Selling my Ecommerce Business

[DaveC]

Why would that get a higher price? Just from being able to wait it out until the right offer comes along?

I just know that with businesses, you'll get the best price if you have a seller with one of the D's (death, divorce, disease(sick), debt). These sellers have to liquidate and buyers will smell blood in the water quickly. Its unfortunate but its why you want to have your business operating without you now because you don't want to get caught having to sell quickly in case of one of these scenarios.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[amp0193]

Why would that get a higher price? Just from being able to wait it out until the right offer comes along?

I just know that with businesses, you'll get the best price if you have a seller with one of the D's (death, divorce, disease(sick), debt). These sellers have to liquidate and buyers will smell blood in the water quickly. Its unfortunate but its why you want to have your business operating without you now because you don't want to get caught having to sell quickly in case of one of these scenarios.

Ah ok, that makes a lot of sense.

I don't think I fit the desperate category.

 

[Dicky Dee]

Great thread, im also planning on selling one of my amazon businesses beginning of 2018 that i've been building up. My reason for selling is simply to use the cash to kickstart another account though with the extra cash, I figure if I can get 20x monthly profit I could build another account that much faster.

BTW what kind of multiple is the broker estimating you could get? @amp0193

 

[amp0193]

Great thread, im also planning on selling one of my amazon businesses beginning of 2018 that i've been building up. My reason for selling is simply to use the cash to kickstart another account though with the extra cash, I figure if I can get 20x monthly profit I could build another account that much faster.

Low end multiple for an Amazon business should be 2x trailing twelve month profit.

BTW what kind of multiple is the broker estimating you could get? @amp0193

We haven't gotten to that point yet.

He was on a pre-schedule family vacation this week. Next week, we're going to finish working through all of the add-backs, and striking all non-essential expenses from the P&L. And then sorting out the COGS and evening those out.

Once we get a final read on the bottom line "Seller Discretionary Earnings", we'll talk asking price and multiple. I'll let ya'll know when we get to that point. The target is to have the business listed for sale by next Friday.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Kalpesh Narwani]

Can you share some guides for success of eCommerce business.

 

[amp0193]

May 2017 books complete and added to the P&L. Broker is back from vacation and is quickly putting all of the marketing package together.

He also went in and massaged the books to make it more COGS friendly. Basically, we took total historical COGS divided by total historical sales. Then, taking that percentage and multiplying it by each month's income. Just a quick and dirty way to get a more evened out look at the books.

Of course the buyer will have access to the raw books, displayed in Cash-basis accounting, as another tab on the same spreadsheet.

All said and done, the trailing twelve month profits are a looking a little better than I thought they might.

Business will be listed for sale on Monday!

 

[Greg R]

Subscribed. Have you guys been seeing that net profit multiple for Ecom biz sales have been about 2-3x?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[amp0193]

Business is now publicly listed... I'm anxious and excited to see what happens in the next several weeks.

Will keep you all updated on the process.

We listed the business at 3x Trailing Twelve Months, but I'd be happy with 2.5x.

Subscribed. Have you guys been seeing that net profit multiple for Ecom biz sales have been about 2-3x?

That's what I've heard from Amazon-type business, I don't know about for ecommerce, in general. The more income off amazon, the higher up on that range you'll be able to get.

 

[Greg R]

Business is now publicly listed... I'm anxious and excited to see what happens in the next several weeks.

Will keep you all updated on the process.

That's what I've heard from Amazon-type business, I don't know about for ecommerce, in general. The more income off amazon, the higher up on that range you'll be able to get.

Gotcha, I was surprised to see that is wasn't more. Probably because they get classified still as "small business (under $5MM)." Either way, it is good for others in this forum to manage their expectations when it comes to selling their internet business.

I was looking at a few case studies were multiples for internet companies under $5MM are actually going down over the years, I guess the hype is starting to normalize.

The only way to up that multiple is to get into the $5MM+ where you can get 8-10x from larger investors.

 

[Scot]

Oh man, big step getting everything listed.

Looking forward to hearing how it goes. Good luck!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[DaveC]

Subscribed. Have you guys been seeing that net profit multiple for Ecom biz sales have been about 2-3x?

