Being your own boss is a highly attractive concept, and with good reason. Whether it’s flexibility you are looking for or perhaps a desire to turn your passion into income, owning a business is highly rewarding.
Since starting a business can be time consuming and incur many risks, it’s not for everybody. Sometimes it’s easier to purchase an already-established business.
In this article, we will discuss the alternative option available to you, which is buying an already established business from an online marketplace.
Keep reading to learn how to buy an online business for sale, or use the links below to jump ahead.
Factors to consider when buying an online business
Before you buy a website or an online business for sale, here are a few things to consider.
A major part of any business is the revenue it generates, which means a big factor to consider when buying an online business is its monetization model – or how a business generates revenue.
What is the current business doing to generate revenue now? Here are some questions to ask.
- Are they selling products or services?
- Who do they sell to?
- Do they use affiliate marketing?
- How are they advertising?
Buying an already successful business likely means all of those areas are already established – and working! Buying an established but relatively unsuccessful business may require a lot more effort to convert. As you learn more about how their business makes money you’ll be able to determine how much you’ll need to change or improve.
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It can be said that a business is only as successful as its marketing strategy. Marketing is all about spreading the word about your business, so it is vital that you have a strong marketing plan. How has the business been accomplishing this? More importantly, is it successful?
Poor marketing can always be improved. Knowing how to market a product is a valuable skill, but there’s more involved for your business as a whole. You may want to look into marketing automation, different types of digital marketing, and social media marketing.
Ask about site traffic and analytics beforehand. Once you own the business, you’ll want people coming to your site in droves.
Marketing helps with a lot with this, but you should have a clear plan for generating traffic – and knowing where you’re starting is important.
Take a look at the traffic patterns of the business you’re interested in. Determine what the high points are. Think about what you can do to increase traffic.
One popular way to increase traffic, for example, is to regularly upload content to your site’s blog. This can increase your discoverability while also giving you the opportunity to monetize your blog.
Check out more tips on how to drive traffic to your website,
Imagine buying a business with zero industry knowledge, what’s trending, and what just doesn’t work. It would be very difficult to be successful.
This is why we highly recommend researching industry trends when considering buying a business.
What’s selling? Are there seasonal dips in interest? Learn how to do product research to ensure you’re buying a business that will help you sell, not put a “for sale” sign on it.
Knowing your industry isn’t enough. How are other businesses selling? What features and updates are you seeing on other business sites? Keep tabs on ecommerce trends, as well – people gravitate towards fast and easy options. You don’t want your online business left in the dust.
Reviews and product quality
How has the business been doing so far? What has the general public had to say about product quality? Do the products appear to be quality?
Remember, a business with a poor reputation will need a lot of work. Sometimes it’s better off just starting from scratch.
If you’re invested in the idea of turning things around, be prepared to announce new management and demonstrate improvements.
You’ll want to:
- Draft and uphold policies for customer service quality standards, shipping, returns, terms and conditions, etc
- State customer-facing policies on your website
- Hire a dedicated person to handle reputation management
- Work on Better Business Bureau ratings
- Utilize review platforms like TrustPilot and incentivize new reviews
Marketplaces for online businesses
Multiple online marketplaces exist that allow you to buy and sell businesses anywhere you can access the internet. Here are a few examples:
Flippa.com is a website that allows users to buy and sell websites, domains, and apps.
It is a marketplace for digital assets, where individuals and businesses can list their properties for sale and interested buyers can browse and make offers.
The site features a wide variety of listings, including ecommerce sites, blogs, forums, and mobile apps.
In addition to buying and selling, users can also browse and bid on website auctions, and explore the site’s extensive inventory of available domains.
Flippa also offers a variety of tools and resources to assist with buying and selling, such as valuation tools and escrow services.
BizBuySell.com is a website that provides a platform for individuals and businesses to buy and sell small and medium-sized businesses.
It is a marketplace for business opportunities, where business owners can list their companies for sale and interested buyers can browse and make offers. The site features a wide variety of listings, including franchises, retail businesses, service businesses, and more.
In addition to buying and selling, users can also search for businesses that are available to lease or franchise.
BizBuySell also offers a variety of resources and tools to assist with buying and selling, such as a business valuation tool, a directory of business brokers, and a blog with articles about buying and selling a business.
Empireflippers.com is a website that specializes in buying and selling online businesses and websites. It is a marketplace for established, profitable online assets, such as ecommerce sites, affiliate websites, and digital products.
The site features a wide variety of listings, with a focus on businesses that have a proven track record of earning revenue.
In addition to buying and selling, the website also offers a variety of resources and tools to assist with the process, such as valuation services and due diligence support.
Empireflippers also provides a team of experts who can assist with the transfer of ownership, as well as ongoing support for both buyers and sellers.
Before you buy: due diligence tips
Review the finances
What do the business’ current finances look like? How much debt will you be adopting? How much cashflow is the business already generating? What makes the business worth the stated value? Are your personal finances in order so you can accommodate any issues that may arise?
These are just some of the things you will need to research when considering a business to buy. The last thing you want to do is buy someone else’s financial headache.
Assess the business structure
Another thing to research and consider is how the business is structured.
