What's your long term plan for your ecommerce business?

[BrightIdeas]

I launched my ecommerce business 14 years ago. I'd say it's been a solid lifestyle business (i.e. £400k turnover, grown fairly organically, small team... turning a profit but not making the profit I would ideally like).

I've been thinking about my long term plans - specifically, the someday exit plans.

I'm not sure if the business is saleable. (Possibly, but I think we'd need to make some changes first... maybe the key one would be to develop a wholesale offering as customer LTV is pretty low due to product).

Would love to hear from other people who have sold/retired from/exited their business, and what the circumstances were - and if you're happy with how it went.

Thanks!

 

[NickZ]

Alone you can only do a limited amount of accomplishment.
You need to partner up, scale up your business.

 

[BrightIdeas]

Alone you can only do a limited amount of accomplishment.
You need to partner up, scale up your business.

Is this something you've discovered yourself in your own business?

 

[antropy]

£400k turnover

With roughly what profit?

Paul.

 

[NickZ]

Is this something you've discovered yourself in your own business?

Sure as I own the business I'm open for proposals. Most don't work out though, but alone you only get that far.

 

[DoolallyTap]

Bringing in a new minority partner after you have made all the running would be hard. Your business is certainly saleable but if net profit is low your value may not be much. You have to decide what you want to do, how old you are, when you would like to sell. Perhaps you have lost some spark. Perhaps you need to evaluate if there is scope to grow the business. Perhaps you need some mentoring.

 

[BrightIdeas]

Thanks everyone…

Firstly, I’ll say that have no interest in bringing in a partner to grow the business. I can’t think of anything worse I employ a small team who pack orders and help customers, and I can bring in expertise with external partners as and when there’s a need.

To answer some questions, the net profit % for the past couple of years has been between 5-8%. This is lower than previous years due to moving into new premises/fit-out/experimenting with new channels, etc. We are looking at about 12%+ this year. Would be more if you exclude the money I take out for my pension contributions.

I still love the business after 14 years. I’m in my mid-forties and can’t imagine not working in it at this point. However, I can’t work in it forever…. at some point I’ll stop. Throughout this time, I’ve been devoted to it but have balanced it with school runs and family needs, etc. Rather than paying into a pension, I’ve prioritised reinvesting back into the business. But, in my mid-forties and without being now shackled to the school run, I need to do some proper financial planning for retirement.

I’m thinking I need to work on the business as if I’m going to exit in 10 years.

 

[fisicx]

If you walked away tomorrow would the business survive? Or are you a vital part of the business?

Maybe start training up your managers to take over your duties. That way they could be in a position to buy the business when you retire.

 

[BrightIdeas]

Honestly, I think it could trundle on for a little while (if I could still make bank payments etc.). But, I'm definitely a key part of it at this stage.

 

[fisicx]

Honestly, I think it could trundle on for a little while (if I could still make bank payments etc.). But, I'm definitely a key part of it at this stage.

In which case start your succession plan today.

A mate of mine sold his business to his management team and it took about 5 years until they were fully trained and ready to take over the reins.

What would happen if you were unable to make bank payments? Is there a backup system in place should you be incapacitated?

 

[Paul Kelly ICHYB]

the net profit % for the past couple of years has been between 5-8%.

Does this include your salary/take, or is the 5/8% it?

 

[BrightIdeas]

In which case start your succession plan today.

A mate of mine sold his business to his management team and it took about 5 years until they were fully trained and ready to take over the reins.

What would happen if you were unable to make bank payments? Is there a backup system in place should you be incapacitated?

There isn't anyone actually working in the business at the moment that would be a suitable fit for taking it over. As a small business, it definitely hasn't warranted a management team. Perhaps if we get to £1m turnover and we can get more economies of scale, we could look at that.

No back up system. I'm the only one that can make bank payments, so perhaps that's something that needs looking at!

 

[BrightIdeas]

Does this include your salary/take, or is the 5/8% it?

I take a salary + dividends. My salary is included in it but dividends are not.

 

[DoolallyTap]

Will you tell us your business name so we can look at it and possibly make some comments.

 

[Will.Lu]

I launched my ecommerce business 14 years ago. I'd say it's been a solid lifestyle business (i.e. £400k turnover, grown fairly organically, small team... turning a profit but not making the profit I would ideally like).

I've been thinking about my long term plans - specifically, the someday exit plans.

I'm not sure if the business is saleable. (Possibly, but I think we'd need to make some changes first... maybe the key one would be to develop a wholesale offering as customer LTV is pretty low due to product).

Would love to hear from other people who have sold/retired from/exited their business, and what the circumstances were - and if you're happy with how it went.

Thanks!

May I ask what you serve? products? services?

 

[JEREMY HAWKE]

Firstly, I’ll say that have no interest in bringing in a partner to grow the business. I can’t think of anything worse I employ a small team who pack orders and help customers, and I can bring in expertise with external partners as and when there’s a need

I am in exactly the same frame of mind as you
This outfit could have doubled its profits with a person with the right skills working with me but I would lose my temper

 

[dx3webs]

"Rather than paying into a pension, I’ve prioritised reinvesting back into the business. "

err what!

Mid forties is not too late.. Start doing this now. Unless you plan on working forever or living in a caravan ..

