Everyone knows that an email list can make your business more profitable, but did you know that it can also make your business more desirable should you decide to sell it?
Learning how to harness the power of an email list to increase your business’s value should be something every business owner considers.
Having been involved in over one thousand deals for online businesses, we know a bit about what buyers are looking for. Today, we’ll talk about how you should be utilizing your email list to increase your valuation for an even more profitable exit.
How to Value an Online Business
The number of buyers for online businesses has been increasing over the past few years. An online business could be an affiliate or display advertising website, an e-commerce store, or a SaaS company. Multiple business models have proven their ability to earn money online.
More and more high-net-worth individuals and institutional investors are looking to acquire profitable online assets. To speak the same language as these buyers, you first need to understand how valuations work.
The formula for valuing an online business is as follows:
The first part of this calculation is known as the pricing window. The pricing window uses the past 12 months’ average net profit to give an overview of the profitability of your business.
This long pricing window allows any anomalous results to even out and provides the best look at your business. There are times when a shorter window can be used, but 12 months is seen as the gold standard by buyers and will allow you to get a better valuation multiple.
Speaking of the multiple, this is the second part of the formula, which often causes more confusion. To decide on a multiple, everything from your business will be analyzed to see how well established and desirable it is.
This could include:
- Email list subscribers
- Business age
- Social following
- The level of owner involvement
There are too many other factors to list here, which is why we recommend getting a regular valuation to understand where your business is at. We have a free valuation tool that can value your online business in just a few minutes.
Why Email Marketing is Valuable to Buyers
Email marketing is rated highly by buyers as it can become a traffic source all of its own.
This means it’s unaffected by algorithm updates and it doesn’t rely on SEO to function well. You are in full control of a warm audience that you can address whenever you choose.
With Google search often being one of the main critical points of failure for an online business, buyers love to see this risk diversified with an email list.
The valuation increase your business receives from an email list doesn’t just rely on subscriber count. How you utilize the list will also be of interest to buyers.
How to Utilize an Email List to Improve Valuation
To make email marketing possible, you first need to be using software like Mailify to automate the process of sending mass emails.
Obviously, the higher your number of subscribers, the higher your valuation multiple tends to be. However, to get a premium valuation, an email list has to be monetized.
This means you are driving revenue from your list, which can be done in a number of ways. The most common way that business owners do this is to set up an email newsletter. I’m sure you’ve seen a newsletter in your email inbox at some point.
An email newsletter can be a great way to earn money from your email list as well as help build up your brand. The idea of creating a newsletter can seem daunting at first, but once the initial setup is done, it can be a weekly task that takes no longer than an hour or so. It could even be outsourced to a VA or freelancer from Upwork.
To get an idea of what’s out there, I’d recommend signing up for the email list of some of your competitors. See what they’re doing, get a few ideas, and aim to create something that’s better.
Before you begin writing, you should set up a way to implement and measure your efforts. If you’ve already got an email list but aren’t seeing the results you desired, then you can also use this method to refine your marketing strategy.
First, answer these four questions:
- What is the aim of your newsletter?
- What metrics will you use to measure your success?
- How will the newsletter achieve your business goal(s)?
- What’s the USP that the other marketing channels don’t currently achieve?
For example, suppose you want to start driving 10% of your total revenue from email marketing. To measure this, you have to track the open rates, click-through rates, and conversion rates.
You don’t need to get too granular on the metrics just yet. Instead, work on getting everything up and running so that you can start gathering data.
How your newsletter will achieve your goal will depend on your business model. If you own an affiliate site, then it can promote affiliate links to generate revenue. For an e-commerce store, it can link back to your sales page. Whatever the business model, there will be a way of monetizing the list.
The USP will also be dependent on a number of factors. It could be that you promote the idea of exclusivity: your subscribers will get information and deals that won’t be posted on your website.
Following these principles will give you a base to prove the worth of your email list. Buyers will love to see that you have an automated newsletter that is opened by your users and has trackable revenue attributed to it.
This is what a monetized email list looks like.
3 Quick Tips For Success
Follow these quick tips to make sure you’re giving your emails the best chance at succeeding.
- It’s Not All About Profit
While we’ve talked a lot about monetization, this doesn’t mean you need to over-sell. Focus on creating quality and engaging content first.
Feel free to inject a bit of personality into your copy. Write from the first person as if you are addressing one individual, not thousands.
- Create Visually Engaging Emails
Make your emails beautiful to read. Consider some kind of consistent formatting that involves a color scheme to compliment your branding. This builds your brand and makes people want to read more.
- Test, Test, Test
There are so many tweaks that you can make in order to optimize your emails. Subject lines, length of copy, number of links, . . . These can all have an impact on your success.
Unfortunately, everything is unlikely to fall into place after one email blast, so be prepared to keep optimizing your efforts to help achieve your email marketing goals.
When to Build an Email List
Once your business is driving consistent traffic, you can start to consider setting up an email list.
Setting up a contact form on your website is relatively easy, thanks to most email marketing software taking care of the technical aspects. Usually, you just have to design how you would like the opt-in form to look, and then you copy a string of text onto your website.
However, it takes time to build up your subscriber count, so expect an email list to be a longer marketing play. If you’re planning on selling your business soon, then it might be better to hold off on setting one up.
While a successful email list is a great feature of an online business, it’s not the be-all and end-all. Buyers like to see an email list, but there are many other factors to consider when selling a website.
Focus on building a profitable business first and you’ll always have an asset that you can sell at a later date.
If you’re still growing your online business, creating a profit-making email list using the tips we’ve talked about will allow you to get more money for your business when it’s time to sell.
Author name: Max Lapit
Max is part of the Marketing Team at Empire Flippers. Before joining the company, he was involved in creating content sites and copywriting. Outside of work he can be usually found watching sport or travelling the world to watch it. He’s hoping to take in more new places after memorable trips to Budapest and Croatia.