sell

It's common for founders to have a "lost period" after they sell, Alexis said.

If your identity is tied to the business, and you don't yet have a next project lined up, it can feel very disorienting.

Her advice is to remind yourself of what you enjoyed from building that business.

Source: Giphy

There are founders who sell multiple businesses because they prefer starting. They sell it because they want to start a new one. And there are others who feel like they're better at scaling, people managing, or running a much bigger business.

Ask yourself what's most satisfying to you in the process, and focus on that for the next phase of your career.

Believe You Can Sell

Surprisingly, many founders don't realize their small businesses are even sellable until someone tells them.

After seeing (and facilitating) many six, seven, or even low eight-figure deals, Alexis believes that most businesses are sellable.

Don't be discouraged by a "bad market." For smaller deals, your specific business performance trump macro trends.

Even in downturns, great businesses find buyers. So don't let an opportunity slip away.

Topics:Entrepreneurship

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