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7 Lessons I’ve Learned From Great Sellers Of Online Businesses
By Mark Daoust
Some sellers do a better job selling their online businesses than other sellers. Selling an online business is a complex process, and some people have the ability to make the process look simple and easy. Others, on the other hand, can’t seem to get out of their way and make the process more complicated and stressful, and often end up with less valuable deals.
What makes some sellers move through the process with ease while others struggle? What are the traits of a great seller?
What Makes a Great Sale?
If we are going to talk about what makes a great seller, I should start by explaining what I think makes a great deal. This is, of course, somewhat subjective to my experience, although I think most sellers would agree that each of these goals is essential to their deal.
A Great Price For The Seller. This is the most obvious goal of any transaction: you want to get a great price for your business. Even though a distressed company sale might turn out well for the client, I don’t consider this to be a great deal. Great deals are those where the seller can honestly see that they sold towards the peak of their ownership.
The Buyer Is Competent & Will See a Return. A deal can’t be great if the person who buys the company loses their investment. Arranging a great deal should act as a successful handoff from one talented entrepreneur to another.
The Process Is Efficient & Smooth. Some deals drag on until their close because the buyer and the seller manufacture obstacles. Great deals move along methodically and quickly. For transactions less than $500,000, this means a close occurs in 30 days or less. For deals north of $1,000,000, the deal should close in less than 60 days. More importantly, there should be no major hiccups or backtracking along the way to the closing.
There Are No Significant Negotiation Disputes. Every deal is going to have negotiations – it’s an expected part of selling a complex and valuable asset. That said, a great deal typically has negotiation elements resolved to the comfort of both the buyer and the seller, and there is relatively little acrimony during the process.
Not everything in this list is under the control of the seller. Obviously, if you have a buyer who is unreasonable it will be impossible to have a great sale. There is also an element of luck involved as well as proper timing.
But to the extent that a seller can control their part of the transaction, what traits make for a great sale?
Trait 1: Great Sellers Aren’t Greedy
“Bulls get rich, bears get rich, pigs get slaughtered.” This is an adage primarily attached to traders, but it applies to sellers as well.
Every seller wants to get a great deal, but if your only focus is what you get out of the deal, you could end up with a worse deal. By not being greedy and by understanding the marketplace where websites are bought and sold, great sellers maximize their price.
Being greedy doesn’t apply just to the price you want for your business. You have every right to try and get the best price possible. But when you negotiate a complex transaction like the sale of an established website, you need to have the fundamental understanding that there are competing interests at every level of the negotiation: your interest and the buyers interest.
Greedy sellers insist they win in every aspect of the deal. Not only in price or terms but even in how the transaction happens. They give the buyer materials that only they think are relevant, on their schedule, without regard for the buyer.
Trait 2: Great Sellers Have Clear Goals
You know that you want to maximize the value of your website within the marketplace, but what is its maximum value? Outside of its price, what other considerations are important to you?
Great sellers create clear-cut goals. Rather than declare that they want the best price possible which is an obscure goal, they identify the prices that they wish to receive for their website. Their goal setting doesn’t end with setting a target price, either. They’ll identify other key criteria for the deal to make sense.
By setting clear goals in advance, great sellers avoid the ambiguity that comes with wanting the best price possible. If a buyer offers you $500,000 for your business, can you negotiate the price up to $525,000? And if you do that successfully, maybe that’s still less than what another buyer would have paid?
Great sellers don’t have this problem. Rather than focus on milking a buyer for every dime possible without any firm reference point, great sellers create a personal reference point. Take the time to decide early on what price and terms will make you happy and satisfied.
By laying out their goals in advance, making decisions becomes faster and negotiations have a much clearer endgame resulting a more efficient and focused negotiation.
Trait 3: Great Sellers Plan Ahead
Planning for the sale of your business six months, twelve months, or even eighteen months can have a significant impact on the value of the business and the efficiency of the sale. Great sellers typically plan for at least a year for their eventual exit.
The result of this planning has several benefits:
- Documentation Is Prepared. Sellers are often surprised at just how time consuming and stressful collecting and organizing documentation for a buyer can be. Great sellers plan in advance, organize their documentation, and have it ready to go to avoid the massive job of collecting years worth of documenation.
- The Business Is Transferable. Great sellers understand that the transition of their business from their ownership to a new owner’s control can be stressful and also an area that hurts their businesses value. By planning ahead, great sellers can identify and smooth out areas that would trip up a transfer.
- Their Business Is Lean. By maximizing profitability and running a lean business, great sellers maximize their valuation.
Trait 4: Great Sellers Are Organized
As mentioned above, one of the results of planning ahead is that documentation is often in order. Great sellers are always well organized.
When a buyer engages a seller and a deal begins to emerge, that deal gains momentum. It is crucial for both the buyer and the seller (but especially the seller) to keep that momentum strong and moving. If the buyer needs some documentation for their due diligence, and if the seller doesn’t have it prepared, waiting for this information to come through can rob a deal of its momentum.
Being well organized is not just about having documentation in order, however. Great sellers also have the ability to pull key metrics and analytics from their business which aids in a buyer’s exploratory due diligence. Absent of having such metrics, many buyers will either pass on a business altogether, or they’ll make an educated, but pessimistic, guess.
Trait 5: Great Sellers Price Correctly
We saw a great example of how pricing correctly can help maximize your value a few years ago at Quiet Light Brokerage. After giving a client our recommended valuation and market price of $800,000 with expected offers of $760,000 for their business, our client wanted us to list the price for $1,000,000. Normally we would pass on such a request, but for a variety of reasons we agreed to list the business at this price point.
When we brought the business to the marketplace, however, our client received mediocre interest and terrible offers. Nearly every offer he received was in the mid $600,000 range.
Since we didn’t have a lot of buyers requesting information, we recommend that our client lower his price point to attract more buyers. He agreed to let us lower the price to $900,000. With the lower price point, our client saw spike in interested buyers and in the value of offers. Now his offers were coming in around $720,000 – $750,000.
In short, by pricing correctly and understanding the market forces, our client increased his offers by 15.38%.
Trait 6: Their Businesses Are Unique But Relatable
Not all traits of a good sale rely on the seller. The website being sold is equally important.
Great sales usually happen when a seller builds a business that is relatable and understandable, but unique enough to avoid looking like a cookie-cutter website. Striking this balance can be very hard to do.
For example, years ago I sold a drop shipping website that sold athletic equipment. The niche itself wasn’t all that unique or unusual, and that made it very relatable. Any buyer who was looking for a dropship website could understand what my client’s business was about.
But my client didn’t create a cookie-cutter dropship website. The website featured a number of enhancements and unique features (like a super-smart product finder) that distinguished his business from others selling the exact same products.
When building a highly sellable website, try to avoid having a buyer ask these two questions:
- “What is it?”
- “Can I build this on my own?”
Trait 7: The Business Is Easy To Manage
The time it takes to run your business is a significant consideration for most buyers. If your business is complex to manage, requires a lot of time, or requires special knowledge of a niche industry, then it is unlikely you’ll have a sale that matches the qualities listed above.
The greatest sellers understand that before they put their business up for sale, they need to simplify the business and make it easy to run. This, of course, relates to the ‘transferability’ of a website, but it also addresses a buyer’s fear that they are effectively buying a job.
Of course, making a business easy to manage is part of that planning which great sellers do.