Selling Your Online Business - Something To Think About.....

by : Richard Grady

I was fortunate enough to spend a weekend in Monte Carlo recently and being surrounded by the luxury yachts and other symbols of extreme wealth got me thinking about retirement :-)

Ok, I know, I am far too young to retire but one day I may well have had enough of working online (or indeed working!) and may want to sell my website businesses and of course, this is the case for any other business owner.

Which brings me to the subject of this article - the ideal time to think about selling your business (and this applies to an online business as well as offline) is long before you actually want to sell it. Preparing a business for sale is not as straight-forward as you may first think, especially if you want to get the best price possible. A business that has been set up in a formal and structured way, with specific operating procedures etc in place is always going to be more attractive to a potential buyer than one which is run on a more 'informal' basis.

Usually the easiest time to put these structures and procedures in place is when the business is first set up - of course, you can always add to them as the business develops and grows but a bit of time spent on this area in the beginning will pay huge dividends later on.

One of the biggest problems that I see with online businesses (from the point of view of reselling them in the future) is that they are often so 'personal'. By this I mean that the website owner has built a business based around his/her own experiences and knowledge and this means that throughout the site there are numerous personal references. I am guilty myself and several of my own sites are built entirely on my experiences and this is reflected heavily in the website content.

Now, this is certainly not a bad thing because the content that I have been able to develop with my experience and knowledge is valuable and earns me a good living BUT what if I wanted to sell my websites? It is unlikely that a buyer would want to purchase a site that had a reference to 'Richard Grady' and 'his experiences' on the majority of pages, which would mean that every reference to me on the site in question would have to be amended in some way. Because of the way that much of my content is written, this would, at best, involve a major revamp of the site and at worst might actually affect the sales of the business (who knows if the 'new' copy would sell as well as the original?)

It is a tough call. In an ideal world, I would have set my website businesses up to be a bit more 'corporate' - this would mean that the websites gave the impression of having a company rather than an individual behind them. However, if I had done this in the beginning, would my sites be as successful as they are today? My feeling is perhaps not - I know that many of my customers have bought from me because they can relate to the situations that I found myself in as they are going through a similar situation themselves. Had my sites represented a faceless corporation, then perhaps my customers would never have become customers in the first place?

I am not sure I have the answer to which is a better approach - personal or corporate - there are advantages and disadvantages to both. However I can make a few suggestions as to simple things that you can do early on in your businesses life which will definitely help you when/if you eventually want to sell it:

  1. Keep accurate financial records - one of the first things a prospective buyer is going to want to know is how much money a business is making. It is no good just telling the buyer a figure and expecting him/her to believe you - your claim will need to be supported with documentary evidence. Also, don't fall into the trap of thinking that you will start keeping records once the business is making a decent income - that could be a year away and if you wait until then, you will have effectively 'lost' twelve months worth of your businesses history. A buyer will be far happier if they can see how a business has grown from day one rather than having accounts that start part-way into the game and show an immediate turnover of $100,000. (The tax-man will also be far happier with complete records!)
  2. Open a business bank account - so many people start off by running their business finances through their own personal account. This means that it can be very difficult to see which transactions relate to the business and which relate to the weekly household shopping bill. A business bank account is key to the business history and for the same reason as you should keep financial records from as early as possible, you should have a separate business bank account.
  3. Ensure that tax returns and other formal requirements are submitted on time - if you are keeping accurate records then there should be no reason why your business tax returns cannot be submitted (and paid!) on time. As well as saving you from being fined, it will also look good to a potential buyer - who wants to buy a business that has filed late returns every year and is regularly fined for late payments?
  4. Speak to a business broker at least one year before you want to sell - a business broker will handle the sale of your business for you but it is important to get them involved in the sale process as early as possible. Doing this at least a year before you plan to sell is a good idea because it will give you time to put in place any suggestions that they may have as to how your business can be made more attractive to potential buyers.

Of course, the one thing you shouldn't do is get hung up on making your business attractive to future buyers - the first priority is to get it earning you some money :-)

Copyright 2004 Richard Grady