How Do You Value an Online Retail Business?
If you’re considering selling your business, you’ll have many advantages if you own an online retail business. Online retail businesses are often in-demand for prospective buyers looking to expand their portfolios.
However, to make the most profitable sale possible, you should know how to value your business and the best avenue to take to sell.
Characteristics of Online Retail Businesses
In general, online retail businesses are asset-light structures primarily valued based on goodwill.
Goodwill describes intangible assets that can bring actual value to a business, including:
- Custom marketing materials
- Strong branding
- Solid, educated team
For example, a fitness influencer who launches their own clothing brand won’t be designing or manufacturing the garments themselves. Instead, they’ll have their products drop-shipped from a factory, likely one that’s overseas.
The sale they make and the revenue they generate comes entirely from their brand’s name recognition — that is, its goodwill value.
Little or No Inventory
With online retail, the inventory is stored overseas and purchased when a customer makes a sale. With a brick-and-mortar retail business, owners must forecast and plan their inventories based on consumer behavior. Products are then housed in-store with the hopes of selling them and making a profit.
Low Barrier of Entry
There are typically few or no barriers to starting an online retail business. The one exception is if you’re trying to build your business around scarcity products, or items that are rare or hard to come by.
Valuing Your Online Retail Business
When selling your business, you should take stock of its goodwill value to make as profitable a sale as possible. You can try to do this on your own, but it’s often easier to work with an experienced business broker.
When you’re so close to your business, you often take aspects of it for granted and therefore can’t see the full value of everything it offers. A fresh set of eyes can help you assess your company’s actual value.
Mobile Business with Better Opportunity
As a mobile business, you have a wide buyer pool, which can be both a good and a bad thing.
On the one hand, you have plenty of buyers interested in purchasing your business. However, many of these could be low-quality buyers who can cause headaches or missed opportunities.
A broker with an intelligent qualifying process in place will vet buyers so you can negotiate with only the most serious and promising ones. At Sunbelt, we specialize in creating a marketing strategy that attracts buyers that will then be interviewed and pre-screened.
Higher Multiples Increase Sale Prices
You can use a higher multiple to increase the sales price if you have a high cash flow or projected growth. While cash flow can be evident on a cash flow statement, your broker needs to be an expert in projecting growth and expansion to get the multiple as high as possible.
Sunbelt’s free online business valuation calculator has the average multiples for each industry built in and can give a great starting point for a business asking price.
Selling Your Business with Sunbelt
Sunbelt markets over 200 business for sale portals, and we spend a lot of money marketing your business for sale, which is why we are so selective about the listings we present.
We offer custom deal structures, dedicated financial advisors, and compelling marketing assets that get our customers the best price for their business. Sunbelt takes the time required to pre-screen every buyer by establishing a profile and receiving a Personal Financial Statement (PFS). Because we do the original legwork, you get a head start on selling your business. Contact Sunbelt Business Brokers of Naples for a free valuation and consultation.