Are you someone that would rather leave the business ideation and development side of things to others, and instead buy an already established business?
Starting an online business from the ground up takes a lot of work, and there is no guarantee that your endeavor will succeed.
By opting to purchase an established business, the risk you are taking on is significantly reduced, and you can rest assured that there is a path to profitability for your investment.
Yet, unlike brick-and-mortar businesses with physical locations that can hang “For Sale” signs in front of their offices, it’s more difficult to know when the owner of an online business is willing to sell.
That’s why I wrote this article.
I will show you how to buy an online business, and the things to consider before taking the plunge.
How To Buy An Online Business: Frequently Asked Questions
Here are the questions people are asking on Google about what they need to do to acquire websites and online stores that are available for sale:
What Kind Of Online Business Is Most Profitable?
Any type of online business (content creation, eCommerce, affiliate marketing, coaching, online courses, digital services, etc) can be profitable, provided you are acquiring a venture with pre-existing brand awareness, a high rank on relevant SERPs, and that has been generating significant revenues for a prolonged period of time.
How Do Online Businesses Get Rich?
Depending on the type of business, online businesses can make money in a variety of ways.
These include eCommerce ventures make money via store sales of in-house products and drop shipping, blogs make money from adverts and sales of digital products, while coaches and SaaS businesses make money using a subscription model.
What Is Needed To Buy An Online Business
1. A Large Upfront Sum
Buying a thriving online business is going to cost you a healthy sum of money. Prices vary, but the more attractive the business is, the more costly it will be.
Unless you are looking for bargain opportunities, check out online marketplaces to see the price range of the type of business you want to buy, and make sure you have the capital available before you start reaching out to sellers.
2. A Legal Adviser
You may need one to help prepare the purchase agreement, and online legal services can help with this. If it’s an eCommerce business, you may also need your lawyer to help renegotiate existing contracts between the seller and suppliers.
3. A Business Broker
Using a broker gets you someone with vast experience helping people buy and sell online businesses. They can help make the process smoother and if any problem pops up, they should know the best way to navigate it.
How To Buy An Online Business: Step-By-Step Instructions
Follow each step below to avoid making a purchase that will create problems for you later on:
- Know what you want
- Join an online marketplace
- Explore other channels
- Rate each buying opportunity
- Calculate the value of the business and make your offer
Step 1: Know What You Want
Your specific goals, especially when it to comes to time commitment and return on investment, will determine the type of business you will acquire.
You may be close to retirement and you are primarily interested in an online business with an established, loyal customer base that will provide you with a steady income.
It could also be that you want to acquire and actively run an online business that you can grow into something much bigger.
There are also others that are interested in bargain investments — online businesses with sound fundamentals that are not maximizing their potential because of lack of vision or mismanagement on the part of the owner — that can be rejuvenated and then flipped for profit.
Understanding what you hope to accomplish with your investment will help you set the criteria that will be used to evaluate each acquisition opportunity.
Also, when you have acquired the new business, you still need to pour time and money into the venture to sustain and if possible grow it.
Buying a new business doesn’t mean zero work for the investor, it simply puts you in a position where the business development work has been done for you, and now you need to manage and grow it.
That’s why I highly recommend buying an online business in a niche you are familiar with.
Knowledge and experience will make the handover process easier, and you can continue running things smoothly and even improve on existing business operations.
So, what types of online businesses can you buy:
- Online blogs
- Membership sites
- eCommerce stores
- Dropshipping websites
- Affiliate sites
- Online training platforms
- Digital product businesses (eBooks, plugins, themes)
- Domain portfolios
- Mobile apps
- SaaS companies
- Blockchain-based business
Step 2: Join An Online Marketplace
These platforms offer a safe place for sellers to list their businesses and for potential buyers to make bids and establish contact.
Many of these platforms will also provide you with important financial information on the business, as well as detailed analysis compiled by their expert vetting team.
I recommend casting a wide net and checking all the major platforms out there so you can have as many options as possible before making a final purchase decision.
The most reputable platforms include:
- Flippa: this is one of the most popular online exchanges and it’s probably the best place online to bid for websites. You will find any type of website you are looking for, including relevant financial and SEO information.
- Motion Invest: the platform primarily facilitates the buying and selling of content websites. Once you know the niche you want to invest in, the marketplace is one of the best places to buy blogs and membership sites.
