How to close your ecommerce business
There are many reasons why you might want to close your ecommerce business. Maybe it's not making enough or any money, or you're retiring, or there's something else you'd rather be doing. Others just have had enough and don't want to do it anymore.
So you decide to close up shop and move on. Pretty simple. Or is it?
The thing is, you can't just close a business. You have responsibilities as the owner or director in running that business, and equally when closing it. In fact, it can cost quite a lot of money to close some businesses, as I'll explain below.
You see, before you can close your company, you need to make sure all outstanding bills are paid. That's invoices you've already received as well as payments you're due to make, like VAT, PAYE and corporation tax (these are due on sales so far even if it's not your year end). And if you have employees you'll need to make them redundant and pay them redundancy payments. That's not even including suppliers and rent (which you might have to pay an exit fee for or pay the remaining rent due on the contract).
As you can see, this could get quite expensive!
And on top of that your company needs to be dormant i.e. not trading for at least 3 months prior to applying to close it.
So what are your options?
Well firstly, you can pay all the items listed above, and then advise companies house and HMRC that you're no longer trading. If you don't have any employees and very little in terms of outstanding creditors or tax, then that is perfectly feasible. It is probably the quickest way of exiting your business if speed is of essence, but you don't get anything for it apart from whatever cash is left over after all the payments. In most cases, if speed is not essential, then selling your business is going to put more money in your pocket.
Your other option is to sell the business as is. You can sell the whole business including creditors and stock, or you can sell just the assets and close the business once everyone is paid off. An asset sale will usually be quicker as there's little due diligence required, but you'll get considerably more for a share sale (the whole business).
There is one additional option, and that's to build the business up and make it ready for sale at the best possible price. This obviously will take a while, so if a quick exit is what you want then this probably isn't the option for you. But if you're willing to work on it for a while longer, usually with someone who can guide you through the process, then the reward at the end is well worth the effort. This is also a good option if you need a certain amount for your business but it's not going to reach that in its current state.
So even though you may want to exit your business quickly, it might not be that straightforward. It may be possible to shortcut some of it, but it is far better to take your time and do it properly, so early planning is always advisable.
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If you're looking at closing or exiting your ecommerce or any other business, we can help. Drop us a message here so we can have a (free) quick chat about your circumstances and advise you on the best way to go.