That's still a pretty rough multiple I've been seeing. I think some Amazon businesses were taking a beating from some of the affiliate changes, sales tax changes, and general concern with Amazon's direction.

 

[Greg R]

That's still a pretty rough multiple I've been seeing. I think some Amazon businesses were taking a beating from some of the affiliate changes, sales tax changes, and general concern with Amazon's direction.

Exactly. That is why I was surprised. Ecomm doesn't sound too much more appealing when your liquidation event fetches the same multiplier that off a B&M, Restaurant, or Construction company.

 

[amp0193]

First 3-way call scheduled with a prospective buyer for tomorrow morning.

Given the buyer's background, I expect it to be a very thorough picking apart of my business.

I've gone through the past 2 years and made notes for every fluctuation in income/expenses (at the P&L category level) that I could be asked about.

I am rehearsing my script now on my reasons for selling the business to make sure I nail this question.


I will report back on how it goes.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[letter9]

Great thread, good luck on getting serious buyer fast.

 

[Scot]

First 3-way call scheduled with a prospective buyer for tomorrow morning.

Given the buyer's background, I expect it to be a very thorough picking apart of my business.

I've gone through the past 2 years and made notes for every fluctuation in income/expenses (at the P&L category level) that I could be asked about.

I am rehearsing my script now on my reasons for selling the business to make sure I nail this question.


I will report back on how it goes.

Good luck. Looking forward to hearing about it!

 

[Chazmania]

Good luck man, hope it all goes smoothly. Sounds like you're prepped for success.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[amp0193]

Call started off with the buyer introducing himself and his background, and then it proceeded into the lightning round of the buyer reading off the 50 questions they had prepared for me. There wasn't much conversation, it was just question, answer, question, answer, question, answer. Questions on shipping costs, using Amazon fulfillment, how to rank a product on Amazon,

From my perspective, the questions seemed more about "how it works" and "how to run the business, and the ins and outs". As if they wanted to buy the business, and just needed some more information to back up their decision.

I was not picked apart as I expected to be, and it did not seem as if they were trying to come up with reasons why they shouldn't buy the business.

I'm optimistic that they'll put in an offer.


My feedback from the broker was that I need to be more "lovable". I totally agree, I was pacing around the room, talking fast, trying to keep up with the pace of the questions.

Next call I will do sitting down, with a cup of tea, and talking s l o w e r.

The call was recorded, and it's going to be painful to listen to, but I will critique myself and try to improve for the next one.

 

[DaveC]

My feedback from the broker was that I need to be more "lovable". I totally agree, I was pacing around the room, talking fast, trying to keep up with the pace of the questions.

This is big...I've walked away from deals where the guy sounded like a curmudgeon, even when the numbers made sense. There's going to be snags in any deal and there is going to be a compromise. You're going to have to work together on a transition, with suppliers, team, etc... and if someone doesn't sound like they would be reasonable to work with then its just not going to work out.

 

[biophase]

Call started off with the buyer introducing himself and his background, and then it proceeded into the lightning round of the buyer reading off the 50 questions they had prepared for me. There wasn't much conversation, it was just question, answer, question, answer, question, answer. Questions on shipping costs, using Amazon fulfillment, how to rank a product on Amazon,

From my perspective, the questions seemed more about "how it works" and "how to run the business, and the ins and outs". As if they wanted to buy the business, and just needed some more information to back up their decision.

I was not picked apart as I expected to be, and it did not seem as if they were trying to come up with reasons why they shouldn't buy the business.

I'm optimistic that they'll put in an offer.


My feedback from the broker was that I need to be more "lovable". I totally agree, I was pacing around the room, talking fast, trying to keep up with the pace of the questions.

Next call I will do sitting down, with a cup of tea, and talking s l o w e r.

The call was recorded, and it's going to be painful to listen to, but I will critique myself and try to improve for the next one.

I've done about 6 of those calls so far. Really no tough questions before an LOI. After the LOI come tougher questions.

The biggest unknown is going to be if they are buying your LLC or your assets and how to transfer the Amazon account over.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[amp0193]

I've done about 6 of those calls so far. Really no tough questions before an LOI. After the LOI come tougher questions.

The biggest unknown is going to be if they are buying your LLC or your assets and how to transfer the Amazon account over.

