Posted by With the growth of eCommerce today, many entrepreneurs are launching online businesses, while some others are switching lanes into this industry. To avoid the weight and struggle of the start-up phase of online business, several have chosen to buy a business online instead.
Now, individual business decisions vary depending on where they are in their entrepreneurial journey; this is why a platform such as Empire Flippers can assist you on how to buy a business online.
Before we go into the steps on how to buy an online business, let’s look at its pros and cons. Is it better to build a business or buy one already generating revenue?
Build or buy an online business: pros and cons
Building or buying an online business often depends on your business and personal goals. Each with its peculiarities; time and effort will be the difference. Looking at the pros and cons of building and buying a business will give you a better perspective of which side is better suited for you.
Related article: How to start a Dropshipping Business on Amazon.
Building an online business
Pros
- You will need less upfront investment to begin.
- You’ll develop a long relationship history with your producers and suppliers
- Good relationships are established with others in your niche
- There would have a better understanding of the trends in your business
Cons
- It takes a longer time to get returns of any kind.
- There is the risk of investing in a type of product that drops in demand
- Building a significant social following from scratch is no simple task
Buying an Online Business
Pros
- It saves time because you skip the start-up phase of the business
- There is a quick cash flow
- You already generate traffic, and there is PPC data
- Scaling becomes much easier
Cons
- It will require a significant investment up-front.
- There is the problem of being unfamiliar with the business operations
- You could encounter issues in finding the right deal
Checks to make when buying an online business
Investors are seeking to acquire established businesses because they are already making profits and showing actual market demand. So, whether you’ve done research to back up the thought of whether a product is a good idea or not, you already have a large audience and market demand for it.
When you locate the right eCommerce business at a price that fits your needs, you avoid time wasted researching other companies that are not correctly aligned with your goals.
Outline the specifics of your potential business; this makes the buying process easier for you. Here is a checklist that helps you identify the right business to buy.
1. Pricing window
Any eCommerce business pricing window will help increase or decrease its valuation multiple, depending on which amount of time is used. This lets you know how sustainable the business is. You can observe sudden upticks or drops in revenue, which would lead to the use of a lower pricing window.
2. Age of the eCommerce business
Many online business buyers will favor an older business over a new one because an existing business will have built a record of sales and data. This alone is a huge advantage for buying an eCommerce business.
3. Traffic diversity
You should note how diversified the traffic sources are for an eCommerce business because the more diverse these sources are, the more they limit the risk from any sudden dip in traffic and sales. The most common traffic sources for an eCommerce businesses include, Search engine optimization (SEO), paid traffic, and social traffic.
4. Reviews and ratings
Ensure there are plenty of positive reviews for the products you are about to acquire. Products reviews and ratings are vital, as they help grow the brand’s reputation, giving new (and old) customers social proof of the quality your company offers. More positive ratings and reviews for a product line translate to a higher multiple for that business.
5. Email list
If you observe a business with an email list, ensure to uncover the value in the list by checking if the current owner still sends out emails regularly. The contact list or email campaigns a seller may already have set up is a massive value-added to any business gaining this addressable audience already gathered for you.
Factors to consider during an online business deal
With a proper due diligence checklist, which will help you focus on the special deal you’re looking for, finding the right eCommerce business to buy will be easier.
As you consider due diligence, consider vetting as well. Vetting determines whether a business is correctly priced, while due diligence depends on the buyer’s needs for the business, based on their preset or predetermined criteria.
Some other details you should consider during your due diligence include:
- What is the level of competitiveness in this niche’s industry?
- In marketing terms, what is the business doing?
- What are the brand’s products, and how many are they?
- What platform is the storefront built?
- How much support will the seller offer?
- Have there been any stock-out issues recently?
With these, you will uncover hidden growth channels and eliminate businesses that don’t have your investment needs.
Where to find good ecommerce businesses for sale to buy online
To buy an online business, you can either locate a broker who will present all the businesses currently live on the market on a platform such as Empire Flippers, or you go with a private deal.
Both of these have pros and cons. So, here are the differences; it will help you gauge which option you think is better.
How to buy an online business through a private deal
Keep these in mind when seeking to buy an online business through a private deal:
First, engaging in a private deal is riskier than going with a broker to help you facilitate the sale from initiation to conclusion. Most significantly, carrying out this type of acquisition provides you with no protection if the deal falls through.
In some instances, you might send the funds for the business and later find out that the seller had lied about all their income and expenses. You find out that the business generates only a fraction of what they had claimed originally.
One of the few reasons a buyer would choose to perform a private deal is that a broker charges a fee.
Some buyers believe that paying a broker fee is losing money in the deal. This is a common misconception. Look at it this way; imagine you pay more than the actual worth compared to similar assets that are live on the market, then you also end with the same results.
It would help if you realized that this fee often limits the risk of losing your entire investment.
How to buy an online business through a broker
Many new buyers in the industry will talk down a broker’s fee even without having experience. The broker protects both the buyer and seller if their agreement does not align during the acquisition process.
Leveraging a broker ensures the deal goes as smoothly as possible and that you, as the buyer, are not investing in some scam.
The broker protects the seller by ensuring that they are not unwittingly handing out all the inner workings of the project they have sweat to nurture and build to somebody whose intent is to copy the brand— and maybe even the products—since they now know their suppliers.
Read on: How to buy an online business on Empire Flippers.
Finally,
Suppose you have decided to take the next step in your entrepreneurial journey to buying an online business that is already generating consistent cash flow. In that case, you can head over to Amazon to create your free business account.
After setting up your Amazon business account, you’ll have access to the Amazon marketplace with new eCommerce businesses listed for sale. Go through how to buy an online business again and the purchase with your Amazon store card.
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