Questions

I've been running an ecommerce business for 3 years now and get good sales from Amazon, but have been investing every penny I've earned back into more inventory. I feel it might be the time to cash out soon and use the funds to start a new business and do it bigger. But I don't know where to even start with finding out how much my business is potentially worth. And I don't want to listen to business brokers give me a sales pitch disguised as a "free valuation", at least not until I've made up my mind.

If you would like some comments from a business broker I would share the following with you.

1. If you are looking to sell your business and are motivated to sell, look at things from a buyers perspective. If you are only willing to sell to meet a set of criteria that works for you it will be hard to find a buyer and ultimately close the sale of your business.
2. Your opening paragraph says you have been running your ecommerce business for 3 years and getting good sales from Amazon but you've been investing every penny back into the business. If your plan is to sell the business and then start a new business and do it bigger wouldn't it be best to keep your current business and make it bigger and better seeing you know it so well and have learned so much?
3. There are different metrics to value a business. A critical metric is how much the owner keeps after all his expenses or what is called Sellers Discretionary Earnings. This is one of the most important metrics as a business with lots of gross revenue doesn't mean its worth anything. For example, if you have a business with $1 million in gross revenue and expenses of $1.2 million to run that business its not too attractive unless the buyer is taking out a competitor. If you have a business with $1 million in gross revenue and expenses of $500,000 that's worth a lot more.
4. Most buyers need to get a loan to buy a business. A lender will not loan to a buyer if the business isn't making money as it can't service any debt the buyer takes on.
5. A good business broker will always charge for their business valuation. If a seller doesn't want to pay for my business valuation then they don't see any value in the information and skills it takes to be a successful business broker. Plus a good business valuation necessitates asking lots of questions which takes time and knowledge to handle correctly.


Answered 5 years ago

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