Your startup has finally taken wings, and now you’re faced with an important decision; should you sell it?
For some entrepreneurs, the answer to this question is quite simple, and they go for the first buyer who shows interest in their venture.
But is that the right thing to do? Your business might have more potential than it shows and it’s up to you to evaluate the money you can get from the sale of your business.
Here is a guide that’ll help you decide on the best course when looking to sell your startup.
Timing – when to sell
Now that’s a tough question. When faced with an offer, most entrepreneurs have no idea what to do. There’s a simple formula behind this. The value of any startup is measured by looking at its growth.
If a startup stops growing, its market value will come down. Entrepreneurs must evaluate their growth value every once in awhile and the moment they feel it’s coming to a standstill, they should sell the startup.
Get a Valuation
Unlike mature businesses, startups don’t have the cushion of past data to base their judgments on.
The best bet they have is to estimate the value of their business using other business metrics. Supply and Demand is one indicator that can be helpful. You can get a feel for site valuations from resources like this one and you could also use this valuation tool — although I would not recommend relying on any one valuation.
If you deal with a technology that can be a trend in the market, you can increase the value of your business by attracting investors.
Still not sure how to value your business? Get help from a financial advisor and save yourself the hassle.
Show the Statistics
Buyers are more interested in seeing a high profit than a steady flow of revenue.
Even if the revenue is high, if the expenses don’t leave for much profit, buyers would have a hard time deciding on the sale.
All buy and sell sites will insist that you provide a certain amount of data so that buyers can browse with confidence. If you are using a broker, that will collate the data in order to present it to prospective buyers.
Shopify Exchange will automatically draw details and statistics on sales, revenue, traffic, and more in order to allow buyers on the exchange to make good decisions. They will also guide you in how to prepare your business for sale on the exchange.
So, make sure you build a compelling set of statistics. Mention the market size you cater to, the potential market penetration rate and the cost required per customer.
It’s important that you keep all the business documentation in order and up-to-date.
The confidential information of the company should not be divulged to all the potential buyers.
Take time to look at typical legal requirements for the sale and purchase of eCommerce and other businesses online. Ask your legal advisor to prepare letters of intent so that you can maximize your strategic advantage.
Even the most foolproof marketing strategy can go out of the window while a startup is growing.
Only through constant changes and amendments can the marketing strategies be tailored to fit the needs of a startup.
This all changes when the startup is up for sale.
As already discussed, the value of a startup is evaluated through its growth rate. When selling your business, make sure the buyer is aware of the marketing strategies. Set the right price and wait for the buyers to contact you.
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