How I Sold My First E-commerce Business

Matus Balogh
Sep 1, 2018 · 6 min read

A year and a half ago I got an idea for an e-commerce project. I wanted to see what it feels like to build something from an idea into a legitimate business. Five months after the idea formed, we launched our brand of handmade scented candles Arum.

Arum turned into a pretty promising venture over the course of the year we’ve been on the market. The brand found its customers around the world, received some very nice blogger coverage and got featured in The Telegraph and Metro. We even found retailer partners in both the UK and the US.

🤔 Should I grow the business or sell it?

Having a pretty clear idea about what it would take to grow the business further, I was faced with a question: do I put in more effort and push growth or do I explore the option of selling?

With a pretty busy personal and professional lives or both me and my co-founder wife in the first half of this year, we decided we would do the brand justice if we hand it over to someone who would be energised by taking charge of the next chapter. Besides, I was pretty curious to find out what the process of selling a company looks like, even on this micro level.

Over the course of June and July, we explored our options, found potential buyers and sold the company to one of them. Which leads to a question:

🧐 How do you actually sell an early stage e-commerce business?

It turns out there are marketplaces where you can buy and sell online businesses, just like any other product.

In the SMB e-commerce segment, they all seem to work in a similar way. After pulling in the last 12 months’ worth of site traffic and revenue data from your e-commerce store, these marketplaces give you a price range of what your business might be worth. Here are 3 that I tried (they all gave similar valuation):

Shopify Exchange. The popular e-commerce platform Shopify has its own marketplace. As I used Shopify to run my store, it was super easy to create my listing, receive an instant valuation and make myself available to potential buyers. I ended up selling the business to one of them.

Flippa. Witty or horrible name, depending on your taste. Works very similarly to Shopify Exchange. The businesses listed here start at a couple hundred dollars and go well into hundreds of thousands. Flippa sells not only e-commerce stores but also blogs, apps and domains.

Empire Flippers. Another funny name. As I learned on a call with their rep, they only work with businesses that have been making a minimum of $1000 in profit for 12 consecutive months. Would have been nice to find this on their site and save myself a phone call. As they deal with higher value companies (they have apparently helped sell businesses worth over $1mil), you get a dedicated account manager. In return they require several months of exclusive rights to find you a buyer.

🤫 So what did the selling process look like?

I did wonder who the buyer would be and especially where they would be based since the Shopify Exchange does not make it easy to filter by the country the business is run from.

It might matter less over the long run as one of the promises of running a profitable e-commerce company is location independence. It however might make establishing trust, negotiation and selling to a new owner the extra bit harder if you don’t get to meet them in person.

Luckily after exchanging a few messages over the platform, I agreed to meet the potential buyer for a coffee as they were also based in London. Meeting a potential new owner of your business felt a little bit like dating – will you get along, can you trust them, are you happy to build a long term relationship?

Over two sessions and an ongoing WhatsApp conversation, we agreed on the sale. It actually went more smoothly than I imagined. I can’t tell if it was beginners luck or if I was reaping the benefits of running the business in a very clear, streamlined and organised fashion over the last 18 months.

For the business of Arum’s size (revenue and site traffic over the last 12 months) the recommended sale price was between $3,000 and $4,000. Included in our sale was the brand, Shopify store, domain, creative assets, social media channels, manufacturing knowledge, fulfillment know-how and any stock at the point of the sale. You as a seller can dictate what is and what is not included in the sale.

I showed everything first hand to the potential buyer as part of our due diligence process and within a week we agreed on the sale. I decided to take $3,000 in cash and a 10% share in the new business formed around the sold Arum assets. The sale was smoothly arranged via the Shopify Exchange platform.

The 10% share turned out to be a smart move. It allows the new owner to consult with me once a week and is also a nice way for me to see the development of my creation first hand.

😉 3 things to consider when setting up my next business

In my last article, I summed up 20 steps to launching your own e-commerce brand. I’m going to build on this knowledge further with a few changes the second time around:

  • Get my products developed externally from the start. This will help me get to a high-quality product quicker, with lower investment and allow me to work with someone who is passionate about their craft.
  • Focus more on wholesale customers (independent boutiques) over direct to consumer. I’d like to learn more about this kind of business and working on Arum also taught me that part of the larger margin you make at a direct to consumer business needs to be spent on customer acquisition via paid media. It might sound obvious but I did not fully appreciate it until I experienced it with my own time and money.

If you run a wholesale business, your margins might be lower but you are primarily selling as opposed to advertising which is arguably a better place to start from. This model allows for lower overheads – you could only make your product once a wholesale customer places an order. Both approaches have pros and cons and I’m keen to try this route with my new venture.

  • Do my own accounting. I’ve learned enough about the fundamentals of running a business that now I can comfortably take care of the day to day by using the accounting software Xero. I will only use accountants to submit my annual accounts to the Companies House. This both saves me monthly retainer fees and further increases my knowledge.

🤩 What now?

Now that Arum has a new home, I’m free to think about a new business (I’ve got the bug now) and already started working on a new idea. I love beautiful interiors, handmade products and launching new ideas. The new brand will continue to build on these passions.

My new venture will be a brand of premium ceramic tableware handmade in Slovakia. Being born and raised in the country, I think it would be fantastic to try to do something with local craftsmen. Combined with a modern aesthetic and neat branding, it could find its audience. I’m going to call it Sunday Table.

The holding page is already up and samples are on their way. Leave your email here if you’d like to stay posted as it comes to life this autumn.

Onwards and upwards!

Happy to answer any follow-up questions. You can reach me on matusbalogh@protonmail.com.

Written by

Digital Advertising Professional | Startup Advisor | Founder

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