A successful Ecommerce website can enable you to follow your dreams
Imagine traveling the world while earning a monthly income from a profitable dropshipping site. A successful E-Commerce website can enable you to do just that.
Others have done it, and with a bit of hard work and focus, you can too.
While ditching corporate life in favor of a four-hour work week sounds stellar, you must put in the research and work first. Starting a business from scratch has helped many entrepreneurs achieve their dreams. Yet this can take weeks to see results – and a whopping 20% of businesses fail within their first year.
Perhaps you’re buying an E-Commerce site to get there faster. Rather than spending hours contacting suppliers, setting up automated emails, and creating marketing campaigns, you find someone who has already done it for you. They want to move on from their E-Commerce business, and you see an opportunity.
Yet you need to make sure you invest the right amount. After all, you want to avoid spending tons of money on an E-Commerce site only for it to fail. You need to conduct intensive research, but where should you start?
To ensure you buy the best E-Commerce business for you and see a return on your investment, we’ve outlined several critical areas to look for when buying an E-Commerce business.
Make sure the site you find has a good niche with acceptable demand and low competition.
What exactly does this mean? For example, many E-Commerce sites sell popular electronics, but these are broad markets with thousands of competitors. Ultimately, if you don’t differentiate your products, value, or brand, you’ll end up competing on price, which means no profits.
Suppose you do choose to compete in a saturated niche. In that case, your business needs to have an extremely valuable Unique Selling Proposition (USP), which takes much more time and invites significant risk. However, finding a less competitive and profitable niche offers a much easier E-Commerce path.
Your niche cannot be general
When buying an E-Commerce business, many entrepreneurs gravitate towards operating a general store. After all, intuitively, you might think having more products means more customers. But forget this logic: if you sell to everyone, you sell to no one.
When selecting a niche, ask yourself who your target market is and what problem you solve for them. If you cannot develop a clear idea of which consumers would shop in your niche, narrow it down further.For example, hone in on a specific part if you want to sell technology. Do you want to sell laptops? How about keyboards? Maybe even colorful keys? You can also target niches that are currently trending, like designer face masks. Continue this exercise until you find yourself in a niche with specific products and buyers.
Your niche needs to strike a balance between competitors and profit
Now, perfect niches do not exist, but there are profitable ones. These niches usually have the same or similar characteristics. You want to target a market with at least some competitors – markets with little to no competition usually indicate a small or nonexistent consumer base.
Next, when buying an existing business, you want to ensure your semi-competitive niche is profitable. Consider searching for keywords and analyzing total volume.
Is your niche driving 10,000 searches every month or barely cracking 500?
A profitable niche will already have monthly search volumes indicating a product-market fit. While search volume is one important factor, weigh it against other factors that still point to opportunities. There is still profitability and opportunity in the long tail of specialization.
You need to find something you’re interested in and can add value to
Focus on an area you’re interested in, and you’re more likely to invest the time and energy needed to make it a success. Given that over 3 in 10 small business owners struggle to find motivation, you should give this considerable thought before you buy the business. Do you have any hobbies you could monetize? Have you taken an engaging and interesting class before?
This also means having expertise in your niche because you want to write good content for your site. For example, suppose the product you sell has multiple components and complex installations. In that case, you can use your expertise to create a free manual to go along with the product, thus giving you an edge over Amazon and charging a premium.
Small products with many accessories are usually difficult to find at a local brick-and-mortar store. They have low turnovers and are great products to sell online. Disposable products mean that people will return to your site often, and you can build a regular customer base. These are just a few compelling examples when buying an E-Commerce business.
You need to focus on profitable products
If you find a product that interests you, logically, you need to figure out if you can make money selling it. When settling on a list of possible products to sell, which have high margins? Which barely break even? You want to target products that generate the most profit per sale.
For example, software as a service (SaaS) typically includes businesses selling online tools and platforms to other companies. Read more about SaaS businesses here in our Guide to Buying a SaaS Business.
While niches seem straightforward, they are the foundation of an effective E-Commerce business. Spend as much time as you need figuring this out – moving forward without doing so could set you up for disappointment.
If you want to thrive in the Ecommerce space, you must study your competitors
If you properly researched your niche, you likely have an idea of where to find your competitors. Chances are they are doing something wrong. When buying an E-Commerce business, you want to find ways to one-up and do more than your competitors.
- Can you merchandise your products better with higher quality product images?
- Can you create great content that educates or entertains customers?
- Can you build a brand identity with customers identifying with you over and above the competitors?
- Are they selling products directly to consumers or operating under an Amazon FBA model?
- Website traffic. The traffic comes from Google Ads, is it organic, or is it a combination of both?’
If you enter an E-Commerce space and replicate what everyone else does, you will not get noticed. You will more likely fade into obscurity. You need to understand the nuances of your competitors and their consumers intently. Intimately understanding how to serve them best will enable your business to grow.
