Different business owners have different types of businesses up and running. For instance, an e-commerce business can drastically vary from a brick and mortar business for a variety of reasons. In different ways, it may be comparatively easier to sell an online store. However, there may also be a slew of challenges associated with it. The ultimate decision made by business owners to sell the business can arise from different areas.
One of the possible reasons could be that the e-commerce business of your could have grown exponentially thereby making it difficult to manage. Another reason could be that your sales target and return of investments are met. As a result, you may want to move on to new ideas and sell the current business.
If you currently own an e-commerce business, the pathway you may have to follow to successfully sell your business can be different compared to selling a business associated with a physical store. Let us have a look at some of the important terms to know that can help you while putting up your e-commerce business for sale.
Important Terms to Know to Sell Your E-Commerce Business
Usually, e-commerce business owners tend to get perplexed with the plethora of terms that are involved in the entire process of selling the business. While it may not be practical to gain a deep understanding of all these terms, here are a few terms that are important to understand.
- Income Statements
It is important for all e-commerce business owners to keep an accurate track of their financials and revenue. Once you have a clear view and understanding of your business costs and finances, you can make reasonable financial decisions that can be profitable from a larger perspective. Income statements are one of the most important financial statements to be considered. It provides a report of the business income over a certain specified period of time.
It is also known as the profit and loss statement or the statement of revenue and expense. This is due to the fact that the income statement covers the gains, revenue, losses, and costs of the company. The net total income is calculated by adding both the revenue and the gains and subtracting the expenses and the losses from this sum.
- Balance Sheets
A balance sheet is a very comprehensive report that provides details and insights into the assets and liabilities of the company. It also provides information with respect to the equities that are allocated to and held by the stakeholders of the company at a particular period of time. A balance sheet contains all the information with regards to the possessions and debts of a company along with the investments that are made by the investors and shareholders. Usually, the balance sheet consists of 2 columns. The assets that are related to the company are usually marked on the left side of the sheet. On the other hand, the liabilities and the shareholder’s equity are recorded on the other side. The assets typically refer to the sum of liabilities and the equity held by the shareholders.
- Bounce Rate
While estimating the customer traction and the revenue that customers contribute to the company, it can be helpful to understand the bounce rate. The bounce rate is essentially the percentage of visitors who leave your website from the landing page without exploring any other ages on your website. This can provide a deep understanding of how many customers are interested in your product. Gaining an understanding of this metric can also help you in the process of defining a valuation for your business.
- Cash Flow Statements
A cash flow statement basically summarized how much cash and how much of its equivalents are being paid to and by your business. In simple terms, it measures the amount of cash that your company can generate in order to cover your debts. It also provides insights into your ability to finance the operating activities for your business. One of the major benefits of understanding the cash flow statements of your business is that it can help you stay informed about how the financial activities of the company are managed. Gaining a clear understanding of your financial activities is important as they have to be debriefed to the prospective seller.
Moreover, it also helps understand where the money comes from and how this money is being spent across different departments and activities in the company. Such a detailed understanding of the cash flow associated with the business is important especially when you have your e-commerce business for sale.
Putting up your e-commerce website for sale can be a huge step ahead in your journey in the space of business. Make sure that you have all the required documents ready and can sell your business at the right valuation. Understanding all of these terms can help you evaluate your business accurately while also communicating better with potential buyers.