What Buyers Look for in an Online Marketplace

What a buyer reads first

The first document a buyer asks for is a monthly report of total sales volume that moved through the site, along with the fee the owner kept from it. The fee as a share of sales volume is called the take rate, and a buyer watches it closely because it tells them how much the owner can charge before sellers start looking elsewhere. A take rate that has crept up over time can look like a strength on a spreadsheet and a threat in a conversation with the biggest sellers.

Next comes what is left after payment processing, refunds, chargebacks, and the cost of support. Marketplaces are often reported on the books at full sales volume when only the fee is revenue, and a buyer's accountant will rework the numbers to the fee alone. If your books already show it that way, the first week of review goes faster. We cover how buyers turn profit into a number they can price in our post on seller's discretionary earnings.

Supply, demand, and who comes back

A marketplace is two businesses stuck together, and a buyer wants proof that both are healthy. On the seller side they ask how many sellers are active in a given month, how many joined and how many left, and how much of the volume comes from the top handful. A site where a few sellers produce most of the sales is exposed in a way that a long tail of small sellers is not. Those few can negotiate a lower fee, build their own store, or take the whole catalog to a competitor.

On the buyer side the question is repeat behavior. A buyer who purchases once and never returns was probably found by an ad, and the owner paid for them. A buyer who comes back every few weeks is what the buyer of the business is purchasing. Cohort reports, which group customers by the month they first bought and show how many return later, are the cleanest way to show this. If you have never built one, ask your developer or analyst to start now, because a buyer will want at least a couple of years of them.

Buyers also look at how many listings sell. A site with thousands of listings and a small fraction that ever sell has a catalog problem that slows everything else down, and it affects the search results a shopper sees on the first page.

Where the traffic comes from

Traffic is the second thing that gets graded. A buyer wants the split between search engines, paid ads, email, social media, direct visits, and any app. A marketplace that gets most of its visitors from one search engine ranking is exposed to the next change in that engine's rules. A marketplace that gets most of its visitors from paid ads has a cost that grows every time the ad platform raises prices.

Email lists and returning direct visitors are worth the most because the owner controls them. If sellers also promote their own listings to their own followers, a buyer will count that as a quiet advantage and ask for proof of it. Customer acquisition cost, meaning the total spent on marketing divided by the number of new buyers it produced, should be computed by month and by channel, and it should be honest about which buyers were bought and which arrived on their own.

Leakage and trust

Marketplaces lose revenue when a buyer and seller meet on the site and then finish the deal somewhere else to skip the fee. Buyers call this leakage, and every diligence team looks for it. Evidence that the site discourages it, through payment protection, reviews that only count for completed orders, escrowed funds, or tools sellers cannot easily find elsewhere, supports the take rate.

Trust and safety records matter in the same way. A buyer will ask how fraud is handled, how many disputes come in, who reviews them, how fast refunds are processed, and whether sellers are verified before they can list. The founder who handles every dispute personally will need to document how it is done, because that is exactly what the next owner inherits.

What has to change hands

A marketplace is software, accounts, and agreements, and each one has a named owner somewhere. The domain, hosting account, code repository, app store developer accounts, and email sending service should all sit under a company login and not under a freelancer's personal email. A sale can sit for days while someone tracks down a former contractor for a password. A buyer's technical advisor will ask who wrote the code, whether a written agreement gives the company ownership of it, and what outside tools and libraries it depends on.

The payment account deserves its own attention. Payment processors approve a specific business, and the account often cannot be handed to a new owner as it stands, so the buyer applies for a new one while the old one stays open for a while. Funds held on behalf of sellers have to be accounted for separately from the owner's own money, and your accountant and attorney should confirm the structure. Rules on collecting sales tax for third-party sales vary by state and your attorney confirms what applies to your site.

The terms of service, seller agreements, privacy policy, and any contracts with logistics, insurance, or verification vendors all need to be read for consent clauses. Customer data may carry restrictions on how it can be shared with a buyer before closing.

What tends to sink these sales

The deals that fall apart usually do so for one of a few reasons. The owner reported sales volume in a way that did not match the bank deposits. A promotion had inflated the last year and a buyer could see the dip when it ended. The top sellers were on handshake terms and wanted a new deal if ownership changed. The code had no documentation and nobody but the founder could deploy a fix. The founder also answered every support ticket at night, so the hours the business takes are hidden from the profit figure.

Add-backs deserve care in this industry. Founder pay, one-time software projects, and personal expenses are all common, but a buyer will push back on adding back a developer who was paid below market and whom the buyer will have to replace. Our post on what counts as an add-back covers where the line sits.

Getting a marketplace ready

Start with the reports a buyer will request, and build them by month: sales volume, fee revenue, take rate, active buyers, active sellers, repeat purchase cohorts, traffic by source, disputes, refunds, and acquisition cost. Move every account and credential to the company. Get written intellectual property agreements from anyone who touched the code or the design. Write a short operating manual covering how listings are approved, how disputes are handled, how sellers are paid, and how deploys work, and hand it to someone other than yourself to test.

Then spend time on the top sellers. Talk to them about their plans, renew terms if they are loose, and see whether a longer agreement is possible before a buyer asks. When you are ready to see how buyers will look at your site, our page on selling an online marketplace is a good starting point, and a call with Business Advisors of America can follow.

This article shares our opinion and general information. It is not legal or tax advice. Always speak with a licensed attorney for legal advice, and a qualified tax professional for tax questions, before you act.