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How to Determine When to Sell Your Ecommerce Business

It’s easy to forget now, but Michael Dell was the Mark Zuckerberg of the day.

Hailed as a young genius, he created the cheap, made-to-order computer in his University of Texas dorm room and marketed it directly to the general public. In the 1980s and’90s, his face appeared on magazine covers, and well before he turned 40, he was a billionaire CEO, rated alongside Bill Gates and Steve Jobs.

But this was a long time past in the fast-moving world of high technology. Now the PC is becoming eclipsed by smart phones and tablets and Dell’s stock trades at approximately $13 from a peak of $53 in year 2000.

For almost a century, no firm commercialized the camera as successfully as Kodak, with discoveries that comprised the Kodachrome color film, the handheld movie camera, and the easy-load Instamatic camera. However, Kodak’s storied run started to end with the arrival of digital photography and printers, applications, file sharing, and third party apps. Since the late 1980s, Kodak has attempted to expand into pharmaceuticals, memory chips, health care imaging, document management, and many other fields. However, the magic hasn’t returned.

Vijay Govindarajan, a professor at Dartmouth’s Tuck School of Business and co-author of The Other Side of Innovation, says successful businesses often fall into three lands which produce the glory days fleeting. First is the physical trap, where big investments in older systems stop the pursuit of more applicable investments. There is a psychological trap, where business leaders fixate on what made them powerful and don’t notice when something new is displacing it. Then there is the tactical trap, when a company focuses only on the market of today and fails to anticipate the future.

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But not just large businesses fall into these traps. Smaller companies can also. In actuality, a lot more smaller businesses neglect. According to the U.S. Small Business Administration, about 50 percent of companies fail in their first five years and 75 percent fail in the first 10.

So, how should you decide when to offer your organization?

Facing the dilemma of succession or continuation of a person’s business is like addressing the demand for life insurance. Neither subject is addressed with much enthusiasm by the average individual. The wise address the inevitable and prepare. As with the purchase of life insurance, the decision to market or plan a workable business’ series can be constantly postponed. Unfortunately, when a company has to be marketed, it is too late. Few folks are willing to get a business which needs to be sold. Of the many businesses I’ve sold, less than a couple were from distressed sellers.

The best choice on when to sell is an analytical individual, not psychological. Businesses fetch the best value when they’re growing. So, find your projected selling price-range by multiplying your trailing 12 month or last year’s gain (before tax) by 2.5 and 3.5 to arrive at upper and lower price range for ecommerce companies around $2.5 to $3 million in earnings. Next, visualize your company over the next three decades and gauge how it will grow. Then ask this question: Would you rather sell now with the above formula, or have a chance which you may sell your company for a higher price in 3 decades?

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If you can not decide using above method, here is another one. Circle your answers to these questions, then see below to see how you scored to determine whether you should consider selling today or later.

  1. Is your company less enjoyable now than previously? Y N
  2. Does your business challenge and provoke you less than previously? Y N
  3. Can you think about selling your company more frequently now than you did earlier? Y N
  4. Do you end up complaining more? Y N
  5. Has the company come between you and your loved ones? Y N
  6. Has your company begun to level off or decrease? Y N
  7. Are you worried you no longer have the stamina your company requires? Y N
  8. Can you ask yourself,”What would I do if I offered?” Y N
  9. Do you often wonder,”What is my company worth?” Y N
  10. Would you be reluctant to guarantee a sizable loan to cultivate your company? Y N

To decide if now is the time to think about selling, count your”yes” answers.

  • 0 yes replies . Congratulations. You’re happy and probably quite prosperous in your enterprise. Keep it up.
  • 4 to 6 answers. Pay attention to your early warning signs. It is best to not make the mistake of staying too long. Sell while you’re still having fun. It’s ideal to begin the preparation process early. The actual sale of a business can have quite a long time.
  • 7 to 10 yes answers. Don’t allow time spoil the fruits of your labour. Choose what you would like to do next, then act.

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