When buying an E-Commerce business, it’s important to understand how it is positioned compared to competitors and if there is an opportunity for you to grow the business by differentiating products further.
Never compete on price
When researching competitors, you should take their prices with a grain of salt. On the one hand, they provide a general idea of the going price rate for your market. On the other hand, competing and matching on price will bring you – and your competitors – down a no-profit path.
Moreover, price competitions inherently attract price-sensitive customers. These consumers prioritize low prices and bargain deals over quality products. As a result, they are typically tough to please and unlikely to be loyal customers you can nurture into a relationship that can represent a lifetime value. You want to avoid these buyers as they are not a profitable crowd.
Buying an E-Commerce business allows you to stand out from the crowd. How can you improve your offering? In what ways can you develop a better product? When you commit to these initiatives, you can charge higher rates than your competitors. You should do this. Consumers perceive quality through the price a company sets.
To ensure your customer base knows your value, consider running marketing and promotional campaigns – which are further explained below.
Develop and leverage your brand identity
At the beginning of your E-Commerce journey, you want to ensure you have a clear brand voice and identity. This means understanding the existing brand voice and identity if it’s working or establishing a new one if this is an opportunity for you to develop the business.
You should do this as soon as possible. At this point, you should better understand your customers’ pain points and problems. Your branding should reflect an intimate knowledge of their issues. When promoting your E-Commerce business, you should always emphasize how you solve their problems.
Additionally, buying an E-Commerce business means staying up-to-date with your online presence. Become active on social media, engage with your audience, conduct polls, respond to comments or direct messages, and stay authentic to your brand. If you have a solid idea of where to best talk to your consumers, go there.
Sometimes, dealing with competitors can get overwhelming and frustrating. But you and other E-Commerce owners are targeting the same audience – and the similarities should end there. Never bow down to price competition, use discounts and promotions effectively and appropriately, and sell quality goods. It will make your offering much more competitive.
All of this information can be included in our business plan, which will, in turn, become a step by step guide for what you plan to do with the business. A business plan is imperative even when buying an established business, as it allows you to set the tone for the business under your ownership.
Suppliers have the power to make or break an Ecommerce business
When you purchase an E-Commerce business. You need to understand how they fully operate. Are they offering digital software and thus have no suppliers? Does the product require multiple suppliers?
When it comes to the suppliers you inherit, you want to ask yourself a few important questions:
- Are the suppliers cost-effective? Do you want them to stay on?
- Where are they located? Where do they ship?
- Are they wholesalers, manufacturers, or middlemen?
- Are they offering a good wholesale price?
- How high quality are their products?
Depending on the company’s complexity, buying a successful eCommerce business could bring several suppliers. In some cases, you may want to let go of one. In others, you might get lucky, and either has none or effective ones. In any case, you want to understand best how suppliers interact with your business and the industry.
Research alternative options
In any industry, businesses are influenced greatly by supplier power. A powerful supplier can constrain profits while weaker ones typically act more flexibly.
First, research the market your suppliers operate in. Are there any alternatives, or do they appear as the only one? Are they the highest-rated supplier in the industry? This can be one of the areas to cut costs and increase your profits.
Typically, if you see multiple suppliers, you can either reduce costs from your current supplier or pick a new one. Since these suppliers operate in saturated markets, they are more sensitive to price competition. On the flip side, if you find little to no alternatives, the supplier generally can set whatever price they want.
Before buying an E-Commerce business, consider finding out the volume of suppliers available, as it could help you find better alternatives.
Gauge how much power suppliers have over you
If you want to sell a digital product, suppliers likely have little authority over you. But if you intend to sell a complicated product that requires several intricate pieces, suppliers are going to charge you high rates because they can. After all, if the E-Commerce business relies on this particular supplier for a critical product element, switching presents many risks.
Consider the following example. If a company produces a device that requires a specific widget that only one supplier makes, that supplier will have significant power over the company. If the client attempts to negotiate down on price, the supplier will simply remind them of the high-stakes nature of the deal. Generally, you want to avoid falling into these kinds of supplier relationships.
Additionally, you want to understand how much suppliers rely on you. If they have only a few clients, this gives you leverage – particularly if your business purchases a significant amount from them. On the other hand, if they have many clients, this gives you far less leverage and gives them the ability to charge more.
As an example, a supplier of cardboard boxes will likely have little authority because their products are undifferentiated, and they have to compete with many other suppliers.
Talk to your suppliers one-on-one
Now that you understand the relationship between your potential E-Commerce business and suppliers reach out to them.
Buying an E-Commerce business often means developing new relationships – and suppliers are no exception. Depending on the size of the business, suppliers might not know a client of theirs has shifted strategically. While the company’s previous owner might understand each supplier better, you should arrange one-on-one chats with them to get the full picture.
