Selling E-Commerce/Subscription Business

[m187]

Hi

Looking to selling my business but just looking for a bit of general advice as the business is a bit more than the run of the mill drop shipping/E-Commerce website due to being a subscription service and the way the business works.

A brief description of the business

We are a subscription service in a popular growing industry, Customers are signed up to receive x amount of product per month at a price. We send out other brands products to our customers, not our own.

The business is 4 years old at this stage and well recognized within the industry working with major brands and influencers. Product is a physical consumable item.

Obviously I know the general methods of valuing a business and have briefly spoke to an accountant about it, but he seemed very much only interested making a valuation based on the financials (which are fine) alone without even discussing anything else?

Some selling points that I'm not sure how to value, how a perspective buyer would value them or if they would come into a valuation at all -

Product is a consumable - Meaning its something people will always need/want more of as opposed to things like Lootcrate that are collectables and novelty items etc

Existing Subscribers - They can cancel anytime obviously like all subscription services, but we have a good portion of our few hundred subscribers that have been with the service for a few years and show no sign of cancelling. I'm assuming this would be valued slightly higher than customers that have no incentive/obligation to return etc?

Brand name - The brand name is a very popular phrase/saying/hashtag within the industry with thousands of uses/mentions per day on social media. We have all relevant trademarks on this also. Our branding also has a "mascot" on the logo which is recognisable and well known within the industry.

Existing relationship with suppliers/wholesalers/manufacturers - Over the years we have built a relationship with lots of brands within our industry and to put it bluntly my approach has always been "We can promote your product to x amount of people but we want a price that reflects that" so we have agreements with various companies to purchase products at a highly discounted wholesale rate below the industry standard and also have the ability to run advertising campaigns, include samples and so on to our subscribers for a fee.

Social media presence/Relationships with influencers - We work with a lot of industry recognized YouTube reviewers and Instagram influencers who are willing to promote products for us on a monthly basis, The product also has somewhat of a community with customers discussing what they have received with each other on social media and so on.

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Finding a buyer - The business is 100% relocatable (within the UK, all sales are online only, all stock is delivered, we own no property or shop front etc) - No special equipment is needed for storing the product, nor is it anything huge that needs a massive warehouse, we rent a very small unit, products can be brought in month to month based on subscription nature of business without needing to hold huge amounts of stock, Website is streamlined to deal with subscription management, customer service and so on at an almost automated level and is very well optimized. No staff outside of remote freelancers used on a regular basis on the website/online maintenance side of things (I do everything else)

So basically we're looking at a ready to go business with an established customer base and a decent position within the industry.

What would be the suggested methods for selling the kind of business? I've looked at things like Flippa but seems more geared towards the US market and the average price looks quite low, I've very briefly spoke to a broker but it was just before Christmas so we didnt go too far into things, What kind of fee is the standard in this kind of situation? Is it somthing that is worthwhile? A lot of the things I've read online are related to things like shops so not really applicable to me.

Lastly, My situation here is that is my reason for wanting to sell is simply just wanting a break and to move onto other projects after 4 years of working far too much to get the business to where its at.

A while ago I did have brief discussions with one of the manufacturers we work with about them buying the company, but they were adamant on having me working for them for 6 months at least as part of the deal and I just don't want to be in that situation outside of it being on a purely consultancy basis so it didnt go anywhere.

Is this common practise/something I'm likely to have issues over?

Thanks in advance for any advice - Sorry its so long just don't really know where to start here

 

[Andy777]

I have sold two businesses successfully on Flippa so I wouldn't rule it out completely. Yes, it is US-centric but there are lots of UK buyers too and as it costs so little to create an add there, why not give it a go? Make sure to put effort into creating a great description, have all the data/sales/traffic numbers etc. in place as people will need solid proof on how well the business is doing.

The new buyer will most likely want you to provide support (at least that's what I did with my two sales) BUT 6 months sounds too long to me. I'd say that 3 months support is enough for a business you describe. If they need more, can offer it as some kind of paid consultation contract.

If that doesn't work, I would most likely go with the broker option - not sure what the fees are, they're most likely negotiable and based on the sale price but it would be the quickest way to make the sale and most likely, with the right broker, you would get a higher price compared to Flippa option.

Hope this helps & Good Luck with the sale! ;-)

 

[Clinton]

What would be the suggested methods for selling the kind of business?

How you go about selling a business depends very much on the size of the business and on the profit not to mention how reliant the business is on you.

You go on and on and on explaining why your business is the dog's boll*cks, but you don't provide any figures. There's no turnover, no annual profit, no bottom line (net assets on the books), no number of employees.

I've spoken with thousands of business sellers in my time, literally thousands. Sellers who aren't very forthcoming with figures - and who choose to use large amounts of text instead of numbers - are generally sellers who have a price expectation that's out of whack with the market. They want to get paid based on the "potential" of the business or some other nonsense. No good buyer wants to deal with a seller like that and, for that matter, no good broker will take on a business like that!

I get the text vibe from your post. I would advise you to lose that approach. Selling a business is not like selling a used car - the more you pitch it the more you will annoy investors and lose their interest. And all you've done through your post is pitch and pitch and pitch without providing any of numbers that buyers want or any of the other information they generally seek! If you've done it to us I bet you'll do it to buyers as well. And the best buyers will drop you like a hot potato.

... as it costs so little to create an add there, why not give it a go?

Flippa is probably the worst place to sell this business. There are a thousand posts on my forum telling you why you shouldn't use Flippa! For one, it's far, far, too expensive. Take a very close look at all the fees you'll be liable for, it ain't cheap!

If that doesn't work, I would most likely go with the broker option - not sure what the fees are,

I've got an article on broker fees. There are plenty of crap brokers who charge no fees at all ... or work on a no-sale-no-fee basis. Business owners who don't have much sense tend to sign up with brokers like those rather than one of the brokers who does a proper job (but charges a high upfront fee).

 

[Clinton]

No staff outside of remote freelancers used on a regular basis on the website/online maintenance side of things (I do everything else)

Just noticed this. Ouch!

No decent buyer wants an OMB (one man band). The buyers with the deepest pockets want a self-running business with a fully capable second tier management. They won't see this as a business - you created a job for yourself and now you're trying to sell that job. Technically, this is a business. For all practical purposes it's a job. You'll have to sell to someone who both has the money to buy a job and is looking to buy a job. They are the worst type of buyers to deal with but that's pretty much the only type of buyer you'll attract whether you sell the business yourself or use a broker.

 

[Andy777]

Flippa is probably the worst place to sell this business. There are a thousand posts on my forum telling you why you shouldn't use Flippa! For one, it's far, far, too expensive. Take a very close look at all the fees you'll be liable for, it ain't cheap!

I'm only talking from my experience - I have sold two businesses on Flippa in the past and got very, very good prices on them - from US buyers by the way. The fees looked totally fine to me but this was 7 years ago, so not sure how they have changed the fee structure now.