Why buy an online business?
Imagine a day where you are suddenly fired from your comfortable and cushy job. You suddenly realize that one entity had such control over your life and destiny. That is the moment you decide to have your own business.
But ideas fail you. You cannot think of any startup idea. Or if you can, you do not know how to create it from the ground up.
You find out that the solution is to buy an existing business.
But you do not want to be tied down to a traditional business setup. You want freedom and flexibility to operate the businesses from wherever and whenever you want.
That is when the only viable option emerges is to buy an online business.
Buying a small business has always been a very tangible, in-person experience. You can see its operations or at least its location and physically interact with the business that you might one day own.
But today, more and more businesses are moving online. The process of buying a small business has followed suit. This is especially true when purchasing businesses that only exist online.
Two-thirds of retail sales occur online. This makes eCommerce a rapidly growing industry. ECommerce is just the tip of the iceberg when it comes to online businesses.
So, this article is a complete guide on how to buy an online business. It will uncover every facet and help you make the right decisions.
Buying vs. Starting a New Online Business
Buying an online business comes down to mitigating the knowledge, monetary, and time investment. It is required to build a business from scratch while still gaining the advantages of owning an online business.
Buying a business helps to skip past the beginning stages of building a startup. This includes the long hours, restricted cash flow, inventory sourcing, system establishment, traffic, and customer discovery, etc.
It skips this and takes them straight to the favorable aspects of operating a business.
Entrepreneurs can buy into an online business that’s already proven profitable. The products are already in demand, which means it is a valuable asset to gain.
Entrepreneurs can also buy into existing businesses. It helps to gain more market share in an industry that already exists. This makes them a more fierce competitor and giving them a more significant opportunity to dominate.
Buying an online business for sale sounds like a better option. Still, it is essential to consider all the disadvantages and advantages.
Even though it might sound like an easier and faster route to success than building an entirely new brand from scratch, there can still be risks involved
When buying an online business for sale, the upfront investment is generally much higher than simply building a business from scratch.
You may get systems and processes that are inefficient or outdated. You may take on employees. There could be legal risks and potential liabilities imposed on the business.
For these reasons, doing your due diligence is of the utmost importance for buying an online business.
Why is an Online Business a Good Investment
When buying an online business for sale, you are putting yourself in the position to invest in online property, similar to investing in physical property like real estate.
Online businesses are akin to a digital version of physical property. Just like real estate values can grow and prosper over time, so an online business value. Buying digital property now can lead to a return on investment later.
There are other reasons why it can be a good investment to buy an online business. Online businesses can generate passive income, meaning that they can generate a high monetary output for low hourly input.
They can also be run and work a typical 9-5 job, meaning that the business owner and operator can earn additional income on top of their regular salary.
Buying an online business can be relatively easy. This is especially true if you shop around on some of the marketplaces we list below. It can also be routine to exit the online business at a later date.
Buying an online business can be as hands-on or hands-off as you want it to be. However, either way, purchasing an online business for sale can be a valuable asset to gain.
It provides you with a return on investment which can help you earn income passively. At the same time, you work your typical day job, and you do not have to dedicate your whole life to it as you can put the business back up for sale again whenever you are ready to move on.
The Pros Of Buying An Online Business For Sale
The Legwork is Done For You
Skip past the late nights and hours and hours required to start a business from scratch; someone else has done it all for you.
The Business is Already Up & Running
No need to create a launch strategy and execute launch campaigns. The business is already past that stage.
Products Have Been Sourced
No need to search high and low for a reputable dropshipping supplier, manufacturing supplier, private label supplier, or wholesale supplier. The online business has a sourcing system.
Systems Have Been Put Into Place
Speaking of having systems put into place, that is one of the main advantages of buying an online business for sale. Systems like sourcing from suppliers, shipping and fulfillment, logistics, return policies, etc., have already been established.
Customer Base Established
No need to generate initial traffic to the online business. There is already a customer base purchasing from the store.
Can Focus on Expanding the Business
All the beginning stages of setting up an online store are taken care of. You can go straight to growing and expanding the business.
Online businesses can be a valuable digital asset that provides a return on investment.
Taking Over Employees
Purchasing an online business for sale can also include the business employees who know how the business’ systems operate. They know what they need to do to fulfill their job roles.
