Buying and Selling Online Businesses
The process for buying and selling online businesses is very similar to buying and selling a bricks-and-mortar business. However, online businesses add in a few extra complications that buyers and sellers should consider. Valuation, in particular, may be difficult to determine for online businesses.
- Consider the business’s online presence. One of the first things that you want to do if you are considering buying an online business is to consider its reputation online. Are you going to keep the name and services? Will that negatively affect the business in the future? Check review sites or talk to customers directly. Consider whether this market will still be there in the long term (is the business catering to a fad?).
- How much is this business actually worth? Check the financial records, including assets and liabilities. Check legal information and tax issues. This will help you determine whether the business is worth the asking price. Accountants and business advisors who specialize in online businesses can help as well. There are accepted methods for valuing websites based on earnings or traffic that are different to the valuation methods traditionally used for offline businesses. Contact us to help you with valuation issues.
- Gather your financial and legal information. Find financial statements for the past three years (if possible) and details about all assets—physical and other assets like goodwill or intellectual property. Gather leases, insurance policies and all registration details associated with the business, online or offline.
- Value your business. Once you have all of the information you need, then you can begin to determine what your business would be worth to a potential buyer. What you think it is worth and what the market will pay are not always the same thing. There are different valuation methods that can be used depending on whether you are selling physical assets or just an online business. . Valuation can be complicated, so give us a call to help with this process.
- Find potential buyers. The traditional methods for attracting buyers still apply, although if your business is purely online, you now have a potential global market. Consider where you might get the best result including advertising online, through your existing networks, trade publications, word of mouth or through specific customers. There are some dedicated platforms that have been established specifically for the sale of purely online businesses. We can help to point you in the right direction.
For both buyers and sellers:
- Negotiate the sale. Negotiations for online businesses need to involve the basics like sale price, deposit amount and settlement period. However, sellers also need to consider handing over things like domain names, passwords, logs, customer contact information and databases. Selling an online business is much more about selling information than its brick-and-mortar counterpart. The buyer may also require some training to continue to the run the business.
- Prepare and agree a contract. We can help prepare the contract so that all of the relevant information of the sale is addressed. For example, the right to use names and customer information will probably need to be specifically included in the contract.
- Prepare the transfer documentation. Transferring a business can also mean transferring registrations, permits, licenses, etc. As a seller you may wish to cancel your ABN, notify the ATO of ownership changes and deal with any tax-related issues.
How can Onyx Legal help you?
Whether you are buying or selling, talk to us first so we can walk you through this complicated process.