How to Successfully Exit Your eCommerce Business | Peak Season Tips

Hi, my name is Reed o'. Brien. I'm the Strategic Partnerships Manager at Empire Flippers and I want to walk you through the peak season tips in context of an exit for your E Commerce or Amazon business. So the number one tip is to plan ahead. It is never too early to start thinking about an exit, whether you think that might be in a year, in two years, right after the peak season, whatever it may be. And there's a few key things that you need to keep in mind when it comes to thinking about that exit. So the number one thing is to figure out your why for the sale. Why are you anticipating exiting your business? This motivation is easily going to be the most important piece of your plan to exit because that's going to dictate your negotiation terms. It's going to dictate how you interact with with your business and kind of what steps you take in the short, medium and long term, and whether it's, you know, you want to sell your business, to buy a house, to retire, to start a new business venture. There's no wrong reason. It's just important that you understand what your base motivation is when you're thinking about an exit. It's also important to note that a business exit is going to take between four to six months from the day you start and you are ready to go until the day you've got your first payment in the bank. Now, if you're interested in kind of what payment terms look like and what deal structures look like, we can discuss that directly. But for the most part, the important thing to know is that it's going to take four to six months. So it's worthwhile to plan ahead and have that in mind. When you think about the timing, it's no secret that Q4 this peak season tends to be the busiest part of the year, and a lot of sellers want to exit day one of January once they've had a big windfall of cash. But again, it's just important to know that it's not going to be that quick and we can help you kind of get prepared for that. Now tip number two keep your books as spotless as possible. Of course, this is something that maybe people know intuitively, but it's important to realize that when you're going through a business exit, the finances are probably one of the top two things considered by a prospective buyer. So having a really clear outlook on your business's finances is of the utmost importance. You need to have a clean P and L and you need to understand what your cost per SKU is you need to understand what your fixed costs are and what's variable, what can be added back. And ultimately most buyers are going to be looking for that P and L to be presented and an accrual format instead of on a cash basis. Now, we're by no means saying that you should redo your books to be all accrual instead of cash, because cash basis is by far the most common type of bookkeeping that we see with direct to consumer sellers. However, you need to be prepared to make that conversion. And if it's something that can easily be incorporated into your business without affecting your tax structure or other finances, I would go ahead and have that ready to go before you start the conversation of a sale. So when in doubt on that, when in doubt on your finances or how to convert them into an accrual versus a cash basis, consult with a professional bookkeeper. It's best if you can find someone that is within the E commerce space who has done bookkeeping for other E commerce sellers. You're going to have the best success there. But having those books in a spotless condition is the number one thing that I can recommend when it comes to that plan of having a successful sale. So the last point here works into both your plan and a bit of your finances as well. And that tip is to balance your profitability and your growth. One of the top things that buyers are going to look for when it comes to your exit is that your company is growing. They want to see that there's an upward trajectory that they can then come over or come take over and continue with that success. Now, growth oftentimes comes with a lot of advertising spend and that is by no means a bad thing. Especially in the holidays. Like we've mentioned, you want to get your product in front of as many people as possible and get those sales up as much as you can. But it's important to note that if you're spending a significant amount on advertising that, say, is not normal, or it's only for the purpose of growth, that is going to have a direct effect on your profitability of the business and then in turn is going to affect your total sales price. Of course, a business that's doing $30,000 a month with a $10,000 net profit is much different than a business that's doing $30,000 a month with a $15,000 net profit. Of course, those figures may not be completely realistic, but just for the sake of the example, it's important to understand that that balance of profitability and growth or at least an understanding of that balance is going to set you up for success when you do look to exit tends to be that if you're looking to exit within the next 12 months, maybe you want to focus a little bit more on that profitability to maximize the amount you can get out of a sale. Whereas if you're over one year or beyond the exit process, maybe you can focus a little bit more on aggressive growth and spending to get that business to where you want it to be in the future. So thank you so much for listening to the Empire Flippers tips on peak season and how to prepare. And if you have any questions, just let me know.