When chatting with them, bring up important aspects of your relationship, particularly going rates. If you purchased a business from someone with little negotiation skills, the current suppliers likely took advantage of that and overcharged. Use your competitive research and power assessment to bring down rates to acceptable levels. If a supplier refuses to budge, and you know of alternatives, walk away and find a new one.
Suppliers often have some level of power over their clients, including you. But understanding their strengths and weaknesses enables you to get the most out of these professional relationships. Conduct a thorough analysis and do your due diligence on suppliers when buying an E-Commerce business – you can potentially increase profits substantially.
Inheriting an Ecommerce business can often mean receiving its current inventory, for better or worse.
When you consider purchasing an E-Commerce business, check if you will also receive its current inventory and if this is included in the sale price. Many companies will include unsold goods when selling as they usually do not need them. However, this could present problems, particularly if you inherit low-quality ones or lack inventory management systems.
Run a quality check
If you receive inventory after buying an E-Commerce business, check through the goods you received to determine if they are worth keeping. If the previous owners did not optimize its storage system, you could receive its less popular or outdated products.
In addition to checking the physical quality of the goods, run through previous shopping patterns to understand the makeup of the business’s current inventory. Are they seasonal products? Will they sell well now or later? Are they generally weak at driving sales?
When managing this inventory, consider using tools such as inFlow, which offers a free trial to use its user-friendly and effective inventory management software. This software lets you understand better how your current inventory fits your needs moving forward.
Align the products with your strategy
Having inherited the business, and you likely want to pursue different strategies from the previous owners. This often includes the kinds of products you intend on selling and developing. As a result, you should thoroughly analyze your current products and determine if they fit in with your goals.
If the products are unpopular, you could try selling them before implementing your new strategy. Alternatively, you can just get rid of them, too. However, when buying an E-Commerce business, you want to communicate with the previous owners your intentions so they understand whether their current inventory still serves a purpose. You could even negotiate to pay less if their current set of products is worth nothing to you.
Figure out how to manage it
When running an E-Commerce business, you will have to manage inventory – whether you stick with what the previous owners gave you. If you intend on purchasing a fairly large company, consider using manufacturing and warehouse management software such as Fishbowl. The software enables you to automate your inventory management and scale the business upwards.
Alternatively, you may choose to avoid dealing with inventory in its entirety. Whether the previous owners of the E-Commerce business managed physical goods or not, you can pursue an entirely digital strategy. Platforms such as Printful enable you to manage your E-Commerce store without inventory. Not only does this lessen the load off you, but it reduces waste and helps the environment.
Now that you have a solid understanding of your current inventory, you can use what you have to your advantage. Whether you sell these goods, they are an excellent way to test inventory management software and hone your product management skills.
Supply Chain (1st Party vs. Drop Ship)
After buying an Ecommerce business, how much control are you willing to give up?
While third-party software can often handle inventory management, you must also figure out how to arrange your supply chain – including manufacturing, retailing, transportation, and logistics.
When analyzing a supply chain, try visualizing a pyramid in the following order from top to bottom:
- First-party logistics (1PL).
- Second-party logistics (2PL).
- Third-party logistics (3PL).
All of these processes need to integrate – and you as the business owner rest at the bottom as the supply chain manager. You must ensure every part of the E-Commerce supply chain flows seamlessly and cost-effectively.
Each logistics system has its pros and cons. Ultimately, picking one strategy depends on how much time you can handle these processes. Are you able to commit time to packaging goods yourself? Can the E-Commerce business afford to outsource shipping? These are questions you will need to answer when buying an E-Commerce business.
First-Party Logistics: Total Control
In this setup, you, as the business owner, have complete control over the logistics of your E-Commerce business. You are responsible for developing and creating the product, packaging, transportation, and delivery. This logistics system could get complicated and tricky unless you have a lot of resources to use on an extended staff.
If you choose to manage delivery, consider using online tools to help optimize costs, such as Track-POD – which provides route planning software. Tools like this help reduce late deliveries, improve efficiency, save time, and cut costs.
Second-Party Logistics: Semi-Control
In this system, you give up partial control over the process by outsourcing to a second party. Typically, you will manufacture the product while outsourcing from another company to deliver it. After buying an E-Commerce business, you likely inherit the previous owners’ responsibilities, which often fall under this 2PL model. Although you are generally responsible for the bulk of your supply chain, a 2PL process alleviates some of the strain.
Third-Party Logistics: Little Control
Instead of dealing with delivery and fulfillment, you now outsource both of these processes to third parties. These other companies manage packaging, transportation, and delivery while you handle other elements of the business outside of the supply chain, such as marketing. Unlike 1PL and 2PL, you will likely pay the most using this logistics model.
