Build Your Business. Live Your Dream.™
WHAT'S NEW
What’s New
e-commerce

6 Tips for E-Commerce Entrepreneurs Who (Eventually) Want to Cash Out

John Holloway

John Holloway

Co-Founder at NoExam.com
John Holloway is a co-founder of NoExam.com, a digital life insurance brokerage founded in 2013. He launched this venture after selling his e-commerce business in 2012 and has since helped over 6,000 families secure life insurance coverage.
John Holloway

Latest posts by John Holloway

Almost three years after starting my journey into e-commerce, I was sitting at my kitchen table with two accountants from a larger retailer who were acquiring my business. They were scanning my inventory to audit my records, going over bank statements, sales data, inventory reports and more. A few weeks later, we finalized the deal. I had successfully sold my e-commerce business.

My company was a motorcycle gear and apparel website I launched off the back of a Facebook fan page I started a year earlier. I spent countless hours working on it over two and a half years, doing everything virtually myself, from accounting to web development to marketing. I learned many things while not only running my business, but also during the process of selling the company.

If you’re thinking of starting an e-commerce business, read on for six tips I wish I had when I started my business.

Offer something unique

The world of e-commerce is rapidly evolving. New brands are launching constantly, and established brands are being acquired by bigger players.

Even with Amazon occupying around 50 percent of the e-commerce market, new businesses continue to break onto the scene and scoop up valuable customers.

Ask yourself, “What are you doing that is unique from other e-commerce businesses?” and “What are you offering that Amazon can’t offer?”

With my business, I didn’t really have answers to these questions. I did have one saving grace though—a Facebook page with three million likes. Besides that, I was doing nothing unique.

If you want to sell your business someday, you have to offer a product or service that isn’t easy to duplicate. There are so many companies out there with huge budgets ready to copy and stamp out smaller retailers. To succeed in today’s e-commerce market (and eventually get someone to buy your business at a profitable price point), you must have a unique brand or product offering.

If you are just getting started with your online business, make sure to have a unique offering, as it will lead to faster, greater success and a potentially profitable acquisition down the road.



Have multiple sources of customers

Buyers want to see a well-rounded business with traffic from more than one platform. Being too reliant on one source is risky. For example, if all of your sales come from Google’s organic search traffic, you are at the mercy of their algorithm. The same goes for social media.

In 2014, just one year after I sold my business, Facebook’s organic reach plummeted. Many business owners faced reduced traffic and sales from their efforts of growing their fan pages.

The point is, nothing stays the same for long. Having multiple traffic sources gives your business longevity and makes it a less risky sale from a buyer’s standpoint.

Build your email list

Your email subscribers are your most loyal fans. They like your product and your company enough that they choose to be notified when you do something new.

It’s important to capture the email addresses of your buyers or users and market to them from day one. Many entrepreneurs wait to work on email marketing until their traffic hits a certain level, but by doing this, they only miss out on potential customers they could have obtained while their site was growing.

A healthy email list with active buyers is a good selling point that offers potential buyers a snapshot of your customer base. Don’t neglect it, because it is important.

Keep orderly books from the start

Don’t fall into the “someday” trap. This is when you tell yourself that you’ll get to that one task… well, someday.

If you think that keeping track of sales at the very beginning isn’t important, you’re wrong. Even when your business is small, it is imperative that you set up your books from the start. Track all income, expenses, inventory and returns, and make doing so a habit early on.

Similar to capturing emails, good accounting and record keeping is something that pays dividend at a much later date, but the best time to establish these practices is in the beginning when you’re just starting up your business.

When you decide to sell your business, the first thing buyers will want to see is a Profit and Loss statement. If you’ve done this right from the start, you will be able to produce one in just a few clicks. If you can’t produce one, potential buyers will not take you seriously, and it could mean the end of the conversation.

Streamline operations for easy handoff

Imagine the handoff for every process you have created. If these handoffs could be simpler, chances are they probably should be. Complicated operations are a reason that buyers might shy away from purchasing your business. Potentially problematic handoffs of operations will usually surface while a would-be buyer does their due diligence assessing your existing business operations.

Whenever you create a system or process for your business, make it as simple as possible. You might be the Jack of all trades at your company, but a buyer will likely have other people to do all the work. If your business relies on knowledge that exists only in your brain, a buyer is going to have problems transitioning operations. Clear documentation is an important piece of every process you have in your business, and it will make for a smoother transaction when you decide to sell.


Sign Up: Receive the StartupNation newsletter!

Minimize overhead when approaching the sale

When you’re just starting out as a new e-commerce business, you’ll likely be spending a lot of money trying to grow the business. This isn’t a bad thing, as it is necessary to grow your customer base and sales early on to garner growth and profits down the road.

However, once you decide to sell your business, it’s important to keep expenses low to maximize profits. An e-commerce business owner often does this a minimum of six to 12 months before a sale.

A buyer is going to value your business based on its average monthly profit over the last year. If you’ve been spending heavily on marketing and investing in content that will grow your traffic and sales six to 12 months from now, it’s not a good time to sell. The buyer will not factor in those potential gains, and the expenses will only count against you.

Keep these tips in mind when starting your e-commerce business. Not only will they help you one day if you decide to sell, but they will also help you grow a stronger business overall.

Total
6
Shares
Previous Article
funding

The Best Funding Options for Minority Entrepreneurs

Next Article
onboarding emails

6 Tactics for Incredible Customer Onboarding Emails

Related Posts