- Niche Investor: this marketplace is for niche websites that cater to a very specific audience. The websites tend to be available at more affordable prices—listing prices range from $1000 to $120,000—and you are likely to find bargain opportunities that you can acquire and develop into something much bigger.
- Side Projectors: the platform lets individuals, teams, and companies showcase side projects that they built to make a little extra cash. The online businesses on offer tend to have a narrow customer base, so they often only cost a few thousand dollars.
- Business Exits: this site used to be called “Digital Exists.” The company helps facilitates the buying and selling of businesses with millions of dollars in revenues (between $2 million to $60 million). I highly recommend the platform if you are looking for a sure bet and the prices are within your budget.
- Empire Flippers: the platform is an online brokerage site that only lists online businesses that have been curated by the company’s staff. The company will vet each business before it is listed, and you can be confident that you will only find quality businesses on the platform.
- FE International: the company caters to serious, deep-pocketed investors. They facilitate the buying, selling, and merger of large online businesses. The company also provides advisory services to buyers and sellers to ensure every aspect of the transaction works smoothly.
Step 3: Explore Other Channels
The online exchanges listed above are not the only places you can buy websites, you can also check out auction sites and website brokers, or contact the site owner directly.
Auction Sites
Businesses are listed for sale in a similar way to what you will see on the marketplaces listed above.
The difference is that the amount you see is only the starting price.
You and other interested buyers will make bids and the highest bidder will claim the venture on offer.
The one advantage of auction sites is that you may be able to find digital products and websites with room for growth that are available at bargain prices.
Online Broker
If you are interested in buying an online business but don’t have the time to sort through online marketplaces and auction sites, you can hire a broker to help you find the right investment for your requirements.
Brokers know the industry well, and they will help you do due diligence to ensure what you are getting is a profitable venture with lots of room for growth.
They do charge substantial fees, but the peace of mind you will get from working with an expert may justify the expense.
Direct Purchase
You can opt for this option if you are interested in a specific online business and you believe the owner may be interested in selling.
Or, you are confident that you can make an offer that will convince the owner to sell.
A tool like Whois.com can help you find the name of the owner of the domain as well as their contact information.
You can also use an email finder tool like Hunter.io to find their email address information.
Before you contact the owner, make sure you do your research to ensure the fundamentals of the business are sound.
Step 4: Rate Each Buying Opportunity
Depending on what you are looking for, it’s almost certain that you will find multiple businesses that meet your criteria.
You are likely only interested in buying just one, so you need a way to evaluate each of them to see which one represents the best investment opportunity for you.
Use the factors listed below to evaluate the businesses, then rate the performance of each business out of 10.
The business with the highest score may just be the right one for you.
1. Website Traffic
You want to buy a business with a domain that ranks high for relevant keywords and that is attracting consistent traffic.
Preferably, you want the traffic volume to show steady growth over a period of at least 12 months.
The source of the traffic is also important.
A business that relies exclusively on organic traffic may face issues if Google suddenly changes its algorithm, while one that relies too much on paid traffic may create a situation that is too expensive for the new owner to sustain.
The best situation is when website traffic is growing and it’s coming from multiple sources (search engines, social platforms, email, backlinks, and Ads).
You can get SEO data from the current owner’s Google Analytics data.
2. Business Model
You must analyze how the business makes money.
Look at where the majority of the business’s revenue is coming from and how sustainable it is.
For example, a blog that makes most of its money from the affiliate promotion of one product that is popular with its readers may run into problems if the company suddenly shuts down the affiliate program.
You want to invest in an online business with multiple, sustainable income streams.
This reduces the risk and also provides opportunities to grow the current revenue.
3. Cashflow
Monthly revenues should be predictable or growing.
You also don’t want to buy a business that is enjoying a surge in sales because of favorable market conditions that are only temporary.
How the sales are generated is important as well.
For example, any buyer will prefer to go for an eCommerce store that generates the majority of sales from customers attracted via organic traffic sources and repeat visitors, instead of a store that is relying on unprofitable Ads to boost sales.
You should also look out for outstanding debts on the balance sheet and unfavorable contracts with suppliers that can suppress future growth.
