Considering buying an online business?
The cost of starting an online business now is extremely low compared with traditional businesses.
That said, success in online business is not a given.
That is why astute investors often buy and sell companies online.
As with any entrepreneurial venture, launching a new business carries risk.
Many things can go wrong. For example your product might not sell well, your logistics partner may have inventory problems or your marketing plan may not achieve your projected numbers.
Reduce your start up risk by looking for online businesses for sale.
Instead of risking time and money on an unproven idea, you can take over an established business. This way, you will immediately start with a database of customers, products that sell and a healthy profit.
Instead of waiting to break even via an unproven start up, you can buy an online business that will deliver profits immediately.
Before you excitedly type into Google “online business for sale”, it is important to remember to do your due diligence. Check the seller’s claims.
Buying An Online Business – Essentials
Understand what the Offer is:
When buying an internet business, consider the following
- What is the owner selling? Some entities may be complex. It is best to establish what exactly is included in the sale. It might include the domain, website, existing inventory, staff, customer list, accounts receivables, intellectual property and all social media accounts associated with the site.
- Profitability & Financials: After signing a non-disclosure agreement, you should have access to verified bank statements and any other documents that reflect the business’ health. Look at cash flow, revenues, expenses and profits.
- Sales channels: How are the business’ products sold? — through its own webstore or marketplaces (like Lazada or Amazon)? Are all the sales channels included in the sale?
- Business model: What business model does the store employ? Are they product suppliers, resellers, wholesalers etc.
- Legal: Understand all the legal issues associated with the business. How is it structured? How many shareholders are there? Are there any outstanding legal concerns?
Visit the online store. By going through the pages and buying process, you’d be able to get a feel of the user experience (UX).
Evaluate website speed, mobile responsiveness. Surfers have no patience to wait and tend to leave slow website quickly. You want to establish that it is technically optimized.
Testimonials and complaints
Look at the brand image when considering buying an online business. You’d expect a well established business to have both positive and negative feedback.
Look at the reviews from both sides of the coin. How does the online business respond to comments? It will show how the owners treat their customers and give an indication of how the business is run.
Website traffic takes time to grow. Make sure that the online business owner is not manipulating traffic sources to mislead would be buyers.
Request to see store analytics to get a detailed picture of the growth rate of visitor volume. If a webstore has high organic traffic, you’ll have strong foundation for future growth.
Look out for traffic trends – are there specific times of year when there are a lot of sales? Which country and regions do sales come in from? Is the traffic coming from desktop or mobile devices?
Understanding the sources of traffic will help you understand whether the business can be scaled.
For example, if much of the traffic comes from paid advertising, then you’ll be able to increase sales volumes directly with your ad budget.
If your traffic is mostly organic (SEO), then you can expect constant sales without having to spend much on marketing.
Ideally, the website should get traffic from multiple sources. This would mitigate the risk associated with overreliance on any one channel.
Traffic metrics like average time on site, bounce rate, number of page views, degree of scrolling and new vs returning visitors help to evaluate the quality of traffic being delivered.
Financial Audit – Necessary when you intend to buy Ecommerce Business
Financial data gives you information about the webstore’s buyers list when you are buying an online business.
Understand the revenue trends – ideally you’d want a business with rising year on year revenue.
Sales and traffic should have a positive correlation. If you are getting visitors from optimised sources, then you should see more revenue with increased traffic.
Identify the traffic source with the most sales. It will give you an idea of how much you can scale the online business.
If revenue patterns are seasonal, you will adjust your expectations for planning purposes.
The successful business owner will want many high paying customers who buy frequently. This would reduce the risk of overdependence on any one individual or group.
Analyse revenue by customers. Look at the average order value per sale, percentage of repeat purchases, frequency of reorders, average order size of repeat sales, profit margin per customer.
Good businesses do not overrely on sales of one product. Having a wide product range lowers the risk of cash flow issues when demand for specific products fall.
Revenue by product – identify bestsellers and the percentage of revenues they account for. See whether product demand trends rising.
Are supply sources of bestsellers varied? Is the popularity of low demand products growing?
Good businesses do not rely on sales of one product alone. Having a wide product range lowers the risk of cash flow issues when demand for specific products fall.
Identifying The Best Online Business For Sale In Singapore
Buying An Online Business – Cost Analysis
Cost analysis involves studying the cost of running the business as well as selling and delivering the product/service to customers. They include cost of inventory, production, marketing, shipping, and refunds.
They are a vital metric that help you calculate the profitability as well as the required cash flow of the online business.
Consider cost of acquiring each item, minimum order requirements, shipping of average sale, warehousing and inventory.
Identify areas where you can lower the costs via your own network, research and connections.
Any online business can expect returns and chargebacks. Top retailers have low single digit return rates. Discuss with the owner how he would lower the return rate if he could. A genuine seller will advise buyers how to improve the business and make it more profitable.
Buying An Existing Online Business For Sale In Singapore Checklist
The technical audit is another crucial element of assessing whether the online business for sale in Singapore is feasible and financially viable.
While online businesses rely heavily on technology, it is safe to say that there is a human team running the show in the background.
It is important to know what technical skills are required to run the operations. Firstly figure out what kind of software the store runs on.
Are you or your intended team familiar with the technical skills to utilise it? What is the software’s learning curve like for newbies?
