Buying a business is a fierce experience, and it is a permanent decision that requires plenty of planning and calculation to avoid failure. On the flip side, selling your business is equally intimidating. After all, this is the company you built and poured your lifeforce and countless hours into.
With the rampant trend of retail-to-online migration only securing itself as the future, both businesses and the process of buying & selling them are moving to the web. Surprisingly, the process of buying an e-commerce business online is quite similar to buying your run-of-the-mill brick-and-mortar store. Whether you are purchasing an online shop or a physical one, both offer a selection of products or services and have external and interior teams in position to provide a successful, profitable operation.
One of the most crucial processes to focus on when selling your business is getting a realistic and accurate evaluation. After all, your company deserves to be sold at the price you've worked it up to be worth. Evaluating an online store might seem trickier and more confusing than putting a price tag on a tangible store – but luckily, some services make it a breeze.
Let's take a closer look at Flippa – one of the top online platforms to evaluate, sell or buy online businesses.
What is Flippa?
As noted before, Flippa is a marketplace, a valuation tool, and an assessment service for online companies – all tied into one nifty website. Examples of online businesses include (but aren't limited to) blogs, e-commerce sites, web apps, etc. The marketplace is stuffed with potential, with a good mixture of high-level businesses flaunting considerable monthly profits and smaller companies that sell for much less.
How do I evaluate my online business?
Flippa offers a free, simple valuation via their website. Simply navigate to their website, and spark up a conversation with Flippa's valuation chatbot.
Due to it's enormous marketplace, Flippa has access to the biggest marketplace for buying. Consequently, the valuation you receive is a pretty realistic indication of the price you might earn for selling your business, provided to you in just a couple of minutes.
How does Flippa manage to give you a realistic figure in a matter of minutes? The following factors are considered in the calculation:
- Financial Performance
Like all other financial assets, online businesses are evaluated based on economic performance, more specifically, their net profits. This is also usually the deciding factor for buyers when deciding on if they want to acquire your business.
This is arguably the most important factor, as buyers will also consider this as a significant factor when it comes to negotiating price, as well.
- Business Age
Businesses are considered less risky if they're over two years old. Namely, because they're easier to assess as historical monetization trends become evident. And with 90% of eCommerce start-ups failing within the first 120 days, it makes sense that age would be a significant consideration.
As a rule of thumb, businesses that are older than two years old are considered less risky. This is due to financial performance trends being easier to spot over longer periods of time, with newer businesses these trends are harder to spot.
- Growth Trends
Similar to business age determining financial performance trends, growth trends help predict how well a company will maintain its performance based on its growth and stability so far. Sites that maintain stable performance and demonstrate predictable growth are the most sought after. However, this can be an unpredictable factor to calculate. As spikes in performance statistics for smaller businesses are often hard to uphold, buyers will consider an average for smaller firms. If your business' growth is declining, you might also be penalized from an evaluation perspective.
- Customer Retention
Sites that exhibit a healthy amount of returning users, and/or customers are valued higher than those entirely ad-driven or only attract single transactions from prospects. In other words, if you've got a loyal audience along with your business, you've got a precious asset.
Flippa Frequently Asked Questions (FAQ)
How does Flippa evaluate my online business?
Flippa determines the value of your business by comparing a handful of crucial elements of your company to the average of other businesses around your size. This estimation is usually quite accurate, due to Flippa's large database of information to use for accurate comparison.
Is Flippa.com legit?
Flippa is a trusted and reputable marketplace favored for more than ten years now. It should be noted that Flippa does not hold the buyer's hands and depends on the individuals themselves to make good financial judgments.
Is buying an existing website a good idea?
This depends from site to site, but overall you should be encouraged to dip your feet into owning an online business. When marketed well they can be very lucrative and eCommerce is only growing more and more popular every day.
Flippa could be just what you are looking for when it comes to earning cash for a business you no longer want to operate. It is a trusted, massive marketplace with a history of countless sales and purchases of businesses, big or small. It is a vast marketplace with regulations and rules in place that allow both business sellers and buyers to approach the process confidently. Even if you aren't looking to buy or sell, you can still make use of their extremely useful valuation tool, for a free evaluation of your business's market value. This feature alone makes Flippa a resource worth checking out for any entrepreneur.