 

[BrightIdeas]

"Rather than paying into a pension, I’ve prioritised reinvesting back into the business. "

err what!

Mid forties is not too late.. Start doing this now. Unless you plan on working forever or living in a caravan ..

I'm paying into a pension but my main focus has been growing the business. It's hard to plough money into both. But, I'm now thinking about what the next steps are - whether I should double down on growth with the plan of selling in 10 years OR escalating the pension to make that a priority (but the business getting reinvestment).

 

[fisicx]

You say you want to grow the business but you also say it's not making as much profit as you hoped.

Would it not be better to focus on reducing costs and increasing profit rather than just growth.

At the same time start training up existing staff to do those things you currently do. And give your accountant access to the bank account so they can do payroll. Make the business less reliant on you so that it becomes a far more attractive proposition when you want to sell in 10 years.

 

[Ivanzyt]

I can't imagine ever selling my business but if I were then the things I would need to do to ensure it provided me with the maximum cash would be.

Build the balance sheet and credit rating.
Show sustained positive EBIT for multiple years preferably growing year on year.
Have a secure management team/succession plan that can take over running the business when you leave.

All these things add value to what someone will pay for the business as a going concern. Without any of them, the residual value of the business is greatly diminished. You probably need to start implementing or cultivating these things now if you want to exit in 5 years time. None of them can happen overnight or even in 1-2 years.

Also be prepared to work in the business for a number of years with the new owner as that would increase anyone comfort level in making a purchase. If you structure a deal to stick around for a hand over period for a few years that would be add value.

That's what I would focus on if I were looking to exit as these things would maximize my payout.

 

[BrightIdeas]

You say you want to grow the business but you also say it's not making as much profit as you hoped.

Would it not be better to focus on reducing costs and increasing profit rather than just growth.

At the same time start training up existing staff to do those things you currently do. And give your accountant access to the bank account so they can do payroll. Make the business less reliant on you so that it becomes a far more attractive proposition when you want to sell in 10 years.

Yes, this is indeed the current plan for this financial year! I moved into new premises and had to invest in a number of areas - but what's also eroded margin is testing new marketing.

I didn't know accountants could do that - i.e. access our bank account! Is that normal practice??

 

[BrightIdeas]

I can't imagine ever selling my business but if I were then the things I would need to do to ensure it provided me with the maximum cash would be.

Build the balance sheet and credit rating.
Show sustained positive EBIT for multiple years preferably growing year on year.
Have a secure management team/succession plan that can take over running the business when you leave.

All these things add value to what someone will pay for the business as a going concern. Without any of them, the residual value of the business is greatly diminished. You probably need to start implementing or cultivating these things now if you want to exit in 5 years time. None of them can happen overnight or even in 1-2 years.

Also be prepared to work in the business for a number of years with the new owner as that would increase anyone comfort level in making a purchase. If you structure a deal to stick around for a hand over period for a few years that would be add value.

That's what I would focus on if I were looking to exit as these things would maximize my payout.

Great points... same, I can't imagine selling my business at this point!

I think I'll speak to my accountant and get some advice from him on all this.

 

[fisicx]

I didn't know accountants could do that - i.e. access our bank account! Is that normal practice??

Mine does. You just need to set them up as a signatory.

How do you run payroll or pay suppliers when you are on holiday or not available?

 

[BrightIdeas]

Mine does. You just need to set them up as a signatory.

How do you run payroll or pay suppliers when you are on holiday or not available?

I schedule it before I go away.

 

[fisicx]

I schedule it before I go away.

So if something happens to you the whole business falls over.

You do really need to assess your current position and begin the succession plan.

 

[BrightIdeas]

So if something happens to you the whole business falls over.

You do really need to assess your current position and begin the succession plan.

I take your point - I hadn't even thought about other small business employers having a second signatory on their account.

 

[Ozzy]

Speaking from personal experience, I have never gone into business without having a plan on how I'd get out of it later. I enjoy what I do, I like working, but I always have an eye on the way out later.
My current plan is for the management team to take over the business operations, but in previous businesses, it's been a Plug'n'Play setup to be taken over by a competitor, and so on.

You are thinking now about these things, so what do you want and what is the most viable? It could be sell to a competitor, a supplier, a management team, or something else. Work that out, and then start working towards it and be open about that with your team too. My team know I want to sell and retire, it's not something to be ashamed of.

I'd suspect that with a clear vision and direction on where you want to take the business you'll have an energy boost in yourself, and your small team, and you'll get there.

 

[sdob]

I'd focus on improving you operational efficiency if growth is challenging. That will improve the net profit and is an easy way to drive up the valuation.

Tools like our OneSila can help you do that improve your operational efficiency.

What you will also find, is that if you have a challenging product range you might struggle to find a buyer for the businesses. Probably selling it off to a competitor as a strategic acquisition is the way to go.

Happy to look at it in detail if you drop me a msg with your website.

 

[AliceStitcher]

I've worked on projects involving endless customization options with Zolak furniture configurator, which has given me some insights into enhancing product offerings. To make your business more saleable, consider diversifying your product range and introducing features like product customization. Developing a wholesale offering is a great idea as it can boost your customer LTV. Also, focus on improving your online presence and customer engagement.

When I worked on similar projects, enhancing the product's appeal through customization significantly increased customer interest and retention. Best of luck with your exit plans!