There’s no denying that starting an internet business can be one of the most profitable and freedom-producing adventures you can undertake.
With more and more entrepreneurs discovering the power of building an online business, the opportunity to capitalize on this digital frontier becomes even more attractive.
Even though starting an online business can be incredibly fruitful, you’ll need to know going into it that turning your idea into a successful business online can also be one of the toughest things you’ll ever do.
This is why a large number of entrepreneurs are choosing to invest in established businesses instead of building the business from the ground up by themselves.
Buying into an established business is the way to shortcut your path to success, and allows you to cut years off your learning curve and frustrations.
Why Buy Established Online Businesses?
Whenever you’re thinking about starting an online business, you’re going to need to understand quite a bit. Not only will you have to know how to build a business, but you’re also going to need to understand the technical aspects of pulling everything together online.
You’ll have to setup social media accounts and manage them properly, you’ll need to be able to track down new customers and convince them to buy, you’ll need to track the performance of your business, and you’ll need to understand how to always look to the future so you can continue growing on a regular basis.
This is a small taste of what goes into getting a business off the ground. There are reasons 90% of online businesses fail within their first 3 years — the steep learning curve plays a big role in the huge failure rate.
The learning curve shouldn’t keep you away from your dreams of owning an online business, though. There are still alternatives available.
Instead of devoting your time and energy toward getting the business off the ground, you can tap into someone else’s hard work and purchase a business that has already been established.
If you want to generate revenue online, and bypass the huge learning curve (and failure rate), buying an online business could be one of the best moves you’ll make.
- Buying a business gives you immediate access to generating profits. One of the hardest parts of turning a business into a success is identifying a niche market that can generate profits, and then wedging yourself into it. When you buy an established business, this hard work has already been done for you.
- You don’t have to be a pro to start making money. Buying an established business means you’ll start generating income from day 1. You could leave the business alone and let it sustain itself, or you could learn the skills needed for that specific business. This means you don’t have to already be a pro to start turning a profit.
- It shifts the thoughts from “if” to “how much”. A big, negative thought that runs through an entrepreneur’s mind is whether or not they can actually pull off their ideas. When you buy an established business, though, it makes you shift your mindset from “if it’s possible” to “how big can I grow this”.
- You’re setting yourself up for larger deals. The skills you learn from running a business that you’ve bought will transfer over in the future when you’re either ready to buy another, bigger business, or you start looking to build a new business from the ground up. This knowledge is impossible to take away once you’ve gained it.
- You’ve instantly diversified your portfolio. Diversification is important if you want to build true wealth over time. A huge advantage for owning an online business is the fact that the business generates profits every month, without you actively being involved, and is still worth a large amount of money if you ever need to sell it for a quick cash influx.
Which leads us to the biggest question most people reading this are going to be asking themselves, “how do you actually find these businesses?”
How To Find Established Online Businesses To Buy
Even though you know why buying an established business can be so successful, actually finding those businesses can be a challenge.
There may be places that have thousands of businesses currently being sold, but finding one that matches your specific criteria is where the real fun starts.
In general, there are 4 main types of businesses that you’re going to want to consider:
- Businesses that sell information products and courses.
- Businesses that generate revenue through affiliate marketing.
- Businesses that generate revenue through advertising, like Google’s AdSense.
- Businesses that sell physical products to customers around the world.
To help you begin your adventure, here are a few different places you can start looking.
Whether you’re ready to buy, or you want to fine tune your due diligence skills, using public marketplaces, like Flippa, can be a great way to get experience and find a wide range of business listings.
Before you jump into a listing and start submitting an offer, though, you’ll want to make sure you’ve researched the business.
There are a large number of scams on public marketplaces, and it’s easy to get duped, so you definitely want to make sure you know how to separate the scams from the legitimate listings.
Reaching Out To Webmasters
If you already have a business in mind, or you know a niche market or industry that you want to get into, another great way to find a business to buy is to start reaching out to the webmasters and business owners that have a website you want to make an offer on.
These can often be some of the best deals possible, because most owners are simply unaware of what their business is worth. That means, with the right negotiation skills, you can often find deals that were hidden diamonds in the rough.
By far, one of the best ways to save yourself the time and frustration of tracking down an established business on your own is to use a website broker’s services. They bring the knowledge and experience you need to the table, and can definitely help you get the deal done quicker.
