Buying an Internet Business: 5 Questions to Ask Before You Buy

In today’s world, it can seem like internet businesses are a dime a dozen. However, owning and operating a successful internet business is more complicated than it seems. With 1.13 billion registered sites, the World Wide Web has become a crowded place. So, if you’re thinking about buying an internet business, use this guide from Sunbelt to make sure it is worth your while.

What to Consider When Buying an Internet Business

Before you jump into any new business venture, it’s important to know what you’re getting yourself into. Analyze all the pieces and parts of the established business before you buy to ensure you’re making a smart investment. Below are a few key considerations to help you get started.

1. Is the internet business reputable?

When it comes to buying established internet businesses, low overhead, coupled with a digital data trail, equals low risk. But sometimes even existing internet businesses with polished websites and large social media followings can turn out to be scams.

How do you determine if the web-based business you’re looking to buy is legitimate? Typically, it’s best to work with an attorney or trusted advisor, but areas to study include cash flow, profit margins, industry trends, and cost of upkeep. Steer clear of internet businesses that are selling products or services based on unrealistic claims, those that have come to market quickly, or don’t offer anything original.

2. What will you need to learn to run this ecommerce business?

A lot of people are under the impression that to own a web-based business, you must have a technology background. But you don’t need to be a computer programmer or engineer to see success with online businesses. It is important, however, to understand the industry you’ll be entering and gain knowledge of the market in which the internet business exists.

For example, is the web-based business an e-commerce store that sells goods? Is it a software-as-a-service business? Or does it rely on a pay-per-click model using programs such as Google Adsense?

Even if you aren’t tech-savvy, elements like backend coding and website developing can easily be outsourced to others for a fee. So long as you have an interest in the business and a solid grasp of the market, you shouldn’t necessarily be scared away by terms like search engine optimization, web applications, or display advertising.

3. What is included in the sale of the internet business?

While negotiating terms and conditions, verify what exactly is included in the sale. The deal should consist of far more than just the domain name and website. Aspects of the company such as the marketing strategy, generated leads, email lists, social media platforms, and other virtual commodities like additional software services should be built into the transaction. If the business is not run remotely, inquire about the real estate. Is the lease transferable? If the seller owns the real estate, is it included in the sale?

4. Why is the internet business for sale?

Don’t neglect to ask why the owner is selling their web-based business. Typical answers to this question include preparing for retirement, experiencing industry burnout, unfortunate health problems, or pursuing new business opportunities.

But if the current business owner reveals they are selling due to performance or financial issues, consider that a warning sign that their business may not be doing well. There is a chance that under your management, the performance of the internet company could be reinvigorated, but it’s best to investigate further before you make the purchase.

5. How did the owner arrive at his or her asking price?

Finally, be sure to ask the seller how they determined their asking price. Successful web-based businesses should fetch somewhere around two to three times their annual revenue. But there are several ways to calculate the financial value, and an asking price that lacks a formal valuation or professional BOV (broker opinion of value) could be negotiable.

When it comes to getting you the best deal possible, Sunbelt’s business brokers are the ultimate experts. So, if you’re ready to start browsing internet businesses for sale, contact your local Sunbelt office. Buying an internet business that meets all of your desired criteria is easy and painless with help from Sunbelt Business Brokers.