What to look out for when buying an eCommerce Business

In This Post

Guide to Buying an eCommerce Business

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 eCommerce 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 the corporate life in favor of a four-hour-work week sounds stellar, you need to put in the research and work first. For many entrepreneurs, starting a business from scratch has helped them 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 eCommerce 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 eCommerce 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 eCommerce site only for it to fail. You need to conduct intensive research – but where in the world should you start?

To ensure you buy the best eCommerce business for you, as well as see return on your investment, we’ve outlined several critical areas to look out for when buying an eCommerce business.

Niche

Make sure the site you find has a good niche with acceptable demand and low competition.

What exactly does this mean? As a telling example, many eCommerce sites sell popular electronics, but these are broad markets with thousands of competitors. In the end, 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), but this takes much more time and invites significant risk. However, finding a less competitive and more profitable niche offers a much easier eCommerce path.

Your niche cannot be general

When buying an eCommerce 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 and remember: if you sell to everyone, you sell to no one.

When selecting a niche, ask yourself who your target market is and what problem are you solving for them. If you cannot come up with a clear idea of which consumers would shop in your niche, narrow it down further.

For example, if you want to sell technology, hone in on a specific part. 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 a specific set of products and buyers.

Following Trends:Following a trend has inherent risks too. What if the trend dies or there is no longer a need for your product. Can you pivot? Find new markets for your niche? Ideally you want to have a plan for every possible circumstance.

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.

Along with understanding the search volume for your niche, you also want to consider search intent and how your website will serve that intent.

Next, when buying an eCommerce 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?

Typically, 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 substantial thought before buying an eCommerce business. Do you have any hobbies you could monetize? Have you taken an engaging and interesting class before?

This also means having some expertise in your niche because you want to write good content for your site. As an example, if the product you sell has multiple components and complex installations, you can use your expertise to create a free manual to go along with the product, thus giving you an edge over Amazon and allowing you to charge a premium.

Products that are small with a lot of 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 be coming back to your site often, and you can build a regular customer base. These are just a few effective examples to consider when buying an eCommerce 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 products to potentially 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, you can read more about SaaS businesses in our Guide to Buying a SaaS Business.

While niches can seem straightforward, they are the foundation of an effective eCommerce business. Spend as much time as you need figuring this out – moving forward without doing so could set you up for disappointment.

Competition

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 eCommerce business, you want to find ways to one-up and do more than your competitors. Can you merchandise better with higher quality product images? Can you create great content that educates or entertains customers? Can you build a brand identity that has customers identifying with you over and above the competitors?

If you enter an eCommerce space and replicate what everyone else does, you will not get noticed. In fact, 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.

Buying eCommerce Guide Tip3 Flippa.com

Research and understand how others operate their business

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 eCommerce business, you want to find ways to one-up and do more than your competitors. Can you merchandise better with higher quality product images? Can you create great content that educates or entertains customers? Can you build a brand identity that has customers identifying with you over and above the competitors?

If you enter an eCommerce space and replicate what everyone else does, you will not get noticed. In fact, 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 eCommerce business it’s important to understand how the business 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 the prices they set 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 extremely hard 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 eCommerce 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. In fact, you should do this. Consumers perceive quality through the price a company sets.

To ensure customers know your value, consider running marketing and promotional campaigns – which are further explained below.

Develop and leverage your brand identity

At the beginning of your eCommerce 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 have a better understanding of your customers’ pain points and problems. Your branding should reflect an intimate knowledge of their issues. When promoting your eCommerce business, you should always emphasize how you solve their problems.

Additionally, buying an eCommerce 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 on where to best talk to your consumers, go there.

Sometimes, dealing with competitors can get overwhelming and frustrating. But you and other eCommerce owners are simply 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.

