How great would it be to buy a profitable website business for a paltry sum and take a step back, relax and travel the world while earning a lot of money? It can happen but it takes a lot of time to get there and it helps a lot to have prior experience and skills. There are advantages of buying an e-commerce website, such as the fact that it is faster and it allows you to skip the process of building it up from scratch and finding suppliers. However, there are also downsides. For instance, it is not cheap to make such an acquisition and it is risky because you can invest in something that doesn’t generate enough money to allow for a return on your investment. With that in mind, here is a s short list of 5 things to take into consideration when you want to buy an online website:
Niche
You must find a website that has a sustainable niche with low competition levels, as nobody wants to compete with thousands of other sites selling similar products. Obviously, perfect niches don’t exist but there are some good ones around, including USP (Unique Selling Proposition) ones that have similar traits.
You have to discover something you are interested in and add value to it. Here are some examples of good products to sell online: objects that are hard to find in stores, disposable objects that force customers to return for more and thus create regulars,’ and accessories for products that need to be bought separately such as smartphones or tablets. As a beginner, you can always use an online marketplace like Exchange by Shopify to find the proper store to acquire.
Suppliers
In order to avoid unreliable or inefficient suppliers you must ask yourself a series of questions: if they are any good, if you want to keep them, if they offer a good deal, where they are located and how long it takes to ship the goods.
The best way to build a trusting professional relationship is to meet with the supplier in person. You can also make a list of test orders to ensure your supplier is reliable and establish rules or expectations from the very beginning.
Web Design and Marketing
If advertising is what draws people to your website, design is what keeps them on your site and makes them purchase your products. When you buy a website, try to be objective and become a customer yourself, then notice if the design convinces you to make a purchase. Also make sure every aspect of the design is user friendly.
You should pay attention to the web traffic sources and prices and check to see if the traffic brings customers back to the website you are looking to purchase. Along with the web traffic sources comes the SEO and backlink analysis, so use tools to examine what has been done on your site and check to see if there are bad backlinks that can cause trouble. Also check the age of the domain and the page ranking, the bigger the numbers the higher the quality of your site.
Financial numbers
Revenue is obviously very important but margins and profits are the ones that count even more. Ask the former owner for detailed income statements and determine the fluctuation of the margins and revenues over the past years to properly understand the financial aspect of your business.
Price and Valuation
After following the steps mentioned above, if you believe that the business is good, the next thing you need to do is to find out if the site will be sold for a premium or a discount. When dealing with valuation, the concept of multiples takes place, which usually means the online business would sold at 1 to 3 times the yearly profits. Therefore, you need to overlook the investment the former owner made and decide whether or not this business is for you.
In conclusion
Buying an already established online store has its advantages (all is already set beforehand) which can save you a lot of time and effort. However, there are inconveniences as well. For instance if the business has too many issues, starting from scratch might save you the trouble. In the end, it all depends on your financial resources and time availability.