Pros & Cons of Buying an Online Business
As with all entrepreneurship endeavors, buying a functioning online business comes with its own advantages and disadvantages.
Pros
All the paperwork associated with founding a business is already done. You have a ready financial track record, which can make acquiring some extra budget easier. The client base is already there, so you don’t have to worry about the initial marketing processes. Whether it’s an eCommerce, a SaaS, or an advertising business, the platform already works. You don’t need to be concerned about technicalities that much. The same goes for sourcing of any potential products. And perhaps the most important advantage is that you can immediately go ahead and expand your business. Setting one up can take ages, and it can be a tedious process at times, so I believe that the time you save alone is worth purchasing an established platform.
Cons
Not all the things in the business will be exactly as you want them to be, and so you’ll probably need to make some changes. The fact that you have to pay a large sum upfront can be a disadvantage. If the company already has some employees, it might take them some time to get used to a new boss. Likewise, you’ll need some time to learn the characteristics of their work yourself so that you’ll be able to treat them fairly. This, again, takes extra time. Compared to starting your business from scratch, you don’t immediately have full control over it. Running one takes some getting used to. The research alone can take a lot of time and resources.
Should You Buy an Online Business?
This is a question you’ll need to answer yourself. Will you be satisfied with buying an existing business? Are you ready to manage one? There are a lot of factors associated with running your very own company. Think about whether you have the capabilities to jump right into it. Contrary to purchasing an established one, when you start building your business from scratch, you get to learn a lot when doing it. Make sure that you know your way around the market very well. On top of that, you need to be absolutely confident that you can manage all of the things that come with it. Chances are you won’t be able to do everything by yourself, so you’ll need some extra capital to outsource some of the work. Prepare for hours upon hours of research, too. Still, this doesn’t take nearly as much time as setting a business up from the ground up. It’s way riskier, though, as you have to invest a lot of money upfront, so if you have a low-risk tolerance, this might not be the way to go for you. Now that that’s established, we can get to the nitty-gritty.
Research Before Buying an Online Business
There is a lot to do as far as research goes, though I’d say that it is much easier to decide on an online business than your standard, brick ‘n’ mortar one. The data you need to check out is readily available via tools, online databases, and auction sites.
How to Start with Your Research?
Figuring out your niche The first thing you need to do is decide upon what sort of business you’re after. If you know your way around a particular niche, then that’s where I would start. Still, it’s entirely possible to learn about something else, but it takes a lot of extra time. You need to cover things like market research, competition, SEO, and other characteristics to get a grip on the market. Due diligence If you found some opportunities that look great on the surface, you should conduct due diligence for online business. Due diligence is an in-depth financial and technical assessment that lets you determine whether the company has any potential. This covers financial records, revenues, profits, competition, traffic, and, of course, technical aspects. Due diligence is enough to assess whether a business is worth buying. If you choose to partner up with an IT agency to help you out with the technicalities, it’s good practice to complete a partner finance assessment.
What to Look for Before Acquiring an Online Business?
Growth If an online business is in a state of constant growth, then it’s a good sign. You don’t want to spend your money on something that is losing its customers or is in long-term stagnation. Such businesses have much less potential of being profitable and are extremely hard to develop. SEO analysis SEO Analysis can be done using various tools, such as backlink checkers, social listening platforms, or all-in-one suites. Checking things like the website’s backlink profile, presence in social media, brand awareness, and its parameters such as Domain Authority is vital for making the right call. Reviews of the business Make sure to check what kind of reviews the business was getting before making the purchase. Look for testimonials, positive comments, and influencer endorsements. If the review profile is mostly positive, then it’s a sign that the company was doing its job well and the current customers are happy with the services. Website Unless you want to spend extra money on web development services, look into the website’s functionality. Check it thoroughly and make sure that it loads quickly, looks professional, and has no bugs.
Where to Buy an Online Business?
Nowadays, the process of buying an online business is like making any other purchase. If you’re done with your research, then it depends on what sort of platform you choose to complete the transaction through.
Auction Site
Such websites work as facilitation for business owners to sell their companies. They operate like your regular auction sites – you bid whatever sum you want to pay for the business. Now, this takes some time to learn whether something is worth bidding on or not. Some firms practice hiring bidders to up the price of their auction.
Owner
This works like a cold call. Say you stumbled upon some websites that seem like they’re worth buying. You do your research with available tools – look up how the business performs in reviews and social media, the type of traffic it gets, its growth potential, and SEO analytics. It’s worth figuring out what kind of marketing the business does, too. Then, you need to find out who the owner is and simply email them with your offer. It’s mostly a shot in the dark, but it’s worth trying if you find a real gem. For this to be successful, though, you’ll need a broad spectrum of websites you reach out to, which takes additional time. If you’re going to send your requests one by one, it will take ages to make the purchase finally.
Broker
A broker is a person that was hired by a particular business to make the sale. If a business owner uses a broker, then it’s telltale that they’re serious about selling their site, as brokers usually make sure that it’s not a scam in any way. I’d say that it’s the safest form of purchasing an online business, as brokers take care of all the transaction elements and can answer any questions you may have.
Marketplace
The sole purpose of a marketplace is to connect the buyers and sellers. There are many of those, and they mostly operate in different ways. Some of them may help you with the paperwork and the transaction, while others will leave you to it. All of them have their own requirements that need to be fulfilled before listing a business for sale. Examples of such marketplaces would be: Shopify Exchange Shopify Exchange is pretty straightforward to use. It focuses only on eCommerce businesses. All traffic data is taken directly from Shopify statistics of said store, so you know it’s real. The transactions operate via Escrow. As for the costs, they’re not disclosed, and they depend on the final transaction. FE International FE is quite a bit more sophisticated than Shopify, as this marketplace also features SaaS and content businesses. The price tag on most offers ranges from $50,000 up to $5,000,000. FE International has specialists who will help you make the purchase, conduct due diligence, complete the legal paperwork, negotiate, and evaluate. The price for each purchase is $1,000 or 2.5%. Empire Flippers The main requirement for listing your business on Empire Flippers is $1,000 monthly profit. Again, they’re not limited to eCommerce, and the businesses they list for sale cost $15,000 up to $10,000,000. The cut Empire Flippers takes for a successful transaction is 2 to 15 percent.
Wrap-up
As you can see, there are many options in terms to buy an online business. Still, you’ve got to remember some rules that need to be followed when making the decision. The business you buy can become your primary source of income if you do it right. Do thorough research, conduct due diligence with proper attention to detail, find a trustworthy website, and aim for a niche that you’re the most comfortable with. That way, you can ensure that the business you purchase won’t be a flop, and you’ll be happy with what you’ve got.