Dropshipping: No Control Over Manufacturing
Dropshipping has become an extremely popular E-Commerce model recently because of its hands-off approach. When creating a dropshipping store, you outsource your products’ manufacturing to a third party. To make profits, you typically sell at a higher rate than the cost of goods acquired.
For example, many online apparel brands have stopped dealing with inventory using a print-on-demand (POD) model. They create the graphics and designs for their merchandise and outsource the manufacturing to POD providers. The platform also provides dropshipping services for inventory outside its custom print merchandise. This enables you to manage your inventory all within one service.
Alternatively, many dropshipping stores sell items such as technology – including massage devices, flashlights, and more. You can practically sell anything you want through a third party after buying an E-Commerce business.
Again, however, this all depends on how much control you are willing to give up. By outsourcing your manufacturing, you are forfeiting your ability to control the quality and timeliness of the product. Although you might have more time to focus on other aspects, this opens up your business to reputational risk.
Now that you fully understand how to set up the logistics of your business, make a list of pros and cons:
- What do you envision yourself doing as an E-Commerce business owner?
- Do you want to take a hands-off approach?
- Do you see yourself working at every level of the supply chain?
Unlike other sections, this depends on how you balance profits with time – and you need to figure out which one to prioritize.
As a business owner, your website acts as the foundation of your brand, sales, and consumers.
Buying an E-Commerce business means putting your hat in the ring of digital shopping. Unlike some brick-and-mortar stores, which can afford to skimp on their website, you do not have that same luxury. You have to make sure you polish and refine your E-Commerce store’s website.
Evaluate the website
Websites have several components which help prospective buyers through their consumer journey. Effective copy, engaging graphics, and a user-friendly experience are key components of a stellar web design.
When looking at a prospective E-Commerce website, is the copy short-and-sweet or wordy? Are the call-to-action buttons clear? Could you see a user navigating the website’s interface easily? Jot down initial thoughts to determine how the current website stacks up. Consider looking at competitors as well – what are they doing well on their website?
By putting yourself in the customer’s shoes, you’re allowing yourself to pinpoint any technical issues that need to be attended to immediately.
Fix the website
Often, when buying an E-Commerce business, you may have to rework the initial website design. Whether you want to pursue a different aesthetic or notice technical problems, you should work on fixing and altering the website to your needs. Even if you agree with the business model and idea, a website refurbishment will help prospective buyers convert more easily.
If you need a specific area to start, look at the website’s current landing pages. Undeniably, these often represent the first step a consumer takes on its journey with your brand. Some consumers come through targeted ads, while others search for the website directly. Are the currently used landing pages effective enough?
Consider optimizing your landing pages by adding more pages. Companies that increase the number of landing pages from 10 to 15 observe a 55% rise in leads. Why? Your customers are looking for tailored, customized, and seamless experiences. They want to feel special – and effective website design helps achieve this.
As another example, if you notice the shopping cart lacks user-friendly features, use a tool such as LitExtension – which helps automate shopping cart migration and makes shopping carts mobile-friendly. The entire website could function perfectly – but if you notice users stop converting when they check their cart, you need to rework the experience.
Align the website with your strategy and branding
If you decide to refine a brand’s aesthetic after buying an E-Commerce business, your website has to align with your new mission and goals. Look for brand cohesion through fonts, colors, and typography. When rebranding, you need to check every section of your website – an off-brand page could negatively signal consumers.
As an example strategy, consider adding videos to your landing page. Users look for engaging and animated content – a video could easily catch their eye and help you stand out from competitors. Since landing page videos can increase conversions by 80% or more, you should create videos featuring happy customers and your products.
You could even take this further by monetizing exclusive videos for prospective customers through platforms like Uscreen. It’s an all-in-one video management platform that allows you to use your business’ established expertise to create subscription-based webinars and courses.
E-Commerce owners have a unique task of operating in an entirely digital space – and your website represents the hub of your operations. Spend time understanding how to improve user experience and consider using third-party software. For improved performance, remember to keep track of the key metrics for your website.
Martin Bispels | Flippa Success Story
Without an easy-to-use and useful platform, you limit what you can do with your online store.
When buying an E-Commerce business, you will inherit the platform it currently operates on. Some platforms are extremely friendly to those with little coding experience, while others require some technical prowess. Consider your abilities when assessing the E-Commerce store’s current platform – does it enable you to pursue your goals, or are you limited?
Evaluate the current platform and its offerings
As you rework your strategy and determine your overall goals, how does the current platform fit into this mission? Ask the current owners where they see themselves and where you want to go. If you plan on scaling up or expanding into different markets, you want to use a platform that can accommodate that.
Additionally, you must evaluate the current platform’s process for accepting and fulfilling orders. At this point, you should have a general understanding of the business’ supply chain – and the platform also fits into this process. If you want a platform in which you simply click to fulfill orders, you need to see which ones enable you to do this.
