Selling An Online Business
Now may or may not be the right time to sell, so it is important to have a firm understanding of the process before you commit to a sale. Scheduling a thirty-minute consultation call with one of our M&A advisors is free and the best way to establish whether you should sell now or plan for an exit in the future.
01. Cost of Selling
Many small business owners aren’t aware of the costs associated with selling an online business. Speak with your accountant to understand your tax obligations as this will vary depending on where the business is registered, the structure of the sale (assets vs. stock), and the acquisition scenario (all-cash vs. partial buyout or financing). Other common costs include brokerage fees, escrow fees, and legal drafting fees, which will vary depending on the size and complexity of the sale.
After signing a mutual Non-Disclosure Agreement (NDA) one of our Senior M&A Advisors will request additional information about your business by sending you a customized Q&A doc and Profit & Loss Statement. If available, we will also request ‘view only’ Google Analytics access. We use this information along with our internal research and comparable sales data to determine the current market value of your online business within 1-2 business days.
If now is the right time to sell, you will be assigned a Senior M&A Advisor who will be your primary point of contact throughout the sales process. You will also enter into an Exclusive Brokerage Agreement (EBA), which will include our commission schedule and exclusivity length. As we represent businesses ranging from $150,000 to $15,000,000 in value, the commission rate and exclusivity terms vary on a case by case basis.
04. Listing Preparation
We design your sales prospectus and marketing materials to highlight the unique strengths of your business. This includes identifying key performance trends and untapped growth opportunities. Your dedicated M&A Advisor will present you with an overall sales strategy, including the finalized prospectus and a list of planned promotional activities. Before your campaign is activated you will have the opportunity to collaborate and give final approval on our approach.
In addition to promoting the sale to our 1M+ buyer network, we will research thousands of companies operating in related verticals and identify those who may have a strategic interest in acquiring your business. We focus on identifying companies who could acquire your business to improve their existing offering, reach more customers or help them grow market share. In some cases our team will even create custom pitch decks to target a specific company who has expressed serious interest.
06. Buyer Vetting
The biggest risk associated with listing your business for sale is the risk of proprietary information being leaked to an existing competitor, new entrant, or anonymous individual with malicious intent. This can damage the chance of a successful exit and leave you with a business that is now under threat of losing market share. For this reason, all buyers must complete and pass our identity check and sign a custom Non-Disclosure Agreement (NDA) before they can access confidential details about your business.
You will almost always have multiple offers to choose from. We will help you explore your options and develop counteroffers to make sure you achieve the best possible price and deal terms. When you are ready to move forward, you will need to sign a Letter of Intent (LOI), which states the price, payment terms, closing time frame, and any other principle deal terms. We will draft an LOI, however if the buyer wishes to present their own, we will review this agreement with you.
08. Due Diligence
Buyers conduct Due Diligence (DD) to verify the business has been represented accurately. Common DD checks include an audit of traffic and financials, key stakeholder relationships (suppliers and partners), and any other performance metrics represented in the sales prospectus. Our process is designed to facilitate the exchange and mitigate the risk of proprietary information being misused. We also require the buyer to place a 10% deposit in escrow to show good faith and serious consideration. The full due diligence process takes 1-3 weeks on average, but can vary from deal to deal.
09. Purchase Agreement
The Purchase Agreement supersedes all other agreements, so it is important to be satisfied with every term. The most common inclusions are the Bill of Sale, Employment or Contractor Agreements, 3rd Party Assignments, Consulting or Advisory Agreements and Promissory Notes. Building out a purchase agreement can often be a stressful and contentious process, which is why it helps to have an M&A advisor to analyze risk and mediate solutions which work for both parties. We provide a drafted agreement, though it is advised to engage legal counsel for final review.
We encourage clients to use one of our partnered escrow providers who specialize in online business acquisitions. We set up the escrow transaction as per the terms in executed Purchase Agreement. Once both parties have accepted the terms, the purchaser will fund the escrow account. Escrow fees are approximately 0.7% of the purchase price through a discount with our preferred escrow providers and are usually split 50-50 between buyer and seller.
Once the escrow provider has confirmed the account has been fully funded, it is time to begin transferring all business-related assets over to the buyer. This will include all websites, domain names, databases, social media accounts, inventory, and any other assets included in the sale. We will facilitate domain & hosting transfer, as well as any other technical transfers required. Buyers usually have 1-3 business days to inspect the assets and ensure there has been no misrepresentation before confirming with the escrow provider to release the funds.
12. Training & Support
In almost every case, the buyer will require some level of post-sale training and support. Depending on the nature of your business and the experience level of the buyer, this support period can be anywhere from 1 week to 3 months. The training and support terms are fully detailed and agreed to by both parties in the Purchase Agreement to ensure any remaining obligations are clear. At this stage, the Dealflow team is no longer involved on a day-to-day basis, however, we are always interested in the continued success of our clients and can assist if and when needed.