In this video interview, we will be discussing the process of selling an e-commerce business. We will be drawing insights from an interview with Gary Nealon, an experienced e-commerce entrepreneur, and Karen Waksman, the founder of Retail MBA. They will share their experiences and provide valuable tips for those considering selling their e-commerce businesses.

Finding the Right Broker

When it comes to finding a broker to help sell your e-commerce business, Gary Nealon relied on word of mouth for recommendations. He believes that seeking advice from friends and trusted sources is more valuable than conducting your own research. However, he cautions that finding the right broker can be challenging, especially if your business has both a physical location and an e-commerce aspect. It is important to work with a broker who is experienced in selling businesses with similar characteristics.

Nealon recommends interviewing potential brokers and understanding their process. He suggests choosing a broker who takes a strategic approach rather than simply setting a price and putting it on the market without much thought. A strategic broker will work to maximize the value of your business and ensure that you get the best possible deal.

Rolling Up Multiple Businesses

Nealon also discusses the growing trend of equity firms buying up multiple physical product companies and consolidating them into one entity. He explains that rolling up multiple businesses can lead to a higher valuation because it becomes more attractive to larger companies. For smaller Amazon sellers who want to exit or who know others in the same niche, Nealon suggests exploring the option of partnering with other businesses to create a combined offering. This strategic approach can increase the multiplier and make the business more appealing to potential buyers.

Determining the Right Time to Sell

There is no minimum revenue threshold that determines when an Amazon seller should start considering selling their business. Nealon advises sellers with lower revenue numbers to reach out to other businesses in their niche that sell complementary products. By forming partnerships, sellers can increase their revenue and make their businesses more attractive to potential buyers. However, the length of time the business has been operating and its track record of growth are important factors to consider. A longer track record with consistent growth makes the business more appealing to buyers.

The Importance of Justifying Drops in Revenue

Nealon emphasizes the importance of analyzing and understanding the reasons behind drops in revenue. He suggests that sellers should be able to justify these drops and provide data to support their claims. By doing so, sellers can ease potential buyers’ concerns and make it easier to justify a higher valuation. Nealon also recommends projecting future revenue and having financials to back up these projections. This allows buyers to consider the potential growth of the business and factor it into their decision-making process.

Diversify Traffic Flow and Build a Brand

Nealon advises sellers to diversify their traffic flow by not relying on a single source for sales. He recommends selling on multiple platforms, such as Amazon, their own website, and retail stores. By diversifying traffic sources and not relying solely on one platform, sellers can mitigate the risk of losing a significant portion of their business if that platform were to shut down or change its algorithms. Nealon also suggests building a brand around the business, as it adds value and makes it more difficult for competitors to replicate.

Creating a brand helps establish a reputation and differentiate the business from others in the market. Nealon admits that he made a mistake by focusing more on SEO value in the name of his business rather than creating a strong brand. He advises sellers to think long-term and consider how the brand will be perceived by potential buyers.

Be Patient and Project Future Revenue

Selling an e-commerce business takes time and patience. Nealon recommends building a model that projects future revenue for the business. By having financials to back up these projections, sellers can change the conversation from just looking at current revenue to considering the potential growth of the business in the coming years. This can significantly impact the valuation and make the business more attractive to buyers.

Conclusion

Selling an e-commerce business requires careful planning and consideration. It is important to find the right broker who understands the unique aspects of your business and takes a strategic approach to maximize its value. Building a brand, diversifying traffic flow, and justifying drops in revenue are crucial steps in preparing a business for sale. By projecting future revenue and having financials to support these projections, sellers can demonstrate the potential growth of the business and make it more appealing to buyers.

Gary Nealon and Karen Waksman provide valuable insights and tips for sellers considering selling their e-commerce businesses. By following their advice and taking a strategic approach, sellers can increase their chances of getting the best possible deal and successfully transitioning to their next venture.

To learn more about e-commerce business strategies and read case studies and split testing results, visit Gary Nealon’s blog at garynealon.com.