You must let go of the past in order to move on.
You don’t have the time to do everything simultaneously, whether you are looking to build a family, buy a house or start a business. To take the next step in your life, you will need to start with a clean slate.
But there are many who spend a lot time building Shopify stores but never consider selling them. It’s understandable. Any founder would be naturally attached to their startup if they put all their effort into growing it into the ecommerce giant it is today.
We are always looking for ways to increase our side-income in today’s market.
This started as a side business, but it soon grew into a well-respected dropshipping and ecommerce company. You may not want to let go of the business you built with your own efforts if you have found other opportunities or are ready to pursue them.
We want to show you how selling a store can help you get the next opportunity in your life.
Why sell your Shopify store?
Many ecommerce store owners never consider selling their business. Why should you sell your ecommerce business if you don’t have to?
Even if the idea is appealing to you, there are likely many similar concerns among entrepreneurs working with the same idea.
“I spent a lot time and resources building it …”
“Am I selling the right product?”
“Am I too quick to let go of a winner?”
These are valid concerns. In our experience, however, people often sell their existing business for two main reasons.
Personal Circumstances
Some people prefer to keep their business apart from their personal lives, but it can be hard when something happens.
A death in the family is usually a sign of a shift in priorities. Some people may sell to be near their loved ones.
Some people may just wish to be disconnected from the internet completely. There is no better way to get out of your current situation than to sell the company.
We see this all the time: entrepreneurs who are bitten by the travel bug want to have fun and not worry about their finances. They can sell the business to raise money and have fun without worrying about the cost of their vacation.
These situations can be a motivating factor in selling your small business. However, it is possible to have equally compelling reasons for running the business that make it worthwhile.
Business Opportunities
As your Shopify store grows, you’ll find new business opportunities as your reputation improves. You might find that you don’t have enough time to run your primary business if you invest more time in side projects.
You can invest in new ventures by selling your business. You can free up your time and mental bandwidth so you can focus on other side hustles. You raise capital to help grow your projects and get them off of the ground.
Sometimes, selling your business involves a combination of all these reasons. The real question is “Will selling my Shopify shop help me achieve my goals?”
Earn 2-3 years of income right away
T. S. Elliot, a well-known author, once stated that “The End is Just the Beginning.”
The sale of Shopify is not the end, but a new chapter in your entrepreneurial journey. Profitable exits allow you to make a lot of money up front. You might be wondering how much.
Dropshipping is a growing business that allows for huge capital injections. We are seeing dropshipping shops selling for six figures every day. You could purchase a home and start your own family. You might have enough capital to buy a house and start flipping business.
There are many opportunities.
All of this leads to the same question: “Will anyone purchase your Shopify store for six figures?”
Are You able to sell your Shopify Store for multiple six-figures?
Spoiler alert–it depends.
While you might believe your business is valuable, we find that many entrepreneurs have biases when it comes to valuing their brands. This is called “emotional equity”. Entrepreneurs wear them constantly after their journey with the business has been a success.
However, it’s possible to sell for large sums of money. It depends on how much your online store is earning. Your online store may sell for six figures. Shopify store valuations of six figures depend on whether the store has earned at least $3500 per month in net profit, compared to a 12-month average.
This means that Shopify entrepreneurs can sell for six figures.
Even better is the fact that there are many potential buyers available to purchase a profitable business. Our marketplace actually has over $4 billion of verified liquidity available to help with business acquisitions.
Register your Shopify business to gain access to this buyer network
How did we get to this valuation? Let’s now discuss how online businesses can be valued.
Understanding how Shopify Stores Get Their Value
EBITDA X Multiple is a common formula.
We use a variety of EBITDA to calculate our valuation formula, which is slightly different than other brokers. Instead of using a yearly median, we use a monthly average.
This is our formula:
Average net profit for 12-months X Multiple
This formula is easy to follow. It is slightly more difficult to arrive at a multiple.
You don’t have to do this on your own. A valuation tool is available that will provide a free valuation within five minutes. This tool is based on data from many Shopify stores and will give you an accurate estimation of the store’s value.
How multiples can be created
Multiples can be anywhere from 30x up to 50x.
The number depends on many factors that are related to Shopify’s current state. Many of them are based on common sense, but also reflect the business’s growth trajectory.
Traffic diversity
It is important to consider where your online business gets its traffic.
We will consider whether Shopify stores get their traffic mostly from one source (paid or organic), as well as other traffic sources (search engines, SEO, social media accounts and email marketing, etc. ).
Ecommerce businesses that get traffic from multiple sources tend to be more profitable for sellers.