Website brokers can find established, legitimate websites that are already generating revenue, and perform the necessary due diligence for you so all you have to do is submit an offer. One of the most reputable website brokers currently available is Digital Exits.
How To Evaluate Websites That You Find
When you’re looking at a website you want to buy, there are certain aspects that you want to see and verify to ensure you’re not going to be wasting your money.
Go over each of the areas below to ensure you’re making a solid investment:
- At least 12 months of history that can be verified. You want to make sure that whatever business you’re going to buy is established and stable. Any business that is less than 12 months old is considered high risk and should be avoided.
- At least $500 per month in earnings. Not only should it be generating at least $500 in profits, but it should have averaged those $500 per month over the course of the last 12 months. This will help you ensure the income is stable.
- The site has never been sold before. Some entrepreneurs make bad decisions and buy a website, only to turn around and attempt to offload it on another unsuspecting entrepreneur. To avoid this, stay away from sites that are young or have recently sold.
- The traffic is consistent and diversified. The key to sustainable business is having traffic coming from a wide variety of sources. If one traffic source disappears, you want to know that the business isn’t going to suffer too bad.
- There is still potential left in the business. It’s not enough to buy a business that is generating profits, you want to know that you can grow the business to get a quicker ROI. Some entrepreneurs will sell their businesses after they have been completely tapped out, which is something you need to look out for.
- You have a second set of eyes to verify what you see. If you’re not experienced already, you’ll want to have a broker or experienced entrepreneur that you trust to verify what you’ve seen and make sure you’re moving forward in the right way.
Of course, these criteria are simply designed to help you get a quick idea whether or not a business is worth digging into deeper.
Once you’ve uncovered a prospect, you will need to perform due diligence and dig deeper to verify that the seller is being upfront and honest with you about their business.
What To Expect From The Process
First, you’re going to need to find a business that looks good. Examine the business and general information you’ve been given about the website to determine if it looks legitimate, or not.
Then, you’re going to need to submit a letter of intent. Once you have determined that you are interested in moving forward, you will need to provide a letter of intent that states your intentions to purchase the website, provided the due diligence process gives you the results you’re looking for.
Next, you’ll begin discussing terms of the deal with the seller. The seller will need to give you detailed information about the business, its history, its financials, how it was built and structured, how it’s generating revenue, and more. If they disclose everything to you, and you’re satisfied, you can move forward.
Finally, you’ll need to figure out a price you’re both comfortable with. This can be the toughest part of the process, and one where you’re going to need to make sure your sales and negotiation skills are up to par. The price has to make sense for both of you.
When all of that is done, you will sign the contract, put your money in escrow, and begin transferring the business into your name.
How To Perform Due Diligence
In a perfect world, you could believe everything that a seller is telling you. However, we don’t live in a perfect world, and believing that a seller is going to be honest all of the time is a great way for you to lose money.
That means you’re going to need to perform due diligence to verify everything they have told you is true, and that you aren’t going to uncover hidden risks or manipulated metrics.
There are three basics steps you’ll need to take to verify what you’re seeing.
You’ll need to ask the seller questions about how they’ve built the business, where their traffic is coming from, how they convert that traffic into revenue, and get a complete idea about how the business is run.
You want to know every single aspect of the business, and every possible metric they can give you.
Once you’ve gotten the metrics from them, you will need to start your verification process. Do the stats that they’ve provided match with what they’ve told you?
Do their conversion rates seem reasonable? Do their bank statements and PayPal statements add up with what they’ve told you about the business?
Take what they’re telling you and verify it every way you possibly can.
By now, you should have put together a picture about the business that you didn’t have before you started. You can pull together these pieces of the story, and then start asking yourself if everything adds up. Whether or not the story makes sense.
Anywhere that the story doesn’t make sense, you should definitely ask the seller to clarify the red flags. The key with your due diligence should be to find reasons not to buy the business — not looking for more reasons to convince yourself it’s a good move.
Think This Strategy Works For You?
At the end of the day, if you think that buying an online business is a good move for you, there are quite a few different ways you can find those businesses, and different approaches you can take to acquire one for yourself.
Each strategy has it’s upsides and downsides, and your own personal experience will determine how the process goes.
If you have never built or bought an online business before, and you believe that the due diligence process could become overwhelming or that you may miss something, don’t hesitate to reach out to a broker.
Finding an established, profitable online business could be one of the best moves you ever make, as long as you handle the process properly.