Buying an eCommerce business can be a great investment opportunity that many modern entrepreneurs prefer over buying a brick-and-mortar business. Online businesses have many benefits such as larger markets, scalability, and more transparency when assessing metrics and profitability. Additionally, buying an eCommerce business can be more affordable as there are many aspects that you will not have to worry about such as physical space.
If you are wondering whether you should buy an eCommerce business, keep reading as this article will provide plenty of useful information that could help you make an informed decision!
Understanding eCommerce Business Acquisition
The first thing you need to do before you decide to acquire an eCommerce business is to determine your budget and to ensure that you are making a wise investment. The amount of money you are willing to invest in your future business is an essential aspect that should be carefully determined. Keep in mind that the business itself will not be the only expense, as you might also have to make changes and improvements such as website redesign and to invest in rebranding or marketing and handle ongoing expenses.
Once your budget is defined, you have to invest some time into learning about the different types of eCommerce business models. There is a wide range of eCommerce business types on the market such as Business-to-Business (B2B), Business-to-Client (B2C), private labelling, wholesale, dropshipping, etc. Once you choose a preferred business model, it is important to understand how it works in terms of inventory, orders, shipping, contracts with manufacturers/suppliers, and other important aspects.
Extra Tip: Before acquiring an eCommerce business, find out why the current owner is selling. This can tell you a lot about the business itself and it will help you avoid buying a failing business.
What Are the Benefits of Buying an eCommerce Business?
When done right, buying an established eCommerce business comes with numerous benefits such as:
Established Customer Base
Acquiring an eCommerce business that is profitable means that its customer base is already established and you won’t have to worry about finding clients. This also indicates that people are interested in the services or products that the business has to offer. Overall, having an established customer base is less risky than starting a new eCommerce business from scratch without knowing for sure if you will be able to attract clients.
Proven Business Model
This benefit goes hand in hand with the one mentioned above, a successful eCommerce business with an established customer base will also have a proven business model. The previous owners already did their homework before they launched the venture and their idea worked. Investing in an online venture that performs well increases your chances of success in the long term.
Existing Revenue Stream
A performant eCommerce business will provide an existing revenue stream. This is great because it will help you balance your budget and cover some of the costs incurred through the acquisition. You will also have a reliable income that can enable you to grow the business without making more out-of-pocket expenses.
Brand Recognition and Trust
An eCommerce venture that has been successful for some time most likely garnered some recognition and trust. Acquiring a business that is already popular and appreciated is a great asset. This can help you save money and you won’t have to put as much effort into promoting the brand as you would a new brand. If you’re unsure on how well the brand is doing, we recommend getting an eCommerce audit completed on the website. This audit will allow you to understand the depth of brand recognition and trust signals of the website.
Immediate Operational Setup
Setting up a new eCommerce business means developing a website and making a lot of decisions in terms of services and products selection and sourcing. The good thing about buying an established venture is the existing infrastructure. You will save a lot of time as you already have a functional website, a good selection of services/products, established supply chains, and an experienced team that knows how things work.
What Are the Challenges of Buying an eCommerce Business?
Although acquiring an eCommerce venture has plenty of appealing benefits, there are certain risks that you should be aware of.
Previous Owner – before buying an established business, make sure you learn as much as possible about its previous owner. The success of the business might depend on their skills, connections, and experience, so make sure you ask plenty of questions that will help you assess whether the business can function as well after the ownership change.
Upfront Investment means a Risk of Losing Money – There are many different ways in which you can end up losing your money when making an upfront investment such as overvaluation of the business, hidden issues and liabilities, declining sales, unexpected costs, and high operating expenses. In an ideal world, the previous owner will disclose the business’ weak points. Being presented with a perfect business at a very affordable price can be a red flag and you might have to deal with these issues later on. It is highly recommended to be vigilant when investing in an established eCommerce business to avoid losing money in the long run.
Extra Tip: Before acquiring an established eCommerce business it is very important to do your due diligence in terms of research. You need to analyze the business’ revenue, paperwork, metrics, filing status, legal assets, trademarks, etc. Not sure if you should buy an eCommerce business? If you feel a bit overwhelmed by all of these documents, you can hire a legal professional who will help you navigate the whole process and help you determine if the venture that you want to purchase is a good deal or not.
