How One Entrepreneur Cashed Out and Made $81K by selling their shopify store.

 

The first thing you need to know about selling your Shopify business is that it is an “exitable” asset that you can sell for big profits, and there are plenty of buyers looking for this kind of business.

When you’re in the business of helping people buy and sell online businesses, it’s important to build an “easy to hand off” business. It’s crucial that a new owner can easily take up the reins and continue to grow the business with little to no effort on their part.

By doing just this, we were able to sell a Shopify ecommerce business that came on our marketplacefor $81,017 in just 51 days.\

The platform you build a business on matters, and Shopify has become one of the most user-friendly platforms out there for ecommerce. Because of this user-friendliness, the transfer of the business was ultimately a lot easier.

Before we dive into this case study, there are a couple things I want to address.

Prior to selling your Shopify business, you first need to show a good profit track record occurring over a few months’ time. While three months is the minimum average used by Empire Flippers, the longer you can show profits, the higher price estimate you will receive when it comes to assessing your website’s value.

You might be asking why someone would want to sell a profitable online business, since for many, a profitable online business is the dream come true. For sellers, the reasons vary widely.

Some people want to move on to other online projects, and some people want to put a down payment on their house or wipe out their mortgage completely. Others want to use the cash to boost offline business ventures. For instance, one of our sellers sold his website so he could start a physical store that sold donuts.

Motivations for selling an online business are no different than selling an offline business. But the nice thing about selling an online business is that the process is usually much easier, and in the $81,017 Shopify site case, a pretty lucrative deal for the owner.

Let’s dive into this case study and show you exactly how we sold this website for tens of thousands of dollars.

The Easy Handoff

This business had quite a bit going for it. It had a long track record, a huge social media following on Instagram, and a system in place that made it even easier for a new owner to buy and start running profitably right away. The business sells women’s clothing, which could be a problem for someone who has no real knowledge of fashion who wanted to take over and expand this business.

In this case, the business’ big asset was a product selection system. The owner organized her business around her bestsellers list, which showed the top-selling products, trending products, and the products that were being bought most by other merchants. This is great data to have at your disposal and made it possible for the business owner to not need to design her own products. If a product didn’t come with a stock photo, the owner would outsource for a photoshoot to happen and send a unit of that product to the model and photographer.

The fact that no design interests or skills were used in the maintenance of the site was important. The person that ended up buying this business had no interest in or real knowledge about fashion. Because of this, they feared they might not be able to design something worthwhile to keep the business going. However, because of this “plug and play” system, the entire process was very easy to hand over to the new buyer.

Vetting and Pricing

You might be curious as to how this business was valued at $81,017.

After seeing hundreds of online businesses, we have come up with a formula that helps us in deciding the price for each business we sell: it’s primarily based off monthly net profits. We have even created a Valuation Tool that automates this process.

Screenshot of Empire Flippers website vetting tool

Like all the businesses in our marketplace, this successful site went through our personal vetting process. When the seller listed the website with us, we had our team go through all the traffic analytics reports, financial statements, and the actual earnings. In this case, we were able to log in to the seller’s PayPal account to confirm profits earned over a six-month period.

While our Valuation Tool is good, our vetting process is even better, and it’s a big reason why buyers come to our market in the first place looking for high-quality online businesses to buy.

To date, 90 percent of all online businesses that we have sold through our marketplace sell within 10 percent of the listing price we give them. This means that our formula actually reflects the market demand for the business and will give both the seller a lucrative price and the buyer a good deal on the website.

The business was initially valued at $63,604.38. This number was arrived at by averaging six months of its net profit and multiplying by 21—in this case that net profit was $3,028 per month.

We’ve noted that the website was actually sold for much more.

This is because every month we ask for the new profit and loss statements from the business owner and the verifications of profits received. Since the business took 51 days to sell, the number of sales accrued after the business was listed was calculated into the listing price. Since revenues went up even more during that month, we increased the listing price for the business. We then successfully sold it for almost $20,000 more than what it was originally listed for with us.

Let’s dive into some details of what we actually required from this seller in order to list on our marketplace.

The first thing we do is make sure the domain and the hosting are in fact in their name. To find that out, we looked at the owner’s GoDaddy account. See below: the important information is redacted in white.

GoDaddy account screenshot

After that, we asked for the profit and loss statement. We will provide this to potential buyers as verification, so if you are planning on selling your business, this is always a must-have piece of information.

Profit and loss statement screenshot

As you can see, this statement gives us a good overview of what the business is currently doing. Obviously, P&L statements like this can be easily forged. That is why we actually go into the accounts of the seller to verify the accuracy of the P&L.