Investing & Financing
It is often easier for entrepreneurs to get financing to buy an online business for sale or gain investors. This is as the business has a proven history of growth and success.
Rights to Assets
Buying an online business for sale can also give you legal rights to assets like patents and copyrights that the business may own.
The Cons Of Buying An Online Business For Sale
Depending on your risk tolerance, buying an online business for sale may or may not be the right decision for you.
There is usually a high initial upfront cost when acquiring an online business for sale instead of building one from scratch.
Bound by Existing Systems
Changing existing systems in place can be difficult or impossible, depending on the online business for sale. So, you might be bound to operate the online business with its existing systems, whether they are the most efficient process or not.
Searching for the Right Business
Finding the right online business for sale can be a very time-consuming process. It can take lots of searching, investigating, and back & forth between you and the seller.
There is potential for the seller to withhold information and data about the business until you purchase it. So, it is essential to conduct thorough due diligence and ensure you have legal protection if this happens.
Evaluating the Business
Since it is an online business for sale, it can be challenging to evaluate the business as you cannot see anything in person.
Lack of Control
You do not have complete control over the business’ development. This is as the developmental choices have already been decided when the business was initially being created.
Commitment to the Business
Acquiring an online business for sale can be a valuable asset. But it could also mean that you get stuck with the business and all its assets and capital, whether you like it or not. This is as the business may not turn out to be everything you thought it would be.
Tips for Buying an Online Business
Buy in an industry you are passionate about.
Buying something that does not drive you can lead to burnout – motivation stems from passion. Small businesses allow people to follow their passions more easily. Small business owners rated their level of happiness at an average of eight on a scale of one to 10. This is when 10 was being the happiest. Thirty-seven percent rated their happiness at 10. This is according to Guidant’s Small Business Trends survey.
Always conduct due diligence.
This is a close review of the operational and financial health of the business. Potential buyers should look for and understand the acquisition cost to revenue ratio. They should review the business’s site traffic and financials. It is important to find out assets are available in the sale.
That is just the start – it is wise to dig deep to understand how the business works’ operational process. For example, if you are purchasing an advertising -website, learn precisely how the content is produced. If you are purchasing an eCommerce business, learn what product or products contribute the most to revenue.
Respect the nuances of the business model.
Not every online business is the same. It is helpful to respect the differences in business models. It lets you run your new business more efficiently. This meaning you need to understand these nuances before entering the business. Know what you are getting into. Some examples:
- If buying a SaaS business, consider the churn rate, monthly recurring revenue, and customer lifetime value. Multiples are typically higher in a SaaS business. This is due to the recurring nature of the revenue stream.
- If buying an advertising business, consider the costs of creating content, the dependency on the affiliate or advertiser base, and the cost to acquire a customer.
- If buying an eCommerce business, the cost to acquire a customer is a primary concern. Niche products can be great. You need to stand out from the crowd. There are millions of retailers selling the same thing.
Where to Buy & Sell an Online Business
While there are several websites you can buy or sell an online business, each one has certain qualities that impact the buying and selling process, making it a slightly different experience.
Depending on how the website is set up, there may be various procedures by which you need to adhere to buy or sell an online business. These are the most common ways online businesses are sold:
Buyers and sellers personally list their businesses for sale on marketplaces. They connect online business sellers and buyers. Some marketplaces connect buyers and sellers and let them work out the payment terms on their own. In contrast, other marketplaces will help to facilitate the payment process and administrative switch over.
- Each marketplace varies and is entirely dependant on the buyers and sellers that list their businesses on the platform. Each marketplace’s success depends on the buyers’ and sellers’ credibility and providing truthful information in their listings.
- Examples of marketplaces you can use to buy or sell online businesses: Shopify Exchange.
Auction sites operate by allowing buyers to bid on each online business for sale.
- Example of auction sites you can go to bid for an online business for sale: Flippa.
Buying an online business for sale through a broker is a much more personal experience than purchasing through a marketplace or auction site. It is a much more individualized experience for the seller.
- Brokers often have a network of buyers and sellers they work with to pair the correct matches together. They also cut the sale, which drives them to help businesses find the right fit.
- Examples of online business brokers: Digital Exits & FE International.
