Sheehan & Associates, P.L.C.

Points of interest in the sale of an online business

Michigan entrepreneurs interested in selling their online businesses should be aware of the major factors driving sales prices. As with nearly all enterprises, the most important attribute is profit, but the price that an online business may demand is also affected by concerns unique to the online marketplace.

Businesses that can demonstrate higher annual profits may also demand higher figures when negotiating purchase price. Specifically, according to data related to the sales of a number of online businesses in 2013, those with annual profits between $75,000 and $200,000 sold for twice that amount. At the high end, annual profits of between $960,000 and $2.4 million may be sold for 3.5 times that amount.

Price varies based longevity as well as immediate profitability, however. Generally, the longer the company has been earning money, the more it is worth in a sale. In many cases, it is wise to time the sale of on online enterprise when there has been upward growth for a period of three years or more. Buyers appreciate growth trends and use them to project future earnings.

Prior to a sale, online businesses should endeavor to cultivate multiple streams of traffic and stress this diversity when it comes time to sell. Relying on Google as the sole source of site visits is a dangerous proposition because many buyers are aware of the negative impact an update may have on site traffic. Google's 2011 updates wiped out a number of online companies that were unprepared for the changes.

Complex transactions like the sale of an online business are often made simpler with the help of an experienced business attorney. An attorney may be able to assist with due diligence, the structuring of the sale of business assets and liabilities and may work with other professionals to close the transaction.

Source: Business 2 Community, "6 Tips for Selling Your Online Business", Jock Purtle, August 30, 2014

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