Ecommerce software like WooCommerce is the core of an online store. It is imperative that you know what Ecommerce software the website uses.
If it is one that you are unfamiliar with, weigh the cost of changing it to a familiar one and learning how to use the existing platform.
A good ecommerce software should integrate with payment processors, customer management systems and fulfilment processors.
Marketing software are crucial to bringing in customers to the online business. They include email marketing software, customer support tools, chatbots, content management systems, social media marketing tools. Again, evaluate them by software cost, special requirements and learning curve.
You’ll be able to tell when the domain was created. Go through domain history. You will be able to see whether it was used for nefarious purposes. Also check whether the domain has been blacklisted by search engines and mail servers.
Online Business For Purchase In Singapore – Marketing Audit
Buying an online business for sale in Singapore with an existing store provides you with a strong marketing foundation.
This gives you a jumpstart to scaling growth rather than tediously starting from scratch. Even a failing store would have some search engine traffic and social media following.
SEO is the number 1 method of growing an organic following. It is a huge attraction for buyers of online businesses. A website with a strong SEO foundation can command a high price due to the fact that customers are already visiting it and will continue to do so. Using Google Web
It’s much easier to get organic traffic if the store already has a strong SEO foundation. Using tools like Google Search Console, you will be able to get deep insight into the boutique’s traffic, backlinks, keywords and ranking details.
Keep an eye out for any lucrative keywords the site already ranks for. If you can push the store’s ranking to the top three results, you’d get a lot more organic sales.
Buy Ecommerce Business – Additional Audit
A social media audit should consider the number of subscribers/fans/followers on social media networks, the frequency of posts, your ability to create top performing content and whether social media marketing has been fully optimised for results.
The savvy social media marketer will be able to quickly scale results when a firm foundation with credible data has already been established.
Email and referrals are the two biggest sources of traffic to online stores. Consider the size of email subscribers list, open & click through rates and email content.
Evaluate the possible expansion of the referral network, the sustainability of referral traffic, whether the partnerships are long term?
Paid Advertising Campaigns you should also request for paid campaign data on platforms like Facebook and Google Adwords. Assess the cost effectiveness of paid campaigns.
Business consultancies like Blazing Conversions, can audit & evaluate the online business for sale in Singapore that you might be considering.
How To Buy And Sell Companies Online Safely
Buy Shopify Stores – The Personnel Audit
When you buy and sell companies online, you need to do a personnel audit.
Businesses are made up of relationships with suppliers, staff, customers and owners. So it is important to understand the dynamic between them.
Having reliable, cost-effective suppliers can be a big advantage for any business. Having close working relationships, together with long term contracts with such responsible external partners is a big plus for the potential buyer.
Evaluate the terms of agreement with each supplier. Take note especially of terms pertaining to cancellation, refunds, reorder sizes, returns, quantities of SKUs and shipping.
Other external partner agreements to consider are marketing contracts with digital marketing agencies.
If the marketing has been done well, traffic is targeted and sales conversions are high, longer term agreements would be pros to the buyer.
You as a buyer will have certainty with regards to your marketing costs.
It is the same with any freelancers hired by the business. Understand their wages, their responsibilities and how they function within the framework of the business.
Buy Internet Business
How many staff does the online business employ? What are their wages? Where are they based? Are they replaceable? What are their roles and responsibilities?
You’d want to ensure that their duties and processes are documented. This will facilitate handover processes should anyone of them retire or need to be replaced.
If the web store had essential staff with long term contracts, that may be advantageous to you.
Otherwise, you will have to decide whether you want to keep the current team or replace them with your own trusted people.
Be aware of potential legal ramifications of relieving the team currently in place, as well as the training cost associated with new hires.
Finally, assess the owner. Understand his reason for selling, as well as, willingness to help you with the transition.
When you buy and sell companies online, substantial amounts of money are inevitably going to be involved. You would want the current owner to be trustworthy.
You would also want to ask whether he is open to seller financing. This could substantially lower your initial outlay.
If the owner is presently indispensible and his duties are entrenched in the daily operations, you might want to include a clause in your purchase agreement that ties him to a longer handover period.
Buy Ecommerce Business – Advantages
Buying a business is generally considered less risky than starting your own business. This is especially true when the business you are considering is well-managed, profitable and asking for a good price. Consider these advantages:
- The difficult & tedious start-up work has already been completed. It is a proven model. Business plans and procedures have been refined with profits reflected.
- For new business owners, having experience is a great plus. Existing managers and staff will have experience. They have various inputs they can share.
- The market for your service or product has already been researched and established. You save time getting a foothold in your chosen sector.
- You immediately acquire existing customers, goodwill, suppliers, employees, contacts, plant, equipment and stock. These are already done for you networks.
- Buying an established business means immediate cash flow. You can focus on scaling the business or getting a larger market share.
- With a financial history, the business gives you an idea of what to expect. It also makes it easier to attract investors, secure loans or alternate funding.
Buy And Sell Companies Online
Buying an online business or considering an online business for sale can be tiring and expensive. That said, it can be an exciting, lucrative and safer entrepreneurial route.
Instead of starting from scratch before slowly working your way up, you can take advantage of existing established businesses with proven track records and strong foundations.
By investing in due diligence, you can attain higher rewards in a shorter time frame safely.
You might be considering the “buy internet business” model or need help auditing a company for sale. Contact Blazing Conversions for a deeper discussion today.