Want to build a high-value company that buyers will battle over? Of course, you do. Good news: We’re here to give you tips on how you can get there.
Selling your eCommerce business is the second biggest decision you’ll make – after the one to start it. But when you’re ready to sell, one thing is certain: you want to do everything you can to make your business as attractive as possible to potential buyers.
But how do you do that exactly? And what does it even mean to be truly ready to sell? How do you know whether or not you’ve got what it takes? Is it the right time to approach the buyer? Should you focus on certain metrics, or any specific quality before you make your move? What about strategizing which buyers to approach?
There is so much to consider, and it can be difficult to know where to start. But hey, you’re not alone. We’re here to address these critical questions and have you pointed in the right direction in no time.
That said, if you’re methodical about getting your business ready, diligent about vetting the right buyer for you, and clear about your exit goals, you’ll likely increase the value of your business. That sets you up for an exciting, lucrative new chapter in your entrepreneurial adventure.
Check out some of these practical tips below:
1. Brand Management: Focus on strategies that build solid foundations for your ecommerce business
A strong brand increases the appeal and value of your business to a potential buyer. But building a strong brand is about much more than what appears on your bottom line. At Thrasio, we like to see growth beyond the P&L – a customer base of hundreds of happy repeat buyers, for example, or a steady increase in keyword conversion share. Uplevel your brand management strategy, including why you should focus on high profit-dollar products and how you can improve your keyword conversion share.
2. P&L Statements: Pay attention to add-backs
Many aggregators, including Thrasio, will base their valuation of your business on your trailing 12-month (TTM)-adjusted EBITDA – that is, your Earnings Before Interest, Tax, Depreciation, and Amortization during the 12 months before you’re ready to sell your business. We’ll calculate your TTM-adjusted EBITDA by looking at your P&L and then adjusting for add-backs. However, we often find that sellers are unclear on what constitutes an add-back. Learn more about them here and use them to your advantage. You may be more profitable than you think!
3. Compliance: Get your products ready for the world
The regulations your products should meet can change in light of new scientific knowledge, shifts in the industry, or shifting government policy. That’s why it’s a good idea to weave compliance into the fabric of your business operations. Good compliance practices make your company better prepared to meet whatever changes lie ahead – they also make it easier to launch your products in global marketplaces. Up your compliance game and a buyer is better able to start operating and growing your business right out of the gate.
4. Intellectual Property: Manage your copyrights, patents, and trademarks
Taking steps to proactively document, manage, and protect your brand’s intellectual property (IP) can save you many headaches in an increasingly crowded marketplace. Getting your IP house in order has another benefit: it makes your business that much more attractive and valuable to a buyer. IP protections work best when you implement them early in your business-building journey and when you integrate them into your normal business operations. Don’t put your IP program off. Get in the habit of protecting the brand you worked so hard to create, and you’ll be creating more value along the way.
5. Supply Chain Management: Learn what makes a good supplier
Once upon a time, the supply chain was a function that mostly functioned. Ecommerce owners could largely set it and (almost) forget it. Given the last two years of global chaos, that’s no longer the case. That’s why it’s critical to have great suppliers – and great supplier relationships, since your eventual buyer may inherit them. A responsive, reliable supplier makes your business much more attractive to potential buyers. But how do you know what qualities to look for in a good supplier?
You’ll want to look out for their accountability for quality issues, expertise in your product type and target market, production capabilities, just to name a few.
6. Customs & Duties: Be a stickler for the rules
Harmonized Tariff Schedule Codes (HTS) can have a huge impact on the bottom line and the overall valuation of your business. Because they’re applied individually to each product you sell, a wrong code can wreak havoc on your costs. If you haven’t focused much on tariffs in the past, it’s never too late to start. Whether you choose to invest your own time or hire outside help, the resources you spend today to ensure accurate codes will reduce your chances of problems down the road.
Want to find out more?
Created by Thrasio’s in-house experts (the very ones who review businesses during due diligence), our new book, “Getting Your Business Ready for Sale”, will help you build a stronger, more resilient brand – whether you’re thinking about exiting in the next few months, the next couple of years, or not at all.
We’ve got you covered with insights, ideas, and tips for eCommerce entrepreneurs. But no need to get overwhelmed but all of this new information. You don’t need to act on all of it and you definitely don’t have to excel at every aspect of running a business before looking for a buyer. The goal is simply to give you the tools to build a stronger eCommerce company, one with staying power.
