January 4th, 2021 | Updated on August 4th, 2021
Dropshipping businesses are popular with online business buyers because they offer a mostly hands-off entry into e-commerce.
For the most part, they don’t require many skills or knowledge about the logistics of e-commerce when compared to the traditional e-commerce business model. When you have a dropshipping business in an evergreen niche that generates consistent profits, you potentially have a scalable asset, the gold standard in digital assets.
With more and more people shopping online each year, there’s never been a better time to start an online store. Naturally, you want to sell your business for the highest amount you can get as a reward for all the effort you’ve put into building it. Let’s look at some ways to get that maximum sale price, with the added benefits of improving your business by making it more profitable and easy to run.
What Is Dropshipping?
Dropshipping is one of the types of retail fulfillment method for an e-commerce store. In this method, retailers don’t have to keep warehousing inventory. A dropshipper buys products from third-party sources and sells them to the customer. After buying products from a third party, they are shipped directly to the consumers. Thus, owners of online retail stores have nothing to do with handling and maintaining products. This task is done by a third-party supplier. Third-party supplier is also responsible for keeping warehouse inventory. Fulfilling physical orders is the responsibility of third-party suppliers.
Benefits of Dropshipping
- A dropshipping business is easy to set up
- Dropshipping is scalable
- Dropshipping doesn’t require a physical office
- Dropshipping is easy to manage
Disadvantages of Dropshipping
- Dropshipping has low margins
- You have to source products from multiple sources
- You have to rely on your suppliers to do everything right and work seamlessly.
10 Tips For DropShipping Business
1. Get Your Finances Organized
Your business financial figures are the glue that holds your business together.
Without understanding your business finances, you are setting yourself up for failure. You leave yourself vulnerable to silent leaks that deflate your business without you even realizing it.
Start with your revenue and costs to identify your profits; this is the most important element considered when valuing your business, so you want to make sure you have an accurate estimate.
The most effective way to organize your finances is to create a profit and loss statement (P&L). You can do this yourself or have an accountant do it to save you time.
When you understand your business finances, you can identify where you’re wasting money and if you’re bringing in enough revenue to keep your business going.
2. Get Your Operations Organized
Another tip to add to the list of fundamentals is that your operations can make or break your business. You will have repetitive tasks that could be performed by anyone without experience, or better yet, automated through software.
Outsourcing these tasks will leave you more time to focus on scaling your business, thus making it more profitable.
You need to do an audit of the immediate tasks to check the efficiency of their undertaking. Are there sub-tasks that you can automate? Are you spending more time than is needed for certain tasks? The best way to audit your operations while simultaneously making them more efficient is to create standard operating procedures (SOPs).
SOPs are plans you create to document your procedures. It can’t be emphasized enough how powerful these are for your business. SOPs reduce the likelihood of human error and help you understand where you can make operations more efficient.
Write out each of your operations step by step—include screen recordings if it makes the instructions clearer—so anyone (i.e., a buyer of your business) can come in and take over operations.
3. Gather Analytics Data
Online business buyers will want to see the stats for your website. It gives them an indication of the health of the current state of your business and its history.
They’ll be able to see where you’re driving traffic from, the conversion rates of your website, and how your business drives sales.
If you’re on Shopify, you can view your analytics on their built-in analytics platform, but it’s also good to set up Google Analytics or Clicky to get in-depth insights into the state of your site traffic. Not only is this essential for selling your business, but it also gives you insights into the effectiveness of your marketing campaigns.
With analytics data, you can calculate your customer acquisition costs, conversion rates, bounce rates, and more to get a clear picture of the profitability of your marketing efforts.
4. Go Through Your Search Engine Optimization
With the number of dropshippers in the world today, it’s almost impossible to not cross paths. That is why one of the first things you should do when clearing up your search engine optimization (SEO) is to check for duplicate content.
Google struggles to differentiate between original and duplicate content, so your page rankings can be affected if someone has copied your content or you’ve unintentionally created similar content to someone else.
The simplest way to check for duplicate content is through a quick site search on Google, which will look like this: site: [YOURDOMAIN] [CONTENT TITLE].
If you see content from other sites, then you may have duplicate content. If you hire an SEO content writer to write your content for you, then Copyscape allows you to check for duplicate content to see if the writer is cutting corners by copying content.
Another check you should do for your SEO is cleaning up your backlink profile. Low-quality links to your site can affect its rankings. To check the health of your backlinks, you can use services like Ahrefs or Moz.
5. Outsource What You Can
The amount of time you spend working on your business is one of the top factors we consider for business valuation. To reduce the amount of time you spend on your business, you should outsource tasks that you don’t need to be doing.
A virtual assistant can easily handle tasks like responding to customer messages. You can even outsource your advertising by hiring an expert. Take a 360 degree view of all the day-to-day operations you carry out and ask yourself if someone else could handle this task.
6. Inform Staff and Suppliers About the Sale
Your supply chain is the most valuable asset of your business. Without a solid supply chain, your business cannot function. That is why it’s important to establish good relationships with your suppliers.
Let them know you’re selling the business to ensure a smooth transition for the new buyer. You wouldn’t want to find out that your supplier increased their rates for the new buyer.
As for your employees, you want to make sure your contracts are in order in preparation for the sale. While you usually don’t have to tell your employees you’re selling the business, it would make the transition smoother if they know about the sale in advance.
That way, you avoid any employees leaving as soon as the buyer acquires the business, leaving the buyer high and dry.
7. Reduce Supplier Rates
There’s an easy way to increase your profits that most dropshipping business owners don’t dare do, and that’s asking your suppliers for better rates.
You are just as important to their business as they are to yours, so don’t be afraid to negotiate a better deal. Even a few dollars saved on each product can add up to massive savings.
Don’t forget to make sure that these new rates will be kept in place for a new buyer, however, so they can benefit from the lower supply rates.
8. Add to Your Product Line
Adding more products to your store is a quick way to increase your profits, and as a result, your business value. The more products you’re selling, the less reliant you are on one or a few products to make the majority of your revenue.
This helps to make your business stronger because if one of your top-selling products becomes temporarily unavailable when your supplier encounters an issue, you can rely on the sales of your other products to maintain your income.
9. Add New Traffic Sources
If you’re solely reliant on one traffic source, you leave your business vulnerable to external sources out of your control. A Google update can shake up your site traffic if you don’t have a rock-solid SEO structure in place.
Or if all of your traffic comes from Facebook and your account gets banned for an accidental violation, then you will temporarily or permanently lose all of your site traffic, and as a result, all of your business income. That is why it’s important to build multiple traffic sources from organic search, paid ads, referrals, or whatever works for your business.
10. Add New Monetization
Luckily for you, the dropshipping business model nicely syncs with other similar business models like e-commerce and Amazon FBA.
By adding an e-commerce element or selling products through Amazon, you diversify your income streams and make your business more defensible against single points of failure, like a supplier going out of business or a Google update.
With new product lines, you can increase your average order value and the variety of offerings on your site, thus increasing your profits.
Using the tips above, you can prepare your business for sale and increase its value. The added benefit is that you build a better and more profitable business when you prepare it for sale.
When you’re ready to sell your business, we’d be happy to share your business with our buyer pool, which currently has total funds of over $1.3 billion.
Submit your business for sale on the world’s largest curated online business marketplace, and let us hold your hand through business prep, negotiations, migrations to the new buyer, and collecting the funds.