Starting an internet business is a big decision that requires some serious thought before going ahead.
Aside from your own skills and interests, the other important decision you’ll make is whether to start your business from scratch, or buy one that’s already established.
When you buy an online store, you can start trading much more quickly, and benefit from having an existing audience. While the initial expense and learning curve may be steeper, the flipside is a potentially far quicker return on your investment.
So where to look first? First, you need to know what you’re letting yourself in for.
Identify the potential risks
There are some very particular risks to be aware of when buying your first online store. As such, performing your due diligence is a must. You need to identify any and all factors that could undermine the success of your new business in future. These include:
- Unstable site traffic – Your success relies heavily on a good, consistent level of website traffic, primarily via organic search. Be sure to evaluate all traffic sources and pinpoint issues that could threaten your search rankings
- Technical expertise – Most online companies need a certain degree of technical experience behind them. Unless you’re comfortable with this side of things, consider hiring an expert to evaluate the site on your behalf and identify spammy SEO tactics
- Future competition – The is always a chance that you could end up competing against the seller post-sale, since it’s impossible to enforce non-compete clauses overseas. Make sure you research the seller’s background before agreeing to a deal with them
- Financial flaws – Look closely at the store’s financial information and compare it with what you would expect it to be earning based on its metrics. If the data doesn’t match up, it’s a sign that something fraudulent could be going on
- High maintenance – As the new business owner, you’ll likely play an important role in maintaining the website, so speak to the seller about how long they usually spend maintaining it, and ask yourself whether you’re likely to need additional help. If so, this will need to be factored into the budget
Determine your profit potential
One of the benefits of buying an online store, as opposed to a brick and mortar business, is that you save yourself a lot of time-consuming and expensive jobs — but you still need to pay out for the site.
High-performing sites can be expensive, sometimes selling for hundreds of thousands of dollars. However, you can also find more modestly priced options around the £300-£1200 mark.
If you’re not sure how much a business is worth, try this technique: take the business’s annual profit and multiply by 2 or 3. On top of this, you should also take into consideration it’s branding, the strength of the domain, traffic, social media presence, and existing customer base.
If you’re looking for a sound investment, here’s a good checklist:
Find an online store for sale
For a first-time entrepreneur, finding an online store to buy can feel like a bit of a minefield. There are several ways to find them – the most common are listed below:
- Approaching the owner directly – this is a good option if you know exactly what you’re after. You will still need to do your research and prepare a business plan, as with any new business purchase. Before approaching the owner, analyse the website’s traffic and backlink profile using a tool such as Ahrefs. Performing your due diligence is absolutely crucial and you’ll need to come up with a killer pitch to convince the webmaster to consider selling
- Online marketplaces – Through a specialised online marketplace like Exchange, potential buyers can set up an account and search through a variety of listings in their chosen industry, interacting with sellers and asking for additional information where necessary
- Auction sites – With a website/domain auction site, the key difference compared to an online marketplace is that potential buyers can bid on sites. This gives sellers the opportunity to drive up the price, however, some sellers auction off sites without having a firm grasp of their value, giving the market a chance to pitch in with their offers
- Website brokers – Website brokers are in the business of buying and selling online stores, so their expertise can be useful. They will of course charge a fee, but they are usually paid at the end of the process once the final sale has gone through.
You can also find sites, businesses, and domains for sale on social media — just monitor relevant hashtags, and reach out to people in groups, discussions, and forums.
Closely assess its metrics
If you’ve found an online store that you’re interested in, the first step is to ask to take a look at its analytics. The seller should be happy to provide all the necessary information for you – if they’re not, you have to ask yourself why.
Using Google Analytics, you will be able to check the website’s traffic levels and sources, in particular, how much of it is organic, paid, or via referral. You should also take a look at the keywords and phrases that are performing well – you can use SEMRush to easily find this data.
Look at the ecommerce sales data over the past year and see if you can spot any worrying trends or issues. Beware of paid traffic inflating sales figures.
Backlinks and site authority are further important factors to look into — you want a clean and natural backlink profile — avoid any spam.
Make meticulous transfer plans
Once you’ve found an online store to buy and agreed on a price with the seller, the next step – and one of the most perilous – is the transfer of ownership to you. This part of the process should be carefully planned, as it’s the crucial moment where deals can sometimes fall apart at the last minute. Everyone needs to be on the same page and have the same expectations for the outcome.
The easiest way to ensure this is to write up the expectations of the sale in advance, including a comprehensive list of all the assets that should be transferred to you before the sale is considered complete. If you’re worried that you’re going into too much detail, don’t be. More detail is always better than not enough.
Here’s a short list of details to start you off – remember to add anything specific to your own deal:
Buying an online business is potentially risky, but it brings its rewards as well. Don’t rush into any decision, and always take the time to carefully weigh up your options before making a commitment. And remember, the hard work is only just beginning once the deal is done. Read these 7 Top Digital Marketing Tips to get your new online store off to a flying start.
– Written by Gareth Simpson
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