Consider the costs of switching platforms
Buying an E-Commerce business typically invites significant changes. If you question the current platform’s sustainability, switching to another one could help you achieve your goals. However, first, understand the costs you will have to incur when changing platforms.
Likely, the E-Commerce business, in its current state, has relied on one platform for its entire operation. If you acquire a brand with many repeat consumers, a switch could throw them off and make them question the company’s legitimacy. Customers dislike change – and switching platforms could undo all they have learned about the brand.
If you switch platforms, remember to communicate these changes clearly with your customers. After all, nearly 7 in 10 customers expect businesses to understand their expectations and needs.
Look at multiple options when switching
Now that you have a firm understanding of the pros and cons of switching platforms, start researching. You need to balance what you want in a new platform – including ease of use, creative flexibility, cost, and fulfillment management. Consider the following four options as a starting point.
Nearly 9 in 10 merchants use Shopify to operate an online store. Buying an E-Commerce business typically leads you to Shopify’s platform because of its immense popularity. From a user-friendly interface to integrations with external shopping channels, Shopify has a great set of options for you to choose from.
WooCommerce is another smart way to create an ECE-Commerce store and is a WordPress plugin. To use WooCommerce, you’ll need to install the WordPress software on your web hosting. Then, you can add the WooCommerce plugin to WordPress to turn your site into a fully functioning E-Commerce store. WooCommerce popularity comes from its flexibility and affordability.
Shift4Shop has a great set of website customization options – if you have a strong brand and aesthetic image, this platform enables you to create landing pages to your heart’s content. Additionally, it also includes order management and marketing tools.
Platforms can get complicated, expensive, and overwhelming. Pixpa offers affordable pricing, 24/7 live support, and creative website templates for you to choose from. They primarily offer a single platform for you to include different websites – from blogs to stores.
Zyro has its coding language embedded in its platform – which can limit creativity – but Zyro offers a quick and easy way to build your website. Simply choose a provided online store template and use their drag-and-drop features to customize quickly.
Regardless of which platform you choose in the end, spend time considering your choice when buying an E-Commerce business. As noted, changing can make your brand appear inconsistent. When finalizing your decision, assume you are stuck with the platform for good.
Want help finding the right business for you? Flippa Finder can help.
Marketing and Traffic Sources
Through search engine optimization (SEO), paid traffic, and social traffic, you can determine the effectiveness of the business’s current marketing.
Although you typically cannot buy the marketing strategies launched in the past by the business, you can use the metrics gathered through these campaigns. How does the website and its pages rank on search engines? What’s more effective, paid or social traffic?
Find out how the website ranks using certain keywords
Search engine optimization (SEO) centers on increasing your website’s ranking on search engines, such as Google. Although SEO normally takes months to develop, buying an E-Commerce business should give you a running start.
If done right, a website optimizes its search engine ranking by honing in on certain keywords and optimizing title tags and meta descriptions. Without technical experience, SEO can overwhelm entrepreneurs who are less familiar with the concept.
Several tools are available to conduct an SEO audit, and remember, Google will penalize you if the website has poor backlinks. Domain age and page rank will also impact how Google ranks your website. If you choose to buy a relatively new E-Commerce website, you will not reap any benefits of a long-term SEO strategy. Luckily for you, Flippa’s partnership and integration make it easy to judge a site’s SEO quickly.
As you can see here, SEMRush pulls through website information such as:
- Authority Score.
- Number of referring domains.
- Number of backlinks.
- The total number of keywords.
- The top organic keywords.
Suppose you’re particularly interested in an E-Commerce business. In that case, you can purchase the premium insights report, which covers an in-depth Traffic Analytics Review, Site Rank, Backlink Profile, Keyword Analysis, Referring Domains, and Competitor Analysis. Overall, over 150 data points are covered in each report, allowing for a comprehensive data set.
As an example of an effective SEO strategy, try finding businesses with an active blog dedicated to their industry. For those in the technology sector, their blog might focus on emerging digital trends and new devices that all relate to the products they sell. In this case, a business could focus on keywords related to laptop plugins.
Now, try finding the article using these keywords on Google. If the article appears on the front page, the business has done an excellent job at SEO, and its efforts have paid off in the long run.
To simplify the process and understand how the E-Commerce store ranks, consider using ClickFlow – which helps you grow organic traffic by finding quick SEO wins. The tool lets you test different SEO headlines to drive more clicks from search results to your website. This is one of the quickest ways to grow traffic on an existing website without paying more for ads.
If you’re still stuck at this stage, follow these 12 smart SEO tips to keep you moving forward.
Use paid traffic to gather leads effectively
Sometimes, the organic traffic garnered through searches can only go so far. When buying an E-Commerce business, ask the owners how they have used paid traffic in the past. Did they advertise on search engines? Which products have generated the most leads?
