IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities.  Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog article has been provided by Seth Rudin. Mr. Rudin is a senior M&A Intermediary at IBA (www.ibainc.com):

Selling an E-Commerce Company – 4 Things You Can Do to Increase Your Market Value

As more and more consumers, approximately 76% of Americans, buy their goods and services online, e-commerce companies find themselves in high demand from investors and buyers of businesses. Consumers buy almost everything online, from baby products to pet care, groceries, firearms, and other household items/services. According to Census.gov, approximately 15% of all goods were bought online in the third quarter of 2022, up from 8.8% in 2017. This growth is expected to continue with at least an 11.9% CAGR setting E-commerce sales to surpass US $117.7B by 2030.

As an owner of an e-commerce company, you will want to plan ahead and consider your business exit strategy. In doing so, you can take specific actions to prepare your e-commerce company for sale to help boost your company’s valuation for you and other stakeholders. IBA has helped many family-owned and privately held e-commerce companies assess their exit plan and market the business for sale. Our experience in e-commerce companies spans different categories, such as sporting goods, lighting, wine, firearms, cannabis, and restaurants. With our expertise, knowledge, and skill, we assist our business owners by navigating the unique considerations that pertain to valuing and selling an e-commerce company.

From our past experiences, these are four steps you can take to best position your company for sale:

1. Understand Your Online Metrics. Buyers will want to study and understand the key usage on your e-commerce platform. Google Analytics, Moz.com, and other website analytic tools help e-commerce companies measure their success. Key metrics buyers will want to see include:
   a) User counts and total sales generated by the site broken down by products and geographies of where the users exist and the product is shipped to.
   b) The average time a user spends on your website, the average number of pages visited, the average time per page, etc.
   c) What is the average purchase price and the number of items purchased versus traditional in-person sales for similar products/services?
   d) How did the users find your website, the effectiveness of your marketing, and the marketing expenses associated with any promotions?
   e) What is the bounce rate for the website or mobile application? A bounce rate measures the percentage of time a user lands on the first page and exits within 10 seconds. This ultimately means if you have a high bounce rate, your website does not convey relevance to the user, and they often do not stay to peruse and shop on the website. Therefore, companies will want their bounce rate to be less than 40%.
2. Create a Sustainable and Scalable Platform. The platform supporting the e-commerce site should support potential growth in users, products, and geographies. As the company expands, the website will need to support backend processes for fulfilling orders, providing key accounting information to downstream systems, inventory management, and other considerations, including foreign currency, calculating and capturing sales and taxes, and payment options. The e-commerce site must ensure proper cyber-security protocols to safely process and store user and payment information. Buyers may want a cloud-supported platform that enables virtual servers that expand during high season, reduce servers during slow seasons, and have proper disaster recovery and backup plans.

3. Develop Effective Sales Funnels & Recurring Revenue Streams. Your marketing and sales efforts should create different sales funnels to attract and channel leads into the platform. This can be created organically, with paid advertising, or through channel / strategic partners. Additionally, e-commerce platforms that generate a recurring revenue stream will undoubtedly increase the company’s value. Buyers will evaluate the % of recurring revenue, the CHURN rate of users, and the recurring revenue growth.

4. Strive for Frictionless or Near-Frictionless Fulfillment of Orders. Buyers will assign more value to e-commerce platforms that minimize the number of human interactions throughout the Order to Ship process.

While achieving the above four steps will undoubtedly be the ideal method to maximize your e-commerce company’s value, owners can still accomplish one or more of these and increase their company’s valuation. Of course, achieving all the steps is unnecessary, but these aspects should be included in any long-range strategic plan.

If you have questions relating to the content of this article or the process associated with selling an E-Commerce business, Seth Rudin would welcome the opportunity to talk with you.  Mr. Rudin can be reached at (425) 454-3052 or seth@ibainc.com.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, accounting, legal, and financial planning communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.