What Buyers Are Looking for in an Online Business

Whatever your online business model is – ecommerce, content/advertising, Marketplace, SaaS, services, Apps, or social media channels – buyers are looking for healthy, revenue-generating online businesses that can continue to make money. 

As is standard practice, before purchasing an online business, a buyer will perform their due diligence to ensure that the digital asset is worth acquiring.

First, let’s break down the kind of buyers that are looking to purchase your online business.

Aggregators and Investors

Investors or aggregators seek out businesses that complement their existing operations or offer strategic value, such as access to new markets, specialized expertise, or proprietary technology. By acquiring and integrating these businesses, the aggregator aims to enhance its competitive position, drive growth, and create value for shareholders.

An aggregator is an entity, such as a company or investment firm, that specializes in acquiring and integrating multiple online businesses into its portfolio. Instead of collecting and organizing information or services, these aggregators focus on acquiring existing online businesses, often with the aim of creating synergies, achieving economies of scale, or expanding their market reach and capabilities.

In this context, the aggregator acts as a consolidator in the online business landscape, bringing together various digital assets under its ownership and leveraging their collective strengths to achieve strategic objectives and maximize returns on investment.

Aggregators and investors typically add value by offering features such as search functionality, categorization, personalized recommendations, and sometimes transaction processing or delivery services. They play a crucial role in facilitating efficient distribution, discovery, and consumption of content or services in today’s digital economy.

Why Do Aggregators and Investors Buy Online Businesses?

Aggregators and investors, often in the form of companies or investment firms, buy businesses for several reasons:

1. Synergies and Economies of Scale: Aggregators can achieve cost savings and efficiencies by integrating acquired businesses into their existing operations. This might involve streamlining processes, consolidating resources, or leveraging combined purchasing power.
2. Expansion and Diversification: Acquiring businesses allows aggregators to expand their market reach, enter new geographic regions, or diversify their product/service offerings. This strategic growth can help mitigate risks associated with relying too heavily on a single market or product.
3. Access to Talent and Intellectual Property: Acquiring businesses can provide access to specialized talent, unique skills, or proprietary technologies that the aggregator may not have in-house. This can enhance their competitive advantage and drive innovation within the organization.
4. Elimination of Competition: Acquiring competitors or complementary businesses can help aggregators strengthen their market position and reduce competitive pressures. By consolidating market share, they may gain pricing power and greater control over industry dynamics.
5. Financial Gain: Aggregators may seek to acquire businesses with the potential for high returns on investment. This could involve acquiring undervalued assets, turning around struggling businesses, or capitalizing on growth opportunities in emerging markets or industries.
6. Strategic Partnerships and Alliances: Acquisitions can facilitate strategic partnerships or alliances that benefit both parties involved. By acquiring a business, an aggregator can strengthen its relationship with suppliers, customers, or other stakeholders in the industry.
7. Risk Mitigation: In some cases, aggregators may acquire businesses as a defensive strategy to protect against disruptive forces in the market or to preempt competitors from gaining a competitive advantage.

The decision to acquire a business is typically driven by a combination of strategic, financial, and operational factors aimed at creating value for the aggregator and its stakeholders.

Acquisition Entrepreneurs

An acquisition entrepreneur is an individual who specializes in acquiring existing businesses with the intention of growing and enhancing their value. Unlike traditional entrepreneurs who start businesses from scratch, acquisition entrepreneurs focus on identifying opportunities to purchase established businesses that may be underperforming, undervalued, or have growth potential.

Acquisition entrepreneurs often possess skills in business analysis, negotiation, and strategic management. They seek out businesses that align with their expertise, interests, and investment goals. Once they acquire a business, they typically implement changes to improve operations, increase efficiency, and drive growth. These changes may involve restructuring the organization, optimizing processes, expanding market reach, or introducing new products/services.

The ultimate goal of an acquisition entrepreneur is to generate a return on investment by increasing the profitability and value of the acquired business. They may choose to hold and grow the business over the long term or eventually sell it for a profit. Acquisition entrepreneurship offers a pathway for individuals to become business owners and create value by leveraging existing assets and opportunities in the marketplace.

Why do Acquisition Entrepreneurs Buy Online Businesses?