If the brand has yet to dive into paid traffic, consider using it as an effective strategy. Almost a third of all website traffic comes from paid search. Start by looking into different channels to generate paid traffic, including Google Ads, Bing Ads, YouTube Ads, and more. This could be a great opportunity to grow the business in the future.
On the flip side, if the majority of traffic is already coming from paid search, then this will most likely be a cost you’ll continue to have to pay when you take over as the new business owner.
Leverage your online presence to drive social traffic
If you end up operating on a low budget or if paid traffic has not proven effective in the past, social traffic represents a more affordable alternative. Rather than paying to generate traffic on certain platforms, you focus on creating engaging content on social media channels. For example, you could feature satisfied customers and product tutorials on your Instagram or Facebook page.
To hone in on social traffic, think about ways you could develop marketing campaigns for your potential eCommerce store. Having now understood the audience the website serves, what do you think they would best respond to? In-person promotional events? Free gifts in the mail? Short-form TikTok videos? Think about the best ways to reach your consumers and develop marketing campaigns.
Simplify the process using automation
You will have to juggle a million different tasks after buying an E-Commerce business – from operations to fulfillment. Instead of constantly managing your social feeds and writing copy for posts daily, automate the process using digital solutions.
For example, DataFeedWatch – a leading feed marketing and PPC automation solution – includes tools to integrate thousands of products under one store, reduce manual work, and determine the returns of online marketing campaigns.
Additionally, you should consider using software to automate your posting on social media platforms. Running your Instagram, Facebook, and Twitter accounts will consume precious time. Rather than publishing posts every day, you can use Bulk to schedule many in one sitting.
Marketing has the power to attract new prospects and drive profits through both paid and unpaid means. An effective E-Commerce business must balance SEO, paid traffic, social traffic, and more to generate a return on your investment.
Prepopulated email lists provide advantages – but there are risks you need to analyze.
Starting an E-Commerce company from scratch means having zero email subscribers. Buying an E-Commerce business eliminates this hurdle, as you will likely have an already-populated email list.
While this may seem unproblematic, you must consider several risks – from avoiding spam folders to eliminating inactive users.
Double-check your sender reputation and score
When an email provider receives a message, it uses your sender score to determine if it belongs in spam. Your sender reputation includes how many reports your emails receive, how often you send out emails, rejected and accepted emails, and other factors.
Why should you care? If you inadvertently have damaged your sender score, your email list – no matter how large – will not help you. First, use Sender Score to determine your reputation rank – and if it rests at a high enough point, your emails should make it to the recipient without issues.
In addition to your score, conduct a thorough cleaning of the email list you receive after buying an E-Commerce business. In many cases, emails become inactive – and if your marketing continues to bounce, this will harm your sender score.
After you clean up your email list, you want to automate as many processes as possible. Email automation will allow you to automate lead collections and convert more visitors into customers. After capturing more subscribers, you can foster an engaged community of repeat buyers. Setting up a powerful email marketing automation strategy can be a great way to increase the value of your website, especially if you’re considering selling the business at any point in the future. But more on that shortly.
Determine your priorities when selecting an email marketing provider
Similar to choosing a platform and website design, you have to evaluate your preferences when running email campaigns. Do you intend on sending emails daily? What kind of emails do you want to create?
For example, how much money are you willing to spend on an email marketing system? Ask the E-Commerce company owner what their returns on email marketing have historically sat at and use that figure as a benchmark. You want to ensure you can justify spending a certain amount of marketing given expected returns.
Additionally, when buying an E-Commerce business, you should also write down a list of features you want your email marketing system to include – from flexible layouts to color selection to tracking.
Automate your emails
As we said earlier, automating alleviates the pressures of manually creating and sending out content regularly, as well as ensuring you’re communicating with your audience at the right times. Instead of drafting emails and sending them when ready, simply automate the process.
Email marketing automation lets you create automatic email campaigns such as sending to leads when they sign up, triggering emails based on a customer’s engagement, or delivering targeted products to different segments of your audience based on their interest. For example, they could receive a free informational pamphlet from you after subscribing to your mailing list. This greatly helps warm up cold prospects so they feel comfortable purchasing from you in the future.
Email lists are a great perk when you buy an existing business instead of starting one from scratch. After all, you no longer have to spend time collecting leads without a subscriber base. However, you must remember the risks involved and consider your needs when choosing an ecommerce email marketing software.
Above all else, a healthy bottom line is essential to running an E-Commerce company
You could have stellar marketing campaigns and the perfect business idea – but you need to find out how the E-Commerce business handles its finances. Moreover, you should try improving how the previous owners managed their finances – through useful tools and helpful financial tips.