4. Business Reputation
The owner could be looking to sell because of a recent incident that has tarnished the credibility of the business in the eyes of customers.
It’s very difficult to change the negative reputation of a brand, so you want to avoid this kind of business at all costs.
Check online customer reviews to see if there are way too many negative comments and complaints from customers.
You can also use a social listening tool like Brand24 to get a more precise understanding of the dominant online perception of the brand.
5. Current Operations
This is particularly important when buying an eCommerce business, but it is still relevant for content sites and other types of online businesses.
For content sites, you want to understand the workflow and processes of the site owner, as well as the employment status of the team of writers, editors, and other staff that make it all work.
With eCommerce sites, you must obtain factual information on how the business owner sources the products that are sold in the store as well as the details of existing supplier relationships.
You also need to know how the products are shipped to customers and the existing policies that customers have grown accustomed to.
6. Legalities
You want to be sure that the business is not facing legal encumbrances.
Like issues with tax avoidance or a legal dispute with a supplier.
You also want to be sure that you will acquire full ownership of all the digital assets of the business.
For example, you don’t want to be in a situation where you are acquiring a blog with a domain name that is about to be made available for members of the public to bid on.
7. Growth Potential
The business should have future earnings potential.
You must ask yourself whether there will be substantial demand for the brand’s core products or services a few years from now.
The size of the customer base is also equally important.
Is there still a large pool of potential buyers in the niche that you can attract to your brand? Or has the market been maxed out?
Making sure there is still room for growth in the market, will help you avoid buying a business with no future.
8. The Reason For Selling
This is a very important criterion because the owner may be looking to sell the business to get out before problems on the horizon hit its profitability.
This could leave you with a business that costs lots of money but is destined for failure.
The owner should have no problem giving you verifiable reasons that prompted the sale.
Good reasons can be retirement, the need for urgent cash, or the desire to move on to other opportunities.
Bad reasons include declining profitability, outstanding liabilities, impaired brand reputation, and cloudy prospects for the future of the niche.
Step 5: Calculate The Fair Value Of The Business And Make Your Offer
The listing price you see on online marketplaces is not always non-negotiable.
If you are a serious buyer (with available funds), you can get in touch with the seller and use the available financial and SEO data as well as the information you have compiled from your research to try to get a price that better reflects the fair value of the business.
Of course, fair value is not the same as market value.
If the demand for the business is high, the market value may be a lot higher than its fair price and you will just have to pony up if you really want to buy it.
Still, knowing how to calculate the fair value of a business will help you avoid a situation where the price is just too high to justify the investment.
To get the fair price for the online business, you will calculate the 12-month EBITDA (earnings before interest, taxes, depreciation, and amortization) of the business, multiply the result by a factor (between 3x to 6x), then add a discount that reflects the cost of annualized expenses that are affecting yearly revenues.
The final number may be quite pricey, which should be expected since successful businesses are rarely ever available for cheap.
Your goal should be to buy value and future potential.
One listing may be cheap, but have limited room for growth.
While another business on offer that seems expensive may have the potential to double or triple revenues in a few years.
Depending on the terms of the listing or the level of competition you are facing from other buyers, you may have no other choice than to pay the listing price.
If there is room for negotiation, make sure you avoid paying above the fair price for the business.
Once the price has been agreed upon, you may need to create a purchase agreement.
This is particularly important for large deals that involve sums that run into hundreds of thousands of dollars and more.
It’s best to work with a lawyer to prepare the terms of the agreement and to ensure that the ownership of all the relevant assets are fully transferred to you.
You should also agree on how the assets will be handed over to you and how payment will be transferred.
Similar Tutorials To Check Out
- How To Buy Digital Real Estate: this article will help you discover the types of virtual properties you can buy online and the best way to acquire such properties.
- How To Buy A Blog: discover the advantages of buying over starting from scratch and where to buy blogs online.
- How To Buy A Website Business: this article will show you the best places to buy websites and apps, as well as how to determine whether a purchase opportunity is worth your money.
Wrapping Up
You can multiply your investment several fold by buying an existing successful business, but there is always the risk of getting scammed or buying a business you are not equipped to run.
It’s best to do your research and ask the right questions to ensure you are buying a venture with a bright future and not a dud.
If you have any questions about the steps I explained above, feel free to reach out in the comments section.
