Buying an Online Business? Consider These Critical Steps

Posted On: / By: Brian Knoderer
Buying A Business

Consumers browse the internet for products daily. Estimations by NASDAQ show that by 2040, 95% of purchases will be through e-commerce. Now is a great time to get your foot in the door by buying an internet business of your own.

Buying an online business is a large initial investment, but for a good reason. Acquiring an established business means you won’t need to do a lot of the heavy lifting. This means things like marketing, SEO, and acquiring a reliable consumer base will already be in place, helping you to avoid many start-up costs and responsibilities. You could choose to let it run as is or work full time to make changes toward improving its current functions and processes. When choosing the right online business, look for fun and enjoyable opportunities that are likely to provide a reliable stream of passive income. Selecting a small to mid-size company is a great place to get the ball rolling.

Keep these critical steps in mind as you get started.

Your Tools for Success When Buying an E-commerce Business

The first thing you will need to do is find a compelling e-commerce business for sale. You should pick a niche that fits well with your knowledge and skills and hone in on profitable business opportunities. A few key things you will want to look at in this stage are how the company is performing, its reputation, and its potential to grow.

woman running an online business

Check to see if the company is making stable and consistent income. Ideally, the right business for you would be making a profit, but if not, consider whether there are serious improvements you can take on to increase the bottom line.

You will also want to search for customer reviews to determine what previous buyers say about the brand and the product. It is essential to see what they are doing right, but it would be advantageous to spot a need for improvement. Finding room for improvement will help you develop a game plan for post-acquisition and could factor into the valuation. There are many online marketplaces out there. What will set your new business apart from other retailers?

Dig a Little Deeper

Once you have found the right e-commerce website for you, it’s time to dig deeper and do even more research. You may need to consult the current business owner for some of this information.

Ask about their current daily, weekly, and/or monthly processes step-by-step to gain insight into how the business model and marketing strategies are performing. Take time to digest this and develop an improvement plan.

Next, comb their social media for metrics like engagement such as comments, likes, and shares, and identify opportunities for lead generation. Consider their following and dig in to see what their audience looks like, and get an idea of their customer base.

Determine what platform the current business owner is using to host the online store. You should have the option to switch to any hosting platform you like, but hone in on the details of why the current owner chose their platform. What’s working? What isn’t? Make sure there is ample time for transferring the domain into your name.

Another helpful factor to consider is backlinks. Are the links guiding people to the e-commerce platform genuine? Backlinks are critical for search engine ranking. Search engines can penalize websites for backlinks that lack integrity or prove to be spam. A free and easy tool for checking links is the Backlink Checker offered by Ahrefs.

Lastly, find out what tangible and intangible assets like domain name, intellectual property, and stock images and graphics come with the sale.

Go the Extra Mile

Don’t settle after completing some of these more preliminary steps. Keep asking the seller detailed questions to get as much information as possible.

As a new owner, you will want to make sure the company:

  • Is growing – growth is vital if you want to increase your income;
  • Has a variety of traffic sources – many platforms like Google Analytics determine metrics such as the rate at which visitors convert to customers, which provide touchpoints on how well the business is doing. Take a peek at the company’s track record as far as sales and profits to ensure you will have a steady income as you advance;
  • Has multiple revenue streams – relying on one stream of revenue is risky in maintaining a sustainable income;
  • Adheres to PCI security standards – protecting your customers’ sensitive data is crucial to gaining customer trust and complying with e-commerce laws. Organizations like the FTC offer additional guidelines for security and consumer privacy;
  • And has an effective marketing strategy in place.

Many of these metrics can factor into the valuation of the e-commerce store you are looking to buy. Experts recommend potential buyers also multiply the annual revenue by two or three times when negotiating a fair asking price.

Business brokers can make the search, selection, and research process go more smoothly and decrease stress. Reach out to a local Sunbelt Network business broker to help you buy an online business risk-free.

Brian Knoderer is the President of Sunbelt Business Brokers. He has over 20 years of experience as a business owner and managing business transactions. As a seasoned intermediary, Brian has successfully represented companies in a broad range of industries helping business owners achieve their desired exit strategy or growth initiative.

Brian is also co-owner of Sunbelt Indiana and Managing Director of MMI Capital Partners, a franchisor focused investment banking firm.

Previously Brian was involved in several entrepreneurial ventures as well as having held corporate roles in Franchise Development for Prime Hospitality and Choice Hotels.

Brian is a graduate of Ball State University with a degree in Management Information Systems and earned his MBA from Butler University. He has received the Certified Merger & Acquisition Advisor (CM&AA) designation, holds both the Series 7 – General Security License and the Series 63 – Uniform Securities Licenses, and is a licensed Real Estate Broker. He has been affiliated with several organizations including the Entrepreneur Organization, a Member of the International Business Brokers Association, Venture Club, and a Board Member of The Entrepreneur Institute.

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