Revenue diversity
We’ll also examine where the revenue is coming from in the same manner. Does it come primarily from one monetization or type of business? You may have multiple sales channels such as a print on-demand store and a dropshipping shop. Which channel makes the most money?
Are there other revenue streams than ecommerce such as affiliate programs or e-commerce?
Your Shopify business is more likely to receive a higher valuation if it has more revenue streams. Your business will have less impact if it makes money from multiple revenue streams.
Age
The general rule of thumb is that the more successful a business is, generally, the older it is.
This bit of common sense was supported by our data analysis.
However, younger businesses may not be able to sell for decent amounts. An older business will likely have SOPs in place and have had to withstand changes in industry standards. It will also have shown that it is making money in a niche that won’t disappear in the next few months.
A higher average net profit equals a higher multiple
This speaks more or less for itself. The higher your online business’s profit, the greater the multiple.
Aiming to increase your monthly profit margins can be a great strategy if you want to grow your business.
Pricing Windows
We generally use a 12-month pricing term.
Sometimes, we will use a 6-month or 3-month period. This is at the seller’s request. If you are looking for a faster sale with a lower multiple, we recommend sticking to a 12-month pricing term.
A short price period can make it difficult for interested buyers to know if everything is still in good order after they purchase the property.
Brand
It can be difficult to quantify brand. This big term was simplified into a single definition.
Strong brands are associated with positive customer experiences and a company’s ability to solve a problem. Customers who have used the product or service are likely to give positive feedback.
This could be a lot more organic social engagement, or unprompted testimonials. It is important that the company presents itself well. The company’s website must be more than a homepage or landing page.
A strong brand also shows strength in the number of customers who return.
An impressive number of repeat customers is a sign of trust and quality in the brand’s products.
There are many other options.
This is not an exhaustive list. There are many other factors that go into a valuation. However, these are the essentials.
To get an idea of the value of your Shopify store, our Valuation Tool is free. Our Valuation Tool generates estimates based on real sales data from thousands upon thousands of transactions.
We’ve now covered the value of an ecommerce shop. Here’s a guideline of what you should do to sell your Shopify shop.
Here are some things to expect when selling your Shopify store
First, get your home in order before you list your Shopify store. Buyers will do their research and leave no stone unturned. There is a lot of overlap between what buyers ask.
We will cover common documents that buyers need as well as frequently-asked questions.
It is important to remember that honesty has proven to be the best policy for answering questions from buyers about your business. Transparency between you and buyers will build trust and increase the chances of closing a sale.
These are some tips to help you quickly sell Shopify stores.
Clean Profit & Loss Statement
This document is the most important when selling your business. This is also the most common mistake Shopify store owners make. Bookkeeping isn’t their forte.
This might not be a top priority on your list, but it could cause a deal to be canceled. A buyer will start questioning your store’s financial statements if they see inaccuracies in the P&L. This is even before negotiations begin!
A solid, well-organized P&L statement is essential.
This is a good thing. We’ll even build it for you as part our services. If you are unable to manage it yourself, we recommend that you hire a bookkeeper with experience in online businesses.
Explaination of traffic spikes and dips
It is normal for traffic numbers to fluctuate throughout the year. As long as the overall trend is upwards, it’s no problem. Buyers will often ask about the reasons behind any spikes that are not the norm.
Perhaps it was an experiment in marketing that led to a significant increase in traffic. Perhaps a Google algorithm change caused a drop in traffic.
Be prepared to explain the situation, because serious buyers will want you to.
Explain Revenue dips and spikes
Buyers will also want to know why revenue increased or decreased during the year, just like traffic. This could be caused by inventory issues such as running out of stock or holding onto inventory longer than six months (also known as “dead inventory”.
Inventory issues can be a major problem for ecommerce stores. However, it is important to be open about the reasons behind these problems. Potential buyers will gain insight into your business by understanding the reasons behind inventory management.
Seasonality can cause wild fluctuations in your revenue depending on the product you sell online. To help buyers plan for peak times, let them know when the business is more active during festivals and seasons.
Analytics are a must for traffic!
Without the right data, it’s hard to show your business’s worth. If you don’t already have analytics, we recommend that you get it as soon as you can.
Google Analytics is the standard for most online businesses. Many buyers will be familiar with its interface. Clicky can be used as an alternative.
To provide context for your business’s growth, you will need at least 12-20 month of historical traffic data.
You are more than a dropshipper
This applies only if dropshipping is your primary business model for your Shopify store.
Dropshipping businesses can be difficult to sell due to how easy it is to copy. This is where things like a strong brand or exclusivity in the product you sell come into play. It’s important to create a strong brand around your business to make it more difficult for others to copy your dropshipping business.
