Buying an online business can be easier than starting an online business. You will not have to worry about growing something from the ground up. Instead, you will take over an already established brand that already has a customer base, a website, and a reputation.
Here are the steps you need to take when buying an online business:
Determine Your Goals
Before you look at an online marketplace or talk to a broker, before you even consider the cost, you need to be absolutely clear about the reason you want to buy an online business.
- Do you want to run the business yourself?
- Do you want to hire someone else to handle the management?
- Do you want to grow a business?
- Do you want to resell it for a certain profit percentage in five years?
Understanding what your goals are will help you choose the right kind of online business.
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This is also a time to think about the kind of business you want to purchase.
- Do you want to run an ecommerce store?
- A service-based online business?
- Are you looking to buy a blog?
- Are you ready to deal with physical products and inventory?
- Do you want to work with writers?
- Do you want to have lots of employees or only a few?
Finally, think about the day-to-day details.
- Will you be running this business by yourself, or do you have a partner?
- Do you have another job or other businesses?
- How will you allocate your time?
Make sure to be completely realistic. Don’t rush into a project you don’t have the time or the knowledge for.
Choose a Niche or Industry
Once you are clear on the why and your goals, you can consider the industry you would like to buy an online business in.
It’s good to think about your strengths, interests, and experience at this point. What industry are you already very familiar with? Perhaps you’ve already worked in it, or perhaps you’ve had a hobby for a decade?
You can start out with a broader list and then narrow it down with market and competitor research.
First, analyse the entire market of a specific industry. Consider the following:
- How large is the target audience?
- What are the prices they are willing to pay for a certain product or service?
- How many visitors can you expect to have?
- How much can you expect to earn from ads?
- What are their marketing strategies?
- How much will you need to invest to stay competitive?
Also take a look at a couple of specific brands or websites in the niche you’re interested in. Check out their social media profiles. Sign up for their newsletter. Read their blog posts. Is this something you could compete with?
You may discover that a niche you have a lot of knowledge about may not be as profitable as you hoped. Or vice versa, you may discover that buying a hobby-related blog can earn you quite a pretty penny.
Look for Likely Online Businesses
Now that you know what kind of online business you want to buy and in what industry, it’s time to look for a likely business to purchase.
You can start browsing on some of the most popular online business marketplaces to begin with:
- Flippa
- MicroAcquire
- Empire Flippers
- FE International
Here you will find businesses large and small, some that are already earning a lot and some that are just getting started.
You can also work with a broker if you prefer. They will often demand a high fee, so take that into account beforehand.
Social media can also be a good place to look. LinkedIn, in particular, is often a place where business owners advertise likely sales. You can also join Slack channels or even look on Reddit.
Finally, you can also contact businesses directly. If you’ve spotted a blog or website you like and would love to own, you can reach out and ask for a conversation. Some business owners may be interested in hearing your offer.
Have a Call with the Owner
Having an introductory call with the current business owner is a great way to get the ball rolling. This is your time to get to know the business and understand whether or not you want to buy it.
You should focus on two objectives: getting to know the brand itself and getting access to any legal and financial documents that will help you gauge the value of the business.
Try to get the owner to talk as much as possible. Ask them the following questions:
- Why did they start the business?
- What has been the most challenging part of running and growing the business? How have they overcome it?
- What has been the most exciting moment, and what has been their biggest success? How have they achieved it?
- Why are they selling the business?
This final question is perhaps the most telling. If a business owner tells you they want to retire, cut down on their hours or venture into something new, chances are the business is in good shape.
Note that not all business owners will be honest with you, so it’s very important to take the step we are about to outline next.
Do Your Due Diligence
This is arguably the most important step to take when buying an online business. You need to analyse whether it’s a sound investment and how likely it is to achieve your goals.
Here’s what you need to examine carefully:
Business model
You will want to know as much as you can about the business and its profitability. In order to get the most comprehensive picture, look at:
- Income streams
- Marketing channels
- Size of the target audience
- Payment methods
- Laws and regulations
Ideally, you will take a look at financial statements for the past three years at least to gauge how the business makes money, how much it makes, and how steady these revenue streams are for the future.