In this case, we were given access to the seller’s PayPal accounts to verify transactions coming in and out of the account, along with other payment portals she accepted, such as Dwolla, shown below:

Dwolla account screenshot

Obviously, we needed more than just earnings to complete our vetting process. We also needed to verify the traffic that this site was getting on a monthly basis. So we asked for access to her Shopify and her Google Analytics accounts.

Shopify admin screenshot

We noticed that there was a dip in traffic in July, which raised a red flag for us. When we queried the seller on it, she explained that it was the result of an experiment they had done where they were sending traffic to their social media store versus their Shopify store. The experiment proved that it was more valuable to send traffic directly to the Shopify store. This brought the traffic back to where it had been prior to July.

Google Analytics traffic screenshot

Along with these proof of earnings and traffic data, we also asked what kind of work is done to the website on a weekly basis by the owner.

The weekly work broke down like this:

  • Emailing correspondents, responding to limited customer inquiries
  • Buying products and purchasing goods for resale
  • Adding new products to website
  • Processing dropship orders
  • Scheduling deals
  • Managing social media by laying out flash sale daily/weekly schedule and posting new products to social media channels
  • Marketing by creating/managing ads and giveaways
  • Sending sponsor packages to bloggers via blogger outreach

After all of this, the business was then listed on our marketplace, and an email was sent out to our 30,000+ list of potential business buyers. From here, we started weeding out buyers. One way this is done is by making buyers put down a deposit, which is a percentage of the actual business price.

This does a few things for us and the seller:

  • Gets rid of the majority of time wasters
  • Locates more serious, prospective buyers who put down deposits
  • Connects us with the buyers to see if they have any questions to begin the sales process

Once we have filtered out the buyers, we then introduce them to the seller to get Google Analytics permissions. In this particular case, this owner required what is known as a Buyer-Seller Call.

These calls are exactly what they sound like. The buyer and the seller create an appointment with each other, where they get acquainted and are able to ask questions and get fast answers. During these calls, we always have one of our deal consultants on the line to help the seller with any kind of negotiations or questions about buying the business that they might be unsure about.

The majority of our negotiations happen between our consultation calls and our Zendesk ticketing system. This business was no different in that regard. Let’s dive into it.

Negotiations and Closing the Deal

When this business went up for sale and was adjusted to reflect the new price, depositors started coming out out of the woodwork wanting to get dibs.

As more buyers deposited on the business, a likely winner rose to the fore.

This would-be buyer made an offer to purchase for the full listed price (the updated price at $81,017), but they had some reservations that needed answering first. They wanted to know about the system the seller used to build out the business, which she informed them of via Zendesk.

Then their offer stipulations were made clear:

  • $50,000 cash up front
  • $31,017 earn out at a 70% monthly net earnings paid to the seller until the full list price was reached

While many people would jump right for this offer, our consultant advised the seller to hold off.

Screenshot of offer

This Skype strategy call is one of the big benefits of using a broker. Since we represent both sellers and buyers, we try and mitigate the risks to both sides while also helping each get a genuinely good deal. We are all about creating a win-win situation for everyone involved.

The strategy call led to our deal consultant to counter the prospective buyer by asking for more cash up front and making the 70% earn out fully paid off within six months instead of a longer waiting period for the seller.

The buyer agreed and paid $65,000 upfront in cash, 80 percent of the listing price of the business, and paid out the remaining 20 percent of the listing price with the earn out.

As I said earlier, however, we want to mitigate the risk of our seller not getting paid properly. We were able to negotiate a deal where the buyer sent the full listing price to Empire Flippers, and Empire Flippers began the earn out process for the seller. This way all of the cash is in a safe place, and there are no worries on the seller side that they might not get their earn out since Empire Flippers held all of the cash.

At the closing of this deal, the two parties agreed via a virtual “handshake” using our Zendesk ticketing system. Not all deals close like this, as many use what are called Purchase Agreements.

Screenshot of congratulations email

Post-Sale Transfer and Turnover Process

From here, the active listing is taken off the marketplace and the migration process begins. This was where our agents took over, created a new migration-specific ticket, and began the process of handing the business over to the new buyer.

Our migration team’s job is to accomplish the following:

  • Push the domain to the new buyer’s registrar and hosting
  • Make sure the site is working properly on the new buyer’s hosting
  • Change over any and all affiliate links
  • Help the seller introduce the buyer to any suppliers or logistical issues

One of the big benefits of Empire Flippers is that we handle almost the entirety of the migration process for our sellers—an often tedious process that most sellers do not look forward to doing.

