People place their Shopify stores for sale for a variety of reasons, both personal and professional. The fears that come with that choice, though, are something they all have in common:
What if I’m unable to negotiate a reasonable price?
What if I’m unable to locate a buyer?
These pointers will guide you through the valuation and marketing process of transferring your store to a new owner, as well as how to make sure your e-commerce business’ accounting is ready to sell.
Step 1: Put a monetary value
There’s no use in beginning discussions until you have a firm estimate of how much your Shopify store for sale is worth – one that accountants, bankers and financial advisors would accept rather than something you made up out of thin air.
eCommerce websites are valued using one of three methods:
- Make a prediction based on future cash flows using discounted cash flow analysis.
- Subtract your obligations (such as debts) from your assets to get your asset value (such as inventory)
- Multiplication of revenue – divide net profit by the number of years.
Step 2: Calculate the Revenue Multiple
To begin, calculate your net earnings for the year. Take a look at your profit and loss statement if your accountant gives it to you. If not, you’ll need to create one; free P&L templates may be found online. Then calculate the multiple — the number of years the company can anticipate making the same or comparable net profit. This multiple is used to estimate how long it will take the new owner to recoup their original investment.
The multiple is based on a number of elements that determine how risky a firm is. As a result, the lower the risk, the larger the multiple. These elements include year-over-year growth in net earnings indicating lower risk, resulting in a larger multiple. Growth prospects should be considered part of the worth of your company, even if they aren’t assured. There are several types of models, and some are riskier than others. When you do the arithmetic, you can see that a larger multiple equals a higher price for your store.
Step 3: Examine the market for opportunities to provide value
Your Shopify store for sale should also be assessed for its strength, long-term viability, and potential for expansion. Obtaining specific figures to support the following elements is a good idea:
- Financials – existing and predicted growth rates, as well as whether or not growth is increasing or decreasing.
- Overview – company age, business strategy, and performance during the last 12 months
- Operations – number of workers, inventory value, and supplier list
- Customers – significant traffic sources (such as Shopify), customer lifetime value, and customer engagement
- Market – what comparable e-commerce businesses have sold for in the past, as well as what’s now available.
- Vertical – how well the store performs in comparison to its rivals, as well as how saturated its market is.
Step 4: Make a good first impression on potential buyers
Here are some actions you may take to showcase your Shopify store for sale in the best light possible.
- Wait until sales are at their annual high, if possible since buyers are most interested in recent purchases. Alternatively, make additional efforts for a few months to boost sales.
- Receipts, classified costs, Shopify refunds or other changes, bank reconciliations, and taxes should all be organized and updated. Buyers prefer clear, concise words to a jumbled mess.
- Use a catch-up accounting service to ensure that your financials are up to date when you’re ready to sell.
Step 5: Placing your Shopify store for sale
Here are a few choices for you to consider.
- Exchange Marketplace – It is dedicated to the Shopify stores for sale. You must fulfill certain qualifying restrictions, such as having a decent credit score and not having ongoing Shopify Capital funding. It’s quite straightforward to transfer the company and get money.
- Brokerage – Consult a professional website broker if you’re not sure whether you’ve properly analyzed your store. Brokers do charge a fee, but they may save you a lot of time and money by optimizing your price and preventing blunders.
Placing your Shopify store for sale can be tiring task. But there are many factors to consider when you take the plunge for doing this. It can be a daunting task, but there are a number of ways out and a number of things must be considered. Knowing when it’s the proper moment to act is one element. Selling too soon may leave you with little funds; conversely, waiting too long may result in you missing out on possible purchasers willing to pay top cash. As a result, knowing when, why and what is critical moving forward. Click here to know more about selling your Shopify store for sale!