What to Look at When Buying an Online Business
Owning an online business seems like the ideal way to earn a living. After all, you can run the business from almost anywhere at any time and at a relatively low operating cost. It’s an ideal setup for anyone who likes to work from home and keep a flexible schedule.
Better yet, if you’re looking to grow the business, buying an established online business gives you a unique advantage. It’s already bringing in revenue, plus it already has customers and an established web presence, giving you something to build from and make your own.
However, not all online businesses are created equal. There are a wide variety of online businesses for sale – from ecommerce businesses to lifestyle blogs. While some may be very lucrative, others may be low-tech lemons with with questionable financials - or worse, scams.
Before you buy any online business, do your preliminary due diligence and see if it’s actually a wise investment. Here are 7 things you should look at before buying an online business:
1. Verify how well the business is performing and its future potential.
Just like any other business opportunity, a potential buyer should evaluate the business as a whole. The business should be well-established, at least 2-3 years, with a customer base and verifiable financial documents. Its annual revenue should be trending upward, showing a history of success. If this isn’t the case, the owner should provide a reasonable explanation. Ask the owner specific questions to get a complete picture of how the business is performing.
2.Verify the website’s online traffic and lead generation.
An online business that depends on generating traffic should have a tracking system, such as Google Analytics, that shows a detailed overview of the site’s traffic. This data should show you how many visitors the site receives and how many visitors are converting to leads. The data should also show how traffic is generated. Is it mostly through paid advertising or another media channel, such as email or social?
3. Verify the website’s search engine ranking.
How high does the website rank against its competitors? If it’s not ranking high it may have performance issues that are affecting its visibility, such as outdated coding and poor functionality. Websites that do not keep up with Google’s latest search engine optimization (SEO) best practices, such as poor page construction and low quality content also rank poorly.
4. Check for any shady backlinks or blackhat SEO practices.
Some online businesses rely on unethical ways to attract users. They pay third party advertisers to generate large volumes of backlinks on low quality websites with spammy content. Yet, many websites link to reputable publications with good content. There are many tools, such as ahrefs’ free Backlink Checker, that can be used to evaluate the backlinks of a website. Some websites also use shady SEO practices, such as keyword stuffing, duplicate content and click bate. Search the business by its own name; if it doesn’t show up in search results, there’s a good chance it’s being penalized by Google.
5. Verify the business model and the company’s product or service.
Online businesses generate their revenue in a variety of ways. If it’s an online retailer, find out if it sells via drop shipping, wholesaling or manufacturing. The business should have multiple streams of income and not rely on the sale of just one product or service. Does the business use sales channels, such as online marketplaces or is there a physical store? How are the purchases handled? Does the business have an SSL certificate to handle credit cards? If the business is selling information in the form of a digital product, such as white papers or how-to guides, consider whether or not you have the knowledge and expertise to continue growing the business.
6. Verify what’s included with the business purchase.
If you’re purchasing an online business, verify whether or not you will have full ownership of the website’s digital assets, including photos and domain name. The domain name should be registered in the owner’s name for at least another 12 months, giving you ample time to transfer ownership. Find out all the tangible and intangible assets included with the purchase, including branding, intellectual property, inventory, client lists, contracts, etc. Verify how the website is being hosted. Many websites are created through marketing companies on shared hosting accounts. As the new owner, you should have the option to shop around and choose your own web hosting company.
7. Review the business’s online reputation and check for complaints.
As you’re studying the online business, search online for reviews and complaints. If the business has a pattern of poor reviews and unhappy customers or if someone has reported it as a scam, it may not be worth pursuing. Ask the owner how they handle returns and charge backs. High return rates could be a red flag. On the other hand, the business may have received rave reviews and recommendations from well-known media sites and bloggers. It may even have a high rating from the Better Business Bureau.
Buying an online business can be a great investment opportunity. It’s a turnkey operation with proven sales, established products and a customer base, but there also a risk. Make sure you verify as much information as possible. Moreover, working with a reputable business broker who has experience selling online businesses can make the search, selection and due diligence process much smoother and less stressful, plus reduce risk.