Buy an Existing Online Business
Starting an online business can be a lucrative opportunity for earning money. Online business is the trend today and there are many kinds of business you can start with. But of course, know that starting your own online business is not an easy feat to do.
Video Overview: 5 Facts You Need to Know About Buying an Online Business
Why Buy Existing Online Business?
Online business means you need to have at least basic prowess on operating a computer apart from business acumen. At the same time, you need to set up a website or a social media account to where your customers will find you and your merchandise. As you can see, there are plenty of things you need to do, not to mention you need a considerable amount of money to start your own business.
There is an alternative, however, if you really want to start an online business. Instead of starting your own, you can buy an existing online business to start with. If your finances permit, buying an existing online business (or website) is truly a fast track towards online success. Do you know that about 80% of new businesses fail?
Even businesses put up by seasoned entrepreneurs sometimes don’t even make it past a year. This is because a business is a gamble and new business is a lot riskier. If you really want to make money online, you can either start from scratch or instead start an existing online business with an already proven record. Here are a few reasons why buying an online business is a good idea:
- Immediate access to a new and profitable niche.
- Even if you’re just starting out, you feel like a “pro”. You’re immediately bringing in real income.
- Takes you from “if” I can make this work to “how much” can I make it work.
- Positions you for future/bigger deals. The process is identical — the terminology, due diligence, considerations. Practicing on less expensive purchases has less risk.
- Instant diversification. While diversification is important in any business,
The question is where can you find an existing business to buy?
Video Overview: Why buy a business NOT build a business?
Ways to Find Existing Online Business for Sale
Know that finding a business to buy is going to be a real challenge. It isn’t like you can find a single place to where existing businesses to your liking are sold. The important thing is you know where and how to look. So here are different ways you can find an existing online business to buy:
- Approach Businesses Directly
If you know what you’re looking for and already has an eye for a business you like, it could worth approaching them about buying their business. Before proceeding to buy the business, you’ll want to do some research first, prepare a business plan and a pitch and more. If after all research you still like the business, then you can proceed with buying it.
- Go to Online Marketplaces
The next logical place to go to is an online business marketplace and there’s plenty out there. These are the most obvious places to start wherein you’ll find available listings of online business in your chosen industry with viable opportunities. There you can find valuable information for any potential interest and go on the process of buying an online business.
- Get Help from Website Brokers
There are also website brokers – companies – that have experience, knowledge, and expertise in the selling of an online business. They have the tools and the network along with the due-diligence process. Additionally, web brokers specifically look for well-established, legitimate sites with a steady income – everything you are looking for. If its easy way of finding and buying an online business, enlisting the help of website brokers is an ideal choice.
What type of businesses can you buy?
There are a lot of online business types, but the four preferred models that come up most for sale are:
- Information Products
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What to look for when evaluating sites?
- At least a full year of history to reflect seasonality.
- At least $400 in profit each month for the last 6 months. Less than 6 months is too unpredictable.
- The site should not have been sold within last one year.
- Consistent traffic with no unusual spikes. Be highly suspicious of huge traffic spikes. Unfortunately, some companies who decide to sell, they pad the stats by sending all sorts of expensive PPC traffic to it. That strategy is not sustainable due to the expense.
- Make sure it passes all due diligence checks (see below).
- Have some synergy targets, ways that you can improve the business and increase the revenues.
- Have a great broker.
The Buying Process
- Find a deal that looks good. Examine the prospectus ( general information about the site). You’re not signing yet, just determining if it looks legit.
- Provide seller with a letter of intent. They see you’re interested, that you intend to buy this business depending on the results of your due diligence.
- The seller creates a Data Room. This is a package of information, usually in a virtual folder, where the seller discloses everything to you – if not – no deal. This information is crucial to your due diligence.
- Consider the things you bring to the table. What is the potential return on revenue, traffic and so forth? Then determine what price makes sense to you to make it a worthwhile purchase.
- Sign up a contract.
The Due Diligence Process
You can’t always believe what you’re told. You have to do some hands-on verification. Does the story you recreate about this online business match up with the seller’s claims?
There are three basic steps to the due diligence process:
Step 1: Understand the “story” the seller is telling you about traffic sources, conversion vehicles, inventory and affiliate products, AdSense… Get complete, total statistics and information – every single metric.
Step 2: Verify every metric with proof. Do the web host stats match traffic? Does the conversion rate make sense? Do the affiliate management company reports show the same number of units? Do the bank deposits and PayPal reports add up? Take the information the seller is providing and verify that it is true and accurate
Step 3: Build your own “story” with all the proof. Does it all really add up? Does it make sense? Ask for clarification where it doesn’t make sense. Your verification has to match up.
The bottom line
If you’re looking to buy an online business, there are a variety of different channels available to you, and one isn’t necessarily better than the other. They all have their upsides and downsides, and you have to check your overall experience with the channel you’re looking to utilize.
If the due-diligence process is new to you, and you’ve never bought a business before, then online marketplaces and auction sites may not be the best options for you. On the other hand, even if you do have a great deal of experience with the sale of online businesses, there are times when working with a broker is still the smartest thing you can do.