How many employees currently work there? How is the executive board laid out? How does the business identify with the IRS?
It is important to understand all aspects of how the business is structured before signing the final dotted line, or in this case, entering in your credit card information.
Business structures range anywhere from super simple one person operations to more complex thousand employee organizations.
Get to know the vendors and suppliers
Who is responsible for ensuring the business is fully stocked? Who provides the services if you are not doing them?
Knowing your vendors and suppliers ahead of time is also extremely important. This allows you to gauge how much capital is needed to keep your business running and stocked. It also lets you discern the relationship that already exists between the vendor and the business, which is important for continued growth.
There are some cases where online stores for sale do not come with vendors or suppliers and you may have to find your own.
Fortunately, finding dropshipping suppliers or other vendors online is easy.
Don’t forget to consult a lawyer ahead of time. You will want to know in advance if the business has any financial or legal obligations that are not readily apparent.
A lawyer can also help you determine whether or not you can operate legally and if you truly have ownership of the business once purchasing.
Why is the business for sale?
With any major purchase, you want to be sure you are getting exactly what you expect and buying a business is no different. Before you buy you will want to ask yourself and the seller, if possible, why the business is for sale for the sake of transparency.
Aside from contacting the seller, you can also do your own detective work. Thoroughly read the description, check the reputation of the seller, and, again, contact the seller if you can.
You ultimately want to make sure you are not making a problem purchase that you are not expecting.
How to get funding to buy an online business for sale
You don’t have to do it all yourself. Here are a few options for financing an online business.
With the rise in popularity of sites such as GoFundMe and Kickstarter, it is easier than ever for entrepreneurs — and those aspiring to be entrepreneurs — to fundraise money to start their business.
This is what the heart of crowdfunding is, the ability to raise money from supporters online or in person. Hosting in person events is a great way to crowdfund or otherwise fundraise for your business. Bear in mind that crowdfunding is not a stable finance option, as not all campaigns are successful.
Friends and family
Sometimes the best way to raise funds to buy or operate a business is to simply ask your friends and family.
These are people who already know who you are and if you tell them what you are trying to do, you may be surprised how much support you will get.
If this is an option for you, you might want to consider reaching out to those closest to you.
Savings and self-funding
The best way to guarantee funding for your business is to save up.
Funds you provide for your business will never need to be repaid and you can always count on the amount you will have to work with. The best part, of course, is the fact that you do not have to deal with a middle-man — you only answer to yourself.
You can also utilize self funding as a supplement to any of the other methods mentioned above. With self-funding, all choices are yours.
Small business loans
This method is pretty self explanatory — loans are issued to small businesses that meet predetermined criteria.
Many small business lenders are dedicated to helping entrepreneurs meet their financial goals. In fact, there are a few different types of business loans available.
- Small business line of credit — According to Experian, a small business line of credit is similar to a credit card. The business owner will borrow up to a certain amount and you will only pay interest on the amount of money you borrow. What is great about this method of funding is that you can withdraw funds and repay funds as often as you like — just don’t go over your credit limit.
- Small-business grants — These grants are special. They offer funds to small businesses in order to get established and grow without having to pay back the funds. This is great in theory, but keep in mind that this is free money for entrepreneurs, which means you might find it difficult to obtain these. However, time spent searching for grants could pay off long term. Just be aware of the competition you will face.
- SBA loans — The United States Small Business Association will offer certain lenders a federal guarantee on their loan, which makes it less risky for lenders to grant loans. There are multiple types of SBA loans available.
Determining if buying an existing business is right for you
Many people open businesses because they want to be their own boss. It’s an attractive prospect – you set your hours, make policies, determine pricing.
Buying an existing business has a lot of benefits for new business owners. Since much of the business is already set up, a lot of the work has been done for you. The reduced risk of failure and higher return on your investment is helpful, because people are already making purchases.
We’ve discussed doing research on the company, talking with the owners about any liability issues, and ensuring your finances are in order. That you can do something doesn’t always mean you should.
Let’s take a look at the pros and cons of buying an existing online business.
Pros and cons of buying an online business for sale
|Lower overhead||Higher initial investment|
|Higher return on investment||May have to take on business’s debt|
|Reduced risk||Older businesses with dated tech and processes may be difficult to convert|
|Be your own boss||Reputation management|
|Startup tasks like deciding on a logo, creating a site, etc. are likely already done|
There’s a learning curve for any new endeavor. Whether you buy an existing online business or launch your own ecommerce store, be prepared to take on the role of multiple employees as you get started.
Alternatively, start your own online business from scratch
Buying someone else’s business isn’t for everyone. While the idea of opening an ecommerce store from scratch can seem stressful, it’s a lot easier than it used to be. And with managed hosting from Nexcess, it’s easier than ever.
If you want to start an online business, Nexcess makes it simple. Setting up your ecommerce store is quick — you just need to customize the look and add products.
You focus on growing your business, while managed hosting takes care of the rest, like:
- Automatic updates
- Keeping your site secure
- Built-in performance tools and automated sales tracking
- Live expert 24/7/365 support
Check out managed WooCommerce hosting from Nexcess to get started today.