Acquisition entrepreneurs buy online businesses for a variety of reasons, including:

1. Scalability: Online businesses often have the potential for rapid growth and scalability compared to traditional brick-and-mortar businesses. Acquisition entrepreneurs may see buying an online business as an opportunity to acquire a scalable business model that can quickly expand its customer base and revenue.
2. Lower Overhead Costs: Online businesses typically have lower overhead costs compared to physical storefronts, such as rent, utilities, and inventory storage. This can make them more cost-effective to operate and potentially more profitable for acquisition entrepreneurs.
3. Access to Global Markets: Online businesses have the advantage of reaching a global audience, allowing acquisition entrepreneurs to tap into markets beyond their local area. This broader reach can lead to increased sales opportunities and revenue growth.
4. Technological Expertise: Many online businesses leverage technology and digital platforms, requiring expertise in areas such as e-commerce, digital marketing, and website optimization. Acquisition entrepreneurs with a background in technology or digital business may see buying an online business as an opportunity to leverage their skills and experience.
5. Diverse Revenue Streams: Online businesses can generate revenue through various channels, such as e-commerce sales, digital advertising, affiliate marketing, and subscription services. Acquisition entrepreneurs may be attracted to the diverse revenue streams offered by online businesses, which can provide stability and resilience against market fluctuations.
6. Operational Flexibility: Managing an online business often allows for greater flexibility in terms of location and working hours. Acquisition entrepreneurs may value the ability to run their business remotely or part-time, allowing them to pursue other interests or business ventures concurrently.
7. Entrepreneurial Opportunity: Like side hustlers, acquisition entrepreneurs may have an entrepreneurial mindset and see buying an online business as a way to build and grow their own venture. They may be motivated by the opportunity to create value, innovate within a specific niche, and achieve financial independence through successful ownership of an online business.

Buying an online business can offer acquisition entrepreneurs a combination of growth potential, cost-effectiveness, technological opportunities, and entrepreneurial fulfillment that aligns with their goals and aspirations.

Meet John Chen: Sold an Ecommerce Business for $555K on Flippa

Let’s take the example of a successful entrepreneur, John Chen, who purchased “Blush and Bar”, an ecommerce jewelry business, in 2017 for $7,500 and later sold it on Flippa in 2019 for $555,000. Chen has used different avenues like Facebook ads and paid social media marketing to expand his business. Prior to becoming a full-time entrepreneur, Chen worked at a private equity firm with $200M under management. After selling his first company, he purchased a plus-size clothing business for $60,000 and is well on its way to making 2 million in revenue.

Like Chen, many entrepreneurs across the globe are looking for ways to take financial control of their lives. For them, leaving the confines of their 9-5 jobs means more stability and flexibility, working from anywhere in the world, often times making money in their sleep.

Meet Stacy Caprio: Creator of Her.CEO

Stacy Caprio, the creator of Her.CEO, a website that inspires entrepreneurs and shares website buying and selling experiences of her own. While still in her 9-5 job, Stacy got her start buying websites on Flippa, which allowed her to gain financial independence and break free from her corporate job. 

“Many people spend their whole lives working toward financial independence so they can retire, but they don’t really think about how they can structure their current lives, so they can have the independence of time and independence of finances,” says Stacy. “Not necessarily not working, but choosing how to focus your work– for me, it’s made me so much happier.”

For the average working person, acquiring an online business is the ultimate way to own their future.

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READY TO SELL YOUR ONLINE BUSINESS?

Sell your online business with Flippa, the #1 platform for online M&A. Flippa has expert M&A Advisors to support you through your exit journey, as well as the tools and technology to match you with high quality buyers and get deals down. Start your exit journey here.

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Meet Mike Finger: Successfully Exited Multiple Businesses

Let’s step into the mind of a buyer and understand what they’re looking for.

Let’s bring in Mike Finger, who shared his insight into planning to exit your business and why it’s so important on an episode of Humans of Flippa.

Mike has successfully sold 4 businesses and works with other small business owners who are interested in preparing to exit their business to ensure their business is in the best position for sale. 

Ninety percent of businesses that exist are small businesses, and Mike reminds all small business owners that because the big business sales are the most publicized, it doesn’t mean you can’t sell at a great price and optimal multiple. 