Expenses
How much does it cost to run the business on a daily and monthly basis? Is there any debt that needs to be paid off? Can the business cover all of its expenses with its current revenue?
Brand value
This is a rather vague term that can be calculated by looking at the market, the size of competing brands, and the value of current marketing and other assets. You can also look at customer lifetime value to gauge how much a brand could potentially be worth.
SEO value
How much traffic the website is getting will be an important indicator of its current and potential future value. Look at the keywords it is ranking for and their monthly volume. Look at the different ways the traffic can be monetised.
Growth opportunities
Try to think of other ways you can earn from the online business than the ones already in place. Is there significant room for growth and improvement, or is the business already doing everything it can to diversify its income streams?
Reputation
You should also look at the business’ reviews to see how satisfied customers are. Look at their social media profiles and do some online digging to make sure you’re not buying a business with a shady reputation.
Since all of this is quite a lot of work, you can also look at businesses that provide due diligence services and who can handle all of this for you. They will have a lot of experience analysing online brands, and they will be able to uncover facts you may have missed on your own.
Consider How You Will Fund the Purchase
After you have done your due diligence, analysed a business from every possible angle, and determined that you are actually ready to make a purchase, you will need to figure out how you will find the necessary funds.
There are several funding options available for buying an online business.
First, you can use your own assets to make the purchase. This, of course, means that you need to have said funds available already, which may not be the case.
You can also take out a loan, either as a private individual or as a legal entity, if you already own a business. If this is the route you decide to take, make sure to go over the fine print with a fine-tooth comb.
You can also find an investor who will back up your purchase. Consider how much you want them to be involved. Some investors will want a say in the day-to-day running of the business, while others will be happy to give you free rein as long as you are able to pay them back, as per your agreement.
Make an Offer
Making an offer to purchase an online business is probably the most exciting part of the process.
Choosing an opening bid will be the biggest challenge here. You don’t want your offer to be very low, as it might close the door for future negotiation. You also don’t necessarily want to immediately offer what the owner is asking for.
Speak to an accountant or financial advisor. Consult someone who already has experience with purchasing online businesses. Get as much advice as possible.
Handle the Paperwork
Arguably the most complex part of buying an online business is the legal work involved. There will be lots and lots of papers to sign, so you need to make sure you are working with an excellent lawyer. Hire someone who has experience with online business acquisitions.
There will be papers pertaining to the sale of the actual business, but you will also need to take ownership of the following:
- The domain name and current hosting plan unless you want to transfer the domain to a new server immediately.
- All the content on the website: you might want to change the name of the authors of any blog posts, and you certainly want to change all the legal information in the terms of service and contact page if required.
- All original logos, images, and videos
- All social media accounts.
- All client databases, including email lists: note that you will need to be very careful with protecting privacy here, so make sure to handle everything by the book.
- Any advertising or affiliate accounts the business may have.
- Access to any marketing, sales or communication tools the business may have.
- All the physical inventory, if you are buying an ecommerce business.
Ultimately, you need to have access to and be the sole owner of every asset the business has.
Also, ask the previous owner to sign a non-compete for a period of at least two years. You don’t want them to become your top competitor.
Take Over
Now that you are the proud owner of an online business, it’s time to handle the complex and potentially complicated process of getting to work.
If the business has any employees, this is the time to get to know them and see how they currently do things. Don’t walk in expecting to know everything and change everything. Listen to their experiences, and slowly start making changes.
Work on getting to know the target audience and their needs. Speak to as many clients or customers as possible and figure out what their pain points are and how they can be met better.
Take some time to learn before you start implementing your new business plan. Change is always challenging, so you don’t want to cause too much disruption overnight. If the business is running well and there is enough revenue to cover current expenses, you don’t have to rush in.
Wrapping Up
Buying an online business will require a fair amount of research and negotiation. There will be a lot of legal and financial work involved, too. Don’t let the length of the process and its intricacy discourage you.
If you find a great online business to buy, running it can be not only a great source of income but a lot of fun as well.