In addition, we transferred the Shopify account by having the seller update the merchant account and store information specifically with the new buyer’s information. We handed over all the social media accounts, including the huge Instagram account. The seller also put together an email login sheet as well as a list of all suppliers and vendors and proceeded to introduce the new owner to the suppliers as well as to the ordering process.

Once this was set up, that was when the domain was pushed from the seller’s GoDaddy account to the new buyer’s GoDaddy account.

This is a multi-step process in and of itself:

1. Create login credentials for the new buyer

2. Clone the website using BackUpCreator

3. Set up the domain on the buyer’s CPANEL

4. Switch DNS nameservers and initiate the domain transfer

5. Verify a successful migration through earnings and traffic that is confirmed by the buyer

Once all five steps are completed, with all the details listed above, then the seller gets their payment for selling the business. Note: this money is already being held by Empire Flippers, so there is no possibility that a buyer might back out at the last moment and not pay the seller, as we already have the cash in hand.

This is a very important protection for the seller and helps mitigate a lot of the anxieties that can come along with selling your business.

At the end of this process, the seller jumped for joy as she claimed her $81,017 dollars, almost all of it up front. That is a huge cash flow to suddenly have to inject into another business venture, which is exactly what she is planning to do with this money.

Some people sell their websites with us so they can buy a new home, pay off a mortgage completely, or like this seller, use the money to jumpstart the speed of her new business’ launch. That is the beauty of selling your business. You are able to get years’ worth of profit from your business upfront. There is a saying that money now is better than money later, and in this case, the seller would likely agree with that statement.

What could you do with an extra $81,000 lying around? What would you want to do?

Just in case you are keen on getting to the point where you can sell your Shopify business, let’s talk about maximizing your potential return.

How to Sell Your Shopify Store for Maximum Profit

If you’re thinking about selling your own Shopify store, follow the steps below to maximize how much your charge.

1. Track Expenses

First, track all expenses. Keep your store expenses separate from personal expenses, other stores, or other accounts where you are having payments coming in and going out. In addition, maintain a P&L statement.

Obviously, a P&L is a requirement if you are planning on selling your business. It is easier to keep up with a P&L from the very start of your business instead of having to figure everything out at the moment of listing your website for sale.

In addition to a P&L, have other income verifications all lined up, such as a PayPal account or Dwolla account into which you receive payments. When it comes to traffic, you will want similar verification and proof through a Google Analytics account. Now, some people don’t like Google Analytics, and if you are one of them, you can always use Clicky as a good alternative.

2. Explain Changes in Traffic

If there are any traffic spikes or drops, have good explanations as to what is happening there. Keep tabs on what you are doing to the website. It would have been much more questionable if our seller hadn’t informed us that the drop in traffic was due to an experiment she was running with her advertising, for instance.

A buyer will want to know the answers to these questions—especially a spike in traffic, in the hopes that the buyer can repeat that spike over and over again.

While three solid months of earnings is a requirement, the longer you can show your business being profitable, the better. A year’s worth of earnings or more is especially attractive. Since so many websites rely on Google organic traffic, this is a good sign that your website has survived a few updates.

For a Shopify website utilizing paid traffic, this is a good sign that the market is big enough not to have been saturated in the year’s time since starting to run the ads. Typically, the longer income-earning proof you have, the higher multiple of your monthly net income you are going to get for your listing price. For instance, instead of a 23x of monthly net income, you might end up with a 26x, which can be a huge difference in the amount of cash that ends up in your pocket.

3. Document Your Process

Remember, buyers want businesses that are as plug and play as possible. That way it does not take long for them to get up to speed, and it also means they can immediately start tweaking different things on the business to increase revenue. Keep a detailed list of your weekly schedule. Write down everything you do on a normal basis for this website.

Is there anything you can systemize? Are there any tasks you can remove yourself from? Which portions of the business can be automated?

4. List Your Website

Once everything is systemized and your house is in order, it is time to list the website.

You can sell privately, and there is nothing wrong with that. Nevertheless, please be aware that by doing it yourself there are a lot more risks and moving parts. Another thing to note here is that most sellers don’t have a big buyer reach.

This will often lead to buyers giving you lower offers than what your website is actually worth, and you might get frustrated or impatient enough to end up taking one of these lowball offers. Ultimately, you benefit from using a broker because they help protect the seller’s interests, mitigate any risks, have a list of potential buyers much larger than most individual website owners.

However, before you can sell your business, you need to know the price of your business. What is it actually worth in the marketplace?

Find out what your business is worth today by checking out our free valuation tool and answering some simple questions.

Source: www.shopify.com

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