According to Mike, in order to ensure that a business is in the best position to attract buyers, there are a few simple rules to follow. 

1. Let go of your unicorn dream and unrealistic expectations. It’s important to understand that small business exits are completely different from big business exits. 

2. Set Aside the Complexity. Most small businesses that fail to sell are because of some small element of the business. Our ability to sell isn’t about some “mystical” number, but it’s about a simple approach. To sell your small business you must have a buyer. The buyer is most likely an individual. It’s important to think about yourself as the one buying the business and that the buyer wants a long list of wants when buying a business. 

There are two primary needs that are going to dominate a buyer’s decision:

• They need to make a living and be compensated for their time. 
• They’re going to have to make loan payments and service the debt from the loan they took out to purchase your business. 

If you can do both of these things, you have increased your chances of successfully selling your business. 

There are three key questions to ask yourself when selling your business. We like to call it “The Three Ds of Selling”.

1. Are my results desirable? Look at your seller’s discretionary earnings and the financial benefit you receive from owning your business. The higher your seller’s discretionary earnings, the higher your purchase price for the business. 
2. Can a buyer duplicate my results? You should be able to transfer a business with the understanding that it does not need to depend on the owner to grow. Your results should exist elsewhere besides the original business owner. If you create a team and systems, it’s easier d’or someone to duplicate. 
3. Can I document my results? Is the traffic what you said it was? Do you have the necessary documentation? It’s important to keep clean records to ensure that your business is staying whole throughout the entire process.

If you can answer yes to all those three questions, you are much closer to a place where a small business exit can be successfully exited.

Side Hustler

A side hustler is an individual who engages in additional income-generating activities outside of their primary job or occupation. These activities, often referred to as “side hustles,” are typically pursued part-time and can range from freelance work, consulting, or small business ventures to gig economy jobs, such as driving for ride-sharing services or delivering food.

Side hustlers pursue these additional income streams for various reasons, including supplementing their primary income, paying off debt, saving for specific goals, or exploring entrepreneurial interests. Side hustles can provide flexibility and autonomy, allowing individuals to pursue their passions or interests outside of their main career.

Side hustling has become increasingly common in today’s economy, driven by factors such as technological advancements, the rise of the gig economy, and changing attitudes towards work-life balance. Many people see side hustling as a way to diversify their income, build new skills, and create financial security beyond traditional employment.

Why Do Side Hustlers Buy Online Businesses?

Side hustlers may buy online businesses for several reasons:

1. Additional Income: Buying an online business can provide an additional stream of income for side hustlers, supplementing their earnings from their primary job or other side hustles. It allows them to diversify their income sources and potentially increase their overall earnings.
2. Flexibility: Online businesses often offer flexibility in terms of when and where work can be done. Side hustlers can manage an online business in their spare time, fitting it around their existing commitments such as a full-time job or family responsibilities.
3. Entrepreneurial Opportunity: For individuals with an entrepreneurial mindset, buying an online business presents an opportunity to be their own boss and build something of their own. It allows them to pursue their passion, interests, or expertise in a specific niche.
4. Scalability: Some side hustlers buy online businesses with the goal of scaling them up over time. By investing in a business with growth potential, they can work towards increasing its revenue and profitability, ultimately generating a higher return on their investment.
5. Skill Development: Managing an online business provides side hustlers with the opportunity to develop new skills, such as digital marketing, e-commerce management, customer service, and financial management. These skills can be valuable for personal and professional growth.
6. Passive Income: Depending on the type of online business purchased, side hustlers may be able to generate passive income streams. Once the initial setup and optimization are done, the business can generate income with minimal ongoing effort, allowing side hustlers to earn money while focusing on other priorities.

Overall, buying an online business can be an attractive option for side hustlers looking to diversify their income, pursue entrepreneurial ventures, and achieve greater financial independence.

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READY TO SELL YOUR ONLINE BUSINESS?

Sell your online business with Flippa, the #1 platform for online M&A. Flippa has expert M&A Advisors to support you through your exit journey, as well as the tools and technology to match you with high quality buyers and get deals down. Start your exit journey here.

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