Valuation is a big part of preparing to sell your business.
It’s a challenging achievement for most people, but an especially challenging one for the owners.
In the midst of trying to leverage earnings, financials and whatnot, it’s not that uncommon that many business owners value their businesses wrongly.
Sometimes at a seemingly higher valuation than it should be, others at a very low value.
You shouldn’t beat yourself up over it. It’s normal to make mistakes.
As business owners ourselves, we’ve made several of those mistakes.
Now that we’ve founded, grew, sold and bought multiple companies, we are at a more comfortable position to help with your valuation.
Throughout this post, we’ll briefly explain some do’s and don’t of business valuation so you can begin to understand how the whole process goes.
The don’ts of business valuation
We’ll hit it off with the negatives already to help clear your mind of all the other blogs and videos you may have heard from on how to value an eCommerce business.
Although it’s a “numbers thing”, there are different techniques being used in the business industry to value a business.
Some may suit your business best, some may not.
With the exponential growth of online businesses, there are also many tools in place that automatically allow you to have a glimpse of your eCommerce business valuation.
The first and most important don’t is this one: Don’t simply accept it without questioning the method.
We’re positive you’ve watched America’s hit TV show Shark Tank.
There are many episodes where business owners contact companies to get a business valuation and, as it turns out, the valuation is all wrong.
And it’s way higher than it should be.
Many business owners, especially younger ones, simply take the first numbers that are thrown at them and that’s it.
A wrongful business valuation will harm your business in ways you don’t even fathom!
Are we saying the valuation companies did a bad job?
Of course not. We’re just saying you may have not yet done your part of the job.
Always question the method they used to reach that valuation.
- What numbers did they run?
- What’s the forecast and why did they use that approach?
- Is there anything that maybe is not being considered?
- Is debt included?
These are very common mistakes for younger entrepreneurs and that’s okay. We’ve all had our first experiences of some sort and made our mistakes too.
If your eCommerce valuation seems a bit too high for what you were expecting, ask questions. Maybe get a second opinion too.
The other Don’t we want to bring you is you should never trust entirely on automatic valuation tools.
AEPIC Partners has its own valuation tool that can give you an idea of a business valuation.
But you should never take it for granted! Always consult with us after using our valuation tool.
That’s actually one of the reasons we ask for your contact information: because we know there are flaws to every business and many numbers.
10 questions will not get you the final business valuation you need to sell your business.
The do’s of business valuation
Each business model has a more suitable valuation method.
When thinking about how to value your eCommerce business, you should just search for “valuation tool” on Google.
Many companies will show up in the results that may not be experts in eCommerce.
You want someone to understand how eCommerce works so they can also understand how eCommerce valuations work too.
We strongly recommend you take these steps to get a proper eCommerce valuation for your business.
STEP 1 – Use AEPIC Partner’s Valuation tool
You can follow this link and get the valuation tool on your screen in seconds.
Follow the steps and answer all the questions. That will help you figure out some of the key numbers you should have in hand when doing a business valuation.
After answering all the questions, your expected valuation will come up on the screen.
As we’ve said before, that is not a final number. It’s an expected valuation considering your questions.
Before you shout your valuation to potential buyers, consider this.
STEP 2 – Schedule a free, non-binding call
You may ask Google about tummy ache symptoms and what they can mean, but only a doctor will actually tell you what is wrong.
The same goes for the value of your eCommerce business.
A valuation tool like the one of AEPIC Partner’s will give you some insight, but you need an advisor to help you understand if the numbers are right or not.
A more thorough analysis needs to come in (like with a doctor’s) to reach that exact amount of your business valuation.
After getting your expected valuation from the valuation tool, schedule a call with one of our team advisors.
The first call is completely free of charge and we’ll help you understand your valuation a bit more.
STEP 3 – Take action to either sell or grow
Exactly: sell or grow.
Your valuation may not yet be the one you’re reaching out for…
Which means there may be some work to do before selling to make sure you sell for the fair value.
Thankfully, AEPIC Partner’s advisors are experts in many areas and they can advise on whether this is a good time to sell or rather if it’s preferable to do some Growth work before considering selling.
Our main goal when working with you is to ease the process of growing and selling. So rest assured that we will be there for you no matter what you choose.
How to value your eCommerce business
In conclusion, there is a right answer to the question of how to value your eCommerce business.
The most important are the numbers.
In terms of numbers, ROI (return on investment) and relative risk are the first thing that buyers will look for.
But knowing these two key indicators is not enough for a proper business valuation.
If you follow steps 1, 2 and 3 that we listed above, you’re guaranteed a proper, fair business valuation.