Flippa offers a number of integrations (such as Stripe and WooCommerce below) to sellers, which allows them to verify the business’s revenue. As a buyer, this can give you confidence in the financial information provided and often gives a bit more detail, such as average order value and the number of sales in the past 12 months.
Figure out how the company makes money
On a basic level, you need to figure out how much the business makes. And revenues alone will not cut it – take a closer look at margins. For every sale, how much money does the firm make? Does it rely primarily on a large volume of buyers or a small number of high-ticket ones?
You should also determine how the company generates profits. Does it rely primarily on email marketing? Social media campaigns? Organic traffic? This exercise also helps you understand how the company’s budget feeds its profits. Essentially, the end goal is to boost sales.
Analyze the company’s income statement
When buying an E-Commerce business, you need to look at their income statements and analyze them yourself. As an owner, you will need to become comfortable with general accounting terms – income statements are the foundation for financial analysis. Get hold of the Profit & Loss (PL Statement) to determine the net income, as this can help you determine if the business acquisition cost will be worthwhile.
Rather than looking at recent profits, identify any noticeable trends over the past five years. Have margins increased or decreased? Are there any sudden spikes in costs? Are revenues increasing? Do the company’s revenues appear seasonal? Involve the E-Commerce owner in these discussions to get a complete picture of their financial situation.
Find a platform to manage your finances
You may also want to figure out how to manage your finances moving forward. If you inherit a workforce from the business, you want to ensure you can appropriately pay them. Moreover, you always want to pay suppliers on time to maintain a healthy relationship.
If you try to do this manually, you will get burnt out. You should consider using a third-party management platform such as FreeAgent – which helps manage invoices, payments, taxes, and more. Taxes, in particular, require a lot of accounting knowledge – and FreeAgent enables you to focus on work while they handle the rest.
Without a solid bottom line, an E-Commerce business will flounder. Before making a final purchase, have an engaging and informative discussion with the current owner. Have them send over financial statements, and remember – they are trying to sell their business to you. Take what they say with a grain of salt and make an objective determination on your own.
Buying an E-Commerce business presents legal challenges – from registering it to filing taxes.
From a legal standpoint, purchasing an E-Commerce store can seem complicated. After all, the seller will transfer their business ownership to you – and how does that impact the legal ownership of the entity? More importantly, how will your business ownership affect your personal taxes?
It can be tempting to get the deal done quickly and move forward, but it is important to seek proper advice and document the terms of the sale. This will ensure the sale is legally binding and that assets are identified accurately and transferred correctly. It also helps you to avoid and resolve disputes in the future.
If you’re at all unsure about the legalities of a sale we suggest using our Flippa Legal service. You can purchase E-Commerce specific (as well as other business types) template legal documents, or you can also engage a lawyer by purchasing one of two legal services packages. The size and complexity of the transaction will determine which option is best suited to you.
Conduct your due diligence
It’s important to do your due diligence before purchasing an E-Commerce business.
Flippa’s comprehensive buyer checklist outlines things to look out for when purchasing a digital asset, like trademarks, financial trends, Google AdSense, traffic sources, and more.
It’s important to ask the current owners for any paperwork they may have regarding the legality of the business, including employees and filing status. Next, do your research – unlike small, one-person companies, businesses of any large size must register with their local government agency.
Additionally, determine the filing status of the business. If you choose to run the business alone, you likely will act as a sole proprietor – but this opens you up for personal legal risk. If you want to move the focus from you, you will need to register the business as a Limited Liability Company (LLC) after buying an E-Commerce business.
Check the E-Commerce business’ legal assets
When conducting your legal, due diligence of the store, remember to find out what materials the owners have legal ownership over. Depending on their size, some businesses copyright their name, but you need to double-check if you must do the same. When purchasing the store, are you also buying any trademarks they may have? These business assets should be listed in the sale’s legal documents.
Work with a professional
You will likely have little idea of how to approach the legal issues surrounding a purchase once you take ownership of the E-Commerce business. Instead of constantly searching for information, consider collaborating with a legal professional. You can avoid inadvertently breaking laws and cover your trademark and copyright bases.
Although the legal nature of buying an E-Commerce business may seem daunting, simply have a candid and open discussion with the current owners about their experience. If you find yourself or the seller in a tight spot, hire a legal professional. They will help alleviate any pressure and help you focus on the other business aspects of the deal.
Sale Price and Valuation
Even with a solid understanding of different E-Commerce topics, you need to determine the appropriate purchasing price.
The previous steps provide a solid foundation for properly buying an E-Commerce business. Yet you must remember: the store’s owner wants to sell you a product. In essence, they are looking to gain something and profit off of the work they have done. As a result, you need to spend some time determining the sale price and valuation.
Use multiples to provide a business valuation foundation
This is where the concept of multiples comes into play. Sellers will try to sell the site at a premium, citing investments in design and marketing. However, these sunk costs are unimportant to you. You need to determine whether the price they set works for your budget and purposes, regardless of the previous owner’s investments.