You can make your business more competitive by implementing unique features.
Make sure everything is transferable
It is as obvious as it sounds that a deal can be difficult if ownership cannot be transferred to allow the buyer the account owner for all aspects of the business.
All business assets must be transferable. This includes the Shopify account, domain and name. If an agreement has been made with your logistics forwarder, the special shipping discount must be transferred to the buyer. Otherwise it will count against you valuation.
It is the same for suppliers, and it is particularly important when a dropshipping company has an exclusive relationship with its suppliers.
You can ensure that the majority of the business can be seamlessly transferred to the buyer. This will make it more likely to close a deal.
How to Negotiate a Sale of Your Shopify Store for Profit
Now that you have all of your pieces in place, it is time to talk about how you will approach the table when you get an offer.
Many sellers use brokerages with a dog eat dog mentality. They fight for every inch to get the best deal for their clients. You should approach negotiations as a collaboration and not as a showdown. After all, you’re both business owners, or business-owners-to-be.
It takes patience and time to negotiate successfully. You will get a better deal if you are willing to compromise rather than engage in gladiatorial combat.
Keep your copywriting hat on
This can increase your chances of finding a buyer.
Because they are so focused on closing the sale, many sellers neglect their marketing skills in negotiations.
If you want to emphasize the benefits of your business, it is worth asking yourself why the buyer wants to purchase your business.
The Give and Take
Shopify entrepreneurs are often too rigid about their sales price and never sell their business. Selling for the highest price might not be the best option for you. You might need an earn-out if you are determined to get the maximum amount from the sale.
Earn-outs can be a form of deal structuring that helps finance a business. Earn-outs can be leveraged to purchase seller debt.
You have, for example, a Shopify store worth $600,000. A deal with an earn out might require you to accept $450,000 upfront and $150,000 over time. You may need to accept less money if you want to receive the maximum amount of money. Instead of $600,000.000 upfront, $500,000 is available with an earn-out.
Negotiations are all about the give-and-take. To get a good deal, both parties must agree to compromise.
It can help you stay calm in negotiations by setting some guidelines.
The Minimum Price Threshold
This is also called “What’s my minimum price?”. It’s basically what you should keep in mind to ensure that you don’t accept an offer that you aren’t happy with.
For a better price, negotiate beyond the original price
Negotiations don’t always revolve around the price your Shopify store is being sold for.
Additional benefits such as your support and other elements can be added to help buyers get started. This will ensure that they don’t negotiate a lower price. If you provide your guidance and expertise, buyers may be willing to pay a higher price.
It is a good idea to stay with the company on a consultancy basis in order to facilitate a smooth transition period when sales are at a low level or no change.
How to sell your Shopify Store
When selling Shopify’s business, there are several options.
Either use a broker to sell the business or you could offload it privately.
Brokers
A broker is recommended for first-time sellers.
Brokers have a great deal flow of qualified and interested buyers, which is one of their greatest strengths. A good broker also has high-quality services and is able to help with vetting the business, connecting you directly with interested/non-tire-kicker buyers, and migrating the business.
Some brokers also offer an escrow service. This is a great security feature that ensures everyone wins. The buyer can verify that the business is running and has the revenue figures they have hoped for by holding on to the money. This helps to build trust between the buyer and seller, and makes it easier for the new owner of the business to transition into their new purchase.
Private Sale
If you have a strong network of HNWI buyers, there’s a chance to score a great deal. We recommend first-time sellers use a broker because they will be able to negotiate the deal for them.
HNWI buyers are often represented by brokers who have millions of dollars to purchase digital assets similar to yours. Buyers will compete for your deal if you have all the documents in order.
You might consider PayPal as an escrow service if you are planning to sell privately.
Let us handle that for you
We are the most trusted broker for online businesses and we can handle your deal efficiently and smoothly. All the services we mentioned are available, plus a sophisticated platform that will help you manage new deals.
We ask buyers for proof of funds to ensure that our marketplace is stocked with quality buyers. Our marketplace is popular with smart investors. We have over $4 billion of verified proof of funds available that can be used to acquire Shopify stores such as yours.
Get started on your journey with our free Valuation tool.
You can quickly find out the value of your ecommerce store in just minutes. We’ll give you an accurate estimate of the price your store will sell on our marketplace after you input a few key metrics such as how many hours you work each month and how much revenue you make.
Only one broker has this tool, which gives you an instant indication of the potential price at which your ecommerce company could be sold.
If the number isn’t what you expected, focus on improving the asset and retrying in a few months.