Ah, ok. So there's more to come... thanks for the feedback on that.

 

[JAJT]

how to transfer the Amazon account over.

I asked Amazon how to do this properly, specifically because (and I told them this) that I wanted to make sure nothing the new owner did would impact any other accounts I had now or in the future because I was no longer the owner as of (date).

Amazon literally told me that they should change the banking details and that's literally it.

I printed off the email, just in case I ever needed it in the future as proof that I tried to do it properly.

 

[DaveC]

I've done about 6 of those calls so far. Really no tough questions before an LOI. After the LOI come tougher questions.

The biggest unknown is going to be if they are buying your LLC or your assets and how to transfer the Amazon account over.

The broker should be able to help with the Amazon transfer. IMO, this should be part of the service with web business transaction and needs to be done correctly as Amazon can burn you if done incorrectly, I know as its happened to me. I've never done an LLC purchase so typically the buyer will will just want the assets and will form a new LLC but YMMV. This will have tax implications especially since most web businesses don't have "assets" but mostly "goodwill". Things like non-competes can also factor into assets so my advice is to also consult a tax expert on how this may hit you.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[amp0193]

Update from the broker:

The caller from last week put in an offer, however, it turns out he doesn't have his ducks in a row, i.e. funds, and isn't capable of buying the business. (So what was the point?)

3-4 buyers are currently in discussion with the broker. He expects one or two of them to turn into a conference call in the next few days.

 

[Scot]

Update from the broker:

The caller from last week put in an offer, however, it turns out he doesn't have his ducks in a row, i.e. funds, and isn't capable of buying the business. (So what was the point?)

3-4 buyers are currently in discussion with the broker. He expects one or two of them to turn into a conference call in the next few days.

Shouldn't the broker screen these kind of applicants? Seems a bit shady to let someone have a full look at your business and financials if they didn't have the money to buy it.

 

[amp0193]

Shouldn't the broker screen these kind of applicants? Seems a bit shady to let someone have a full look at your business and financials if they didn't have the money to buy it.

yeah, there is a screening process. And, TBH, looking at their background, they seemed like heavy hitters, and I didn't think money would ever have been the issue. Not sure how they got to the conference call stage... I'll ask.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[JAJT]

Maybe it was a simple matter of misjudging their liquidity?

Still dumb but would probably make more sense than going into a sales call knowing you couldn't buy it.

 

[amp0193]

Shouldn't the broker screen these kind of applicants? Seems a bit shady to let someone have a full look at your business and financials if they didn't have the money to buy it.

I checked with the broker, and he said that historically, buyers have balked at having to show proof of funds up front before they've seen anything about the business. He usually checks after the conference call, and they remain interested, before the process goes any further.

 

[DaveC]

I checked with the broker, and he said that historically, buyers have balked at having to show proof of funds up front before they've seen anything about the business. He usually checks after the conference call, and they remain interested, before the process goes any further.

Proof of funds is a delicate subject. Most buyers, including heavy hitters, simply don't have the full purchase price sitting in an account somewhere, its usually in some other assets at least temporarily to get a better return. At the least, they'll usually need to liquidate another investment, get a bridge loan, or some other partner to pony up some of it. Its worth having the broker at least broach the subject on how they're planning to finance it though. Bank loan, credit cards, or "I'll figure it out" are red flags.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[amp0193]

Most buyers, including heavy hitters, simply don't have the full purchase price sitting in an account somewhere, its usually in some other assets at least temporarily to get a better return.

Yeah, that makes a lot of sense, thanks.

 

[Paul Thomas]

Proof of funds is a delicate subject. Most buyers, including heavy hitters, simply don't have the full purchase price sitting in an account somewhere, its usually in some other assets at least temporarily to get a better return. At the least, they'll usually need to liquidate another investment, get a bridge loan, or some other partner to pony up some of it. Its worth having the broker at least broach the subject on how they're planning to finance it though. Bank loan, credit cards, or "I'll figure it out" are red flags.

Similar to how when heavy hitting Private Equity firms make billion dollar acquisitions and don't have the purchase price until days before the deal closes (e.g, leveraged buyouts). They have quick and easy access to the capital once its needed, though.