Typically, the sale price of an E-Commerce store sits at 1 to 3 times the yearly profit. In other words, if a business generates $30,000 per year in profit, it would likely sell for $30,000 to $90,000. Of course, you want to target the lower end of that spectrum. After all, spending a multiple of 3 implies you either need to increase yearly profits or wait a few years to see returns.
Consider how your ideas play into a business valuation
Taking a literal valuation approach helps you understand how much to pay. But you should also consider how your business ideas and goals could influence the value of the business. For example, if you feel confident you can increase profits, that may justify paying a price on the higher end of the multiples spectrum.
When considering your ideas, you should also attempt to negotiate down the first proposed rate. After all, the sellers are trying to make as much money as possible. Their first offer only represents a starting point. You have the power and ability to lower the price – and by using your strategies, you can find an acceptable range to pay.
At this point, you should have a comprehensive and solid understanding of what to look for when buying an E-Commerce business. Now, convert your thoughts into actions – find the right E-Commerce store for you, start contacting suppliers, develop your supply chain, coordinate with third-party providers, and more.
If you managed to get this far, you are serious about buying an E-Commerce business. As established, purchasing one has some serious advantages in the beginning. You already know it will generate profit. You can easily scale up. You have a list of prospective customers ready to email. And if you’ve done your research, you’ve acquired an E-Commerce business with opportunities to grow using your skill set.
A successful E-Commerce business eliminates all the growing pains of creating a new one. They have typically covered their niche, supply chain, marketing, financials, and legal issues already.
Just remember to check in with yourself and think beyond costs and revenues – what do you want to do with your professional career?
With buying and selling features available, Flippa is the ultimate platform for building your business portfolio.
If you have bought any E-Commerce websites recently, please share your tips and thoughts in the comments. Did you skip over any parts mentioned above? Do you have any additional advice to share? Let us know below.
Frequently Asked Questions
Is buying an E-Commerce business worth it?
This question depends entirely on the amount of time, money, and resources you have at your disposal. When starting from nothing, you have to build up every function of your business – and the growing pains could inhibit profits during the early growth stages. On the other hand, purchasing an E-Commerce business could initially limit flexibility and cost.
Yet remember a critical point here: you are purchasing an E-Commerce business that has proven profitable already. It allows you to skip the startup phase.
When starting from zero, you have no idea if your startup has found an effective product-market fit. You also can scale up a purchased E-Commerce store – a much easier strategy to pursue than finding a business.
When trying to answer this question, ask yourself how much time you have to commit to your business. If you feel unsure about your ability to contribute 100%, buying one might work better for your lifestyle.
How much does it cost to start an E-Commerce business vs. buying one?
Starting an E-Commerce business typically includes high fixed costs, from subscription rates for different software to paying risk premiums on new supplier contracts. Moreover, securing customers without a preexisting audience costs a lot of money. Yet buying an E-Commerce business similarly costs a lot of initial money.
As established, purchasing an E-Commerce site typically costs 1 to 3 times its yearly profits. For businesses of a larger size, this can add up. You will also have to incur the immediate costs of the E-Commerce store’s subscriptions and third-party tools.
In that same vein, you will have to slowly scale up with external software and subscriptions when building up from nothing. In this case, you will eventually spend the same amount of money – but you have greater control over the pace at which you grow.
While money and costs are something to consider, remember to prioritize the amount of time you have equally. Both options undeniably have high costs initially – but starting an E-Commerce business will require your complete attention.
When answering this question, try figuring out your next best alternative if you do not have to start the business from scratch. What would you do with the additional time?
How to find the right online business?
When looking for an online business, exhaust every option. You want to have a solid list of potential candidates that cover all your bases and interests, and you never know what hidden gem you may find.
As a starting point, you can find E-Commerce websites generating revenue for sale on Flippa. There are many ways to filter Flippa’s search results, all of which are explained in our First-Time Buyers Guide. Get started selling or buying today on Flippa.
Does Flippa have domain names available?
Yes. You can buy or sell pre-existing domain names on Flippa. You’ll find additional detailed information, such as the site age, niche, profit margin, etc. Head to our domain names section to start buying and selling domain names today.
Does Flippa have any additional tips on how to buy an online business?
Yes. Here are some handy guides you might want to check out that cover everything from tips for buying online businesses to financials such as profit and loss statements:
- First-Time Buyers Guide: Buying Your First Online Business.
- How to Buy A Money-Making Online Business.
- Online Businesses Make the Best Cash Flow Investments.
- You Bought an Online Business. Now What?
- Best Online Business Ideas For 2022.
- How to Make a Profit and Loss Statement + Free Profit & Loss Template.
Ready to find the right E-Commerce business for you? Start your search now!