Through lockdown, older generations have started shopping online, which could create a change in the way we shop, creating more income possibilities for online businesses.
All business ventures come with a certain element of risk; however, owning an online business offers entrepreneurs a relatively low-cost start-up and the chance to reach a worldwide market.
A buyer’s profile
If you are planning on buying an established online business, it’s a good idea to choose a website that sells a product or a service you’re interested in. The more passion you have for the business, the better you will be at catering to customers.
You need to have some basic tech skills and be familiar using the backend of a website. If this is something you struggle with, find out if seller support can be offered during handover. Alternatively, you could sign up to a website training course.
You need to be organised and focused; operating online gives you the freedom to work from anywhere. It’s important to have a dedicated workspace in your home; you should block out distractions but also try to have some social stimulation in your days.
What to look for in a business
What are the traffic figures for the website? And what is the average conversion rate, e.g. how many customers that land on the website makes a purchase? Find out where the traffic is coming from too, e.g. social media referrals, and analyse any spikes in traffic.
Has the vendor negotiated good prices with their suppliers? How much stock, if any, will be included in the sale? Do the products on the website have good reviews? Does the company itself have good reviews? These aspects will influence your offer.
Online consumers can be fickle, with so much variety at their fingertips, just because a shopper puts items in their electronic ‘basket’, it does not guarantee a sale. Make sure the site is user-friendly and run smoothly, technical glitches can lose your trade.
How long has the business been running and why is the owner keen to sell? What other websites are offering the same or similar products or services, and how can you create a competitive edge over your rivals? Is there potential for growth or diversification?
Due diligence
There are many methods to value a business; typically, an online business is worth three to six times more than the profits made before interest and taxes are deducted. To calculate an accurate value for a website you will need to gather a lot of data.
It’s important to look at the quality of the traffic coming into the website. Make sure there are no spam or black hat links that have been built; you should see a gradual and organic growth rate. If there are any spikes in the traffic, find out what caused it.
During your due diligence you should also check the domain history; older, well-maintained websites usually rank higher on search engines. Ultimately, the higher up your site is on Google, the more chance you have of achieving and maintaining success.
Buying a Franchise
Buying a franchise in this industry is a good option for anyone with limited capital or is unsure of their skills. Buying a franchise will allow you to buy a business but also get support and training from the parent company.
For advice on buying a franchise and choosing the right one, take a look at the webinar that we conducted:
Is it right for you?
Owning an online business doesn’t suit everyone, some entrepreneurs prefer to have a physical premise and engage with their customers in person. However, it can be a much faster route into business.
Do you have the passion and determination to keep the business successful? Despite operating online, you will still need to source stock, find suppliers, arrange postage, communicate with shoppers, update blogs and social media posts.
Even if you don’t have all the tech knowledge and skills from the start, it’s important to be keen and willing to learn. If you’re keen to sell products online, start selling items on Amazon or eBay to get an idea of what the business involves.
