How To Sell One Website Company When You Have Several Sites Online
A common problem encountered by sellers when selling their ecommerce business for sale is that they have multiple online businesses they run under one ‘blanket’ so to speak. The sellers often only keep one set of accounting measures for all the businesses in operation and usually one bank account where funds are deposited.
Multiple site owner tip #1: Create separate entities for each online presence and have them owned by a larger company. This will cost a little more in the beginning, but will more than pay dividends on the exit. At the very least, separate bookkeeping measures should structured to make paring them away from the others easier at the time of the sale.
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 connected with this one section of their entire online business ‘empire’! Most sellers end up not including basic expenses in the P & L statements that are required to be present or that will be incurred by a new owner. The seller needs to segment all operating expenses related to all of their online businesses and cast these across in ratio to the sales volume of each site. It is better to err on the low side and be conservative with the expenses assessed to the site, since a new owner will have to deal with the full expense of this overhead for the one business if they acquire it.
Multiple site owner tip #2: File separate tax returns for each online business.
Another problem usually connected with these scenarios is the tax return – if requested for due diligence or for SBA financing. With a situation where there are multiple online businesses operated under one business entity and ultimately one tax return, it becomes tricky to extract the financial data from this and corroborate it with the individual business profit and loss statement .
A number of sellers execute good accounting measures that break up the business revenues and expenses, so this is not a concern for them, but for the greater share of sellers with this set up, it can become tricky in determining the exactness of the books during due diligence.
Summary: My council, in review of these stated problems, is for a seller to set up separate accounting measures for every individual business and split all expenses based on the % of gross revenues each site brings in relative to the total.
This will supply a more correct and reasonable valuation of the individual site relative to the whole and avoid complications and distrust that will arise in the due diligence process. It also leads to a faster, cleaner close and a position of power in the selling price when negotiating offers.
Another tactic that can be used of course, is to sell the entire ’fleet’ of online businesses as a bundle, so all revenues and expenses are incorporated and are equal to the tax returns easily. Keep in mind that all of these sales 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
