How To Sell One Ecommerce Company When You Have Several Sites Online
A common problem encountered by sellers when listing their website business for sale is that they have multiple online businesses they operate under one ‘roof’ so to speak. The sellers often only keep one set of accounting measures for all the businesses in operation and normally one bank account where funds are deposited.
Multiple site owner tip #1: Set up separate entities for each internet presence and have them owned by a larger company. This will cost a little more at set-up, but will more than make up for it on the backside. At minimum, separate bookkeeping measures should structured to make paring them away from the others more feasible at the time of the exit.
The trouble starts when the owner needs to sell off one of their businesses and has to divide the business revenues and expenses that are associated with this one component of their entire internet business ‘empire’! Most sellers end up excluding basic expenses in the P & L statements that should be present or that will be expensed by a new owner. The seller needs to prorate all operating expenses related to all of their internet businesses and cast these across in ratio to the sales volume of each site. It is better to blunder on the low side and be conservative with the expenses attached to the site, since a new owner will have to deal with the full expense of this operating cost for the one business if they buy it.
Multiple site owner tip #2: File taxes separately for each internet business.
Another problem normally associated with these scenarios is the tax return - if requested for due diligence or for SBA financing. With a situation where there are multiple internet businesses operated under one business entity and ultimately one tax return, it becomes difficult to dig out the financial data from this and support it with the individual business P&L statement .
A number of sellers keep clean books that break up the business revenues and expenses, so this is not an issue for them, but for the bulk of sellers with this set up, it can become tricky in determining the exactness of the books during due diligence.
Summary: My council, in examination of these stated problems, is for a seller to set up separate accounting measures for every individual business and separate all expenses based on the % of gross revenues each site adds relative to the total.
This will offer a more precise and sound valuation of the individual site relative to the whole and avoid difficulties and distrust that can arise in the due diligence process. It also leads to a speedier, cleaner close and a point of vigor in the selling price when negotiating offers.
Another strategy that can be executed of course, is to sell the entire ’fleet’ of internet businesses as a bundle, so all earnings and expenses are built in and match up with the tax returns easily. Keep in mind that all of these transactions are treated as an asset purchase and that none of the business structure is passed on in the closure of this acquisition.
David Fairley
President, Websiteproperties.com
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