It’s hard to deny that starting an online business can be incredibly profitable.
However, even though starting an online business can be a great move to make, it can also be one of the hardest moves of an entrepreneur’s life. That’s why many entrepreneurs are looking into buying an established business instead of building one on their own.
Buying an established online business is the shortest path to seeing the success that you’re after and allows you to shave years off the process.
Listed below are the basic steps to buying a current online business.
How to Find Established Businesses to Buy
While buying an established business may make your life easier, you still have to track down businesses for sale.
There are 4 different types of businesses to look for:
- Businesses that generate revenue through product sales.
- Businesses that promote affiliate marketing programs for a commission.
- Businesses that display advertisements in exchange for revenue.
- Businesses that generate revenue by selling services.
There are a few different ways to track down these businesses.
Public marketplaces are great for finding businesses for sale. Sites like Flippa can give you the experience you need.
However, make sure you understand what you’re getting into before you start submitting offers. There are quite a few scams on public marketplaces, which is why they’re perfect for learning how to do due diligence.
Reach Out to Webmasters
If you already know the type of business you want to buy and the industry you want to work in, you can start reaching out to existing webmasters to find out if they may be interested in selling.
This may be the way to get the best deal as many webmasters do not understand the true value of their business. With good negotiating skills, you can usually find a deal and buy a diamond in the rough for less than you would be using other strategies.
Work with a Broker
If you’re worried about learning the process and doing the deal on your own, the best strategy is to work with a business broker. They can help you get the deal done with minimal frustrations.
Brokers have lists of established businesses ready to sell. A reputable broker will have already weeded out the scams for you. They will also assist you through each phase of the deal ensuring that all due diligence has been performed before you buy.
Brokers can advise on what things to include in the sale contract and how to perform the transfer of the business and the payment in the safest way possible, so both parties are protected.
How to Evaluate the Businesses that You Find
There are certain things that you should check to ensure you’re not wasting your money.
- At least 12 months of age and easy to verify. Confirm that the business you want to buy has shown stable growth over the course of at least 12 months. Younger businesses are typically riskier.
- Generating at least $500 per month. Check that there is revenue in the market that the business is built around. If it’s not generating at least $500 per month over the last 12 months, you may want to pass.
- Belongs to the original owner. Businesses that get bought and sold on a regular basis are usually hiding something, waiting to pass it on to the next entrepreneur. This means you want to stay away from businesses that were recently purchased.
- Consistent, diversified traffic. Building a sustainable business requires consistent and diversified traffic. If one traffic source gets shut down, you need to know that there are other sources so the business can still grow.
- Existing growth potential. You do not want to buy a business that has already tapped out the market. To get an ROI on your investment, you’ll need to be able to scale what you’re buying and you’ll need existing growth opportunities to do it.
These criteria are designed to help you quickly weed out businesses that aren’t going to be a sound purchase. Once you’ve decided upon a business, you’ll go through the following steps to acquire it.
Start by asking the business owner questions about how they’ve structured the business. Such as, why they built it, how they are driving traffic to the site, and how that traffic is being converted into revenue.
You need to see every aspect of the business. Dig into each of the different metrics that they give you. The more questions you ask here, the better off you’re going to be.
Once the business owner has given you the metrics, you want to start investigating what they’ve told you to verify that it’s true.
During your due diligence, you want to look for any discrepancies and keep your eyes open for any potential red flags. The purpose of due diligence is to find reasons NOT to buy the business.
If the business makes it through due diligence, you’ll want to visualize yourself stepping into the new role as the business owner. Make sure you can devote the proper time and energy to it.
If you can see yourself becoming the new owner, you will begin the negotiation process. You’ll state the terms of the deal and how much you’re willing to pay to acquire the business.
Once the sale terms are agreed upon by both parties, the transfer process begins. You will deposit your money into escrow and the owner should begin transferring the business to your name.
It’s best to include in the sale terms that the previous owner will provide support for a set length of time, to help ensure you’re able to efficiently step into your new role.
Think Buying a Business Could be Right for You?
Buying an established business could be one of the best and most profitable moves that you’ll make, as long as you take your time and move through the process carefully.