Contacting Online Business Owners Directly
You can also contact online business owners directly and ask if they are interested or willing to put their online business up for sale.
- If you choose this avenue, make sure to conduct your research before inquiring with the business owner thoroughly. You should know the fair market price. Also, you need to be prepared to negotiate, you have to know when to walk away. Further, you need to know what you are buying into.
- As part of your research, use tools like Alexa, Ahrefs, and SEMrush to get a more behind-the-scenes look into the business’s health.
Best Marketplaces to Buy & Sell Online Businesses for Sale
It is best for buying online businesses running on the Shopify platform.
Starter Stores – There are tons of starter online stores listed on the Shopify Exchange for less than $100. You can pick any store that can kickstart your business instantly.
- Secure Exchange – Shopify ensures safe and secure transfers of online businesses in partnership with Escrow.com.
- Staff Picks – Shopify offers a list of hand-picked businesses curated by its staff to help you find a suitable online business.
It provides a free buyer’s guide to help you know all the rules of trade.
- Gain access to actionable insights like traffic, demographics, profit margin, and more.
- Shopify properly scrutinizes online businesses to derive accurate analytics and traffic details.
- You can hide your business name and URL through a private listing until your business gets sold.
- It comes with a free valuation tool to help you put the correct price tag on your business.
Shopify Exchange charges a service fee. It is based on your site’s sales price. The service fee includes the Escrow fee and the estimated Exchange fee.
Best for a personalized buying and selling experience.
Monetization – Search for businesses based on monetization methods. These are affiliates, ads, dropshipping, eCommerce, etc.
- Refundable Deposit – You only have to pay a 5% refundable deposit of the value of the business you purchase. Before the purchase, you get access to all the data you would need.
- Podcasts – Listen to an extensive library of podcasts of several business leaders and industry experts to make the right choice.
It can transfer the business on the seller’s behalf.
- Find out the correct worth of your business through its free valuation tool.
- Call support to help you buy or sell quickly.
- Empire Flippers representatives set up conference calls between buyers and sellers for efficient communication.
- You can renegotiate the deal if the business earns less than 50% of the promised amount.
- New listings get posted every week.
Empire Flippers charges fixed listing prices:
- First time sellers: $297 listing fee
- Repeat sellers: $97 listing fee
The seller will get 85-98% of the final sales price.
Best for buying and selling small online businesses.
Financing to Small Businesses – Flippa partners with Guidant Financial to offer small business funding via SBA and 401(k) business financing solutions. The minimum requirement is a 690 credit score and $50,000. This will make you eligible for SBA Loans.
- Escrow – Flippa collaborates with Escrow.com to offer secure transaction services. The escrow process ensures that the buyer can validate the assets before purchase.
- Valuation Tool – Flippa offers a free online business valuation tool to determine your business’s value accurately. It also gives insights to enhance your business’ salability.
- Diverse Categories – Flippa provides neatly segregated businesses into various categories. This includes apps, eCommerce, dropshipping business, services, SaaS, Content, and more. It helps you find the right online business. You can further narrow down your search. It can be done based on filters such as type, price, age, price, etc.
You can sponsor your listings for better visibility on Flippa’s home page.
- Buy templates and new businesses at lower prices.
- Flippa verifies all the buyers and sellers through legitimate government IDs.
- The Escrow Service protects all payments.
- You can also sell Amazon FBA retail stores.
Success Fees: It depends on your sale price.
- Up to $50k: 10% Success Fee
- $50,001 to $100k: 7.5% Success Fee
- Over $100k: 5% Success Fee
- Partner Broker: 15% Success Fee
There are fixed prices as well, including:
- Starter/Template Websites: $15
- Domains: $10
- iOS and Android Apps: $15
- Established Websites: $49
Now you are ready to find your new online business. Look through all of the methods to pick the best fit. Start scanning the available sites. See what the asking prices are. Just doing that will teach you a lot that will help you make your deal.
Ensure you do your due diligence and run the numbers to ensure the business’s financials, traffic, and other essential features are accurate. Remember to do this before you put in offers and certainly before you buy something.
Buying an established business can undoubtedly be a great way to buy into a successful venture and start making it right away. You could even make back the money you invested in the purchase reasonably quickly.
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