Buying eCommerce Guide Tip4 Flippa.com

Suppliers

Suppliers have the power to make or break an eCommerce business

When you purchase an eCommerce 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 an eCommerce business could potentially bring several suppliers with it. In some cases, you may want to let go of one. In others, you might get lucky, and either have none or effective ones. In any case, you want to best understand how suppliers interact with not only your business but the industry as a whole.

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 many 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 competitions. On the flip side, if you find little to no alternatives, the supplier generally can set whatever price they want.

Before buying an eCommerce 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 eCommerce 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.

Buying eCommerce Guide Tip5 Flippa.com

Talk to your suppliers one-on-one

Now that you understand the relationship between your potential eCommerce business and suppliers, reach out to them.

Buying an eCommerce 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 have a decent understanding of each supplier, 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 eCommerce business – you can potentially increase profits substantially.

Current Inventory

Inheriting an eCommerce business can often mean receiving its current inventory, for better or worse.

When you do consider purchasing an eCommerce business, check if you will also receive its current inventory, and if this is included in the sale price. Many companies will include their unsold goods when choosing to sell 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 do end up receiving inventory after buying an eCommerce 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 end up receiving 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 trying to manage this inventory, consider using tools such as inFlow, which offers a free trial to use its user-friendly and effective inventory management software. Using this type of software allows you to better understand how your current inventory fits into what you will need moving forward.

Align the products with your strategy

Having inherited the business, 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 do a thorough analysis of your current products and determine if they fit in with your goals.

If the products are simply unpopular, you could try selling them before implementing your new strategy. Alternatively, you can just get rid of them, too. However, when buying an eCommerce 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 are worth nothing to you.

Figure out how to manage it

When running an eCommerce business, you will have to manage inventory – whether you stick with what the previous owners gave you or not. 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 eCommerce business managed physical goods or not, you can pursue an entirely digital strategy. Platforms such as Printful enable you to manage your eCommerce 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 choose to sell these goods or not, they are an excellent way to test inventory management software and hone your own 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 also need to figure out how to arrange your supply chain – including manufacturing, retailing, transportation, and logistics.

When analyzing a supply chain, try visualizing a pyramid with the following order from top to bottom:

  1. First-Party Logistics (1PL)
  2. Second-Party Logistics (2PL)
  3. Third-Party Logistics (3PL)

All of these processes need to integrate together – and you as the business owner rest at the bottom as the supply chain manager. You need to ensure every part of the eCommerce supply chain flows seamlessly and cost-effectively.

Each logistics system has its pros and cons. Ultimately, picking one strategy depends upon the amount of time you can put into handling these processes. Are you able to commit time to packaging goods yourself? Can the eCommerce business afford to outsource shipping? These are questions you will need to answer when buying an eCommerce business.

First-Party Logistics: Total Control

In this setup, you, as the business owner, have complete control over the logistics of your eCommerce business. You are responsible for developing and creating the product, packaging, transportation, and delivery. Unless you have a lot of resources to use on an extended staff, this logistics system could get complicated and tricky.

If you do 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 eCommerce business, you likely inherit the previous owners’ responsibilities, which often fall under this 2PL model. Although you are still 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 eCommerce model recently because of its hands- off approach. When creating a dropshipping store, you essentially outsource the manufacturing of your products to a third party. To make profits, you typically sell at a higher rate than the cost of goods acquired.

As an example, many online apparel brands have stopped dealing with inventory by 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 of 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. In fact, you can practically sell anything you want through a third party after buying an eCommerce 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 have a full understanding of how to set up the logistics of your business, make a list of pros and cons – what do you envision yourself doing as an eCommerce 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 really depends on how you balance profits with time – and you need to figure out which one to prioritize.

Website Design

As a business owner, your website acts as the foundation of your brand, sales, and consumers.

Buying an eCommerce 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. In fact, you have to make sure you polish and refine your eCommerce store’s website.

Evaluate the website

Websites have several components which help prospective buyers through their consumer journey. Effective copy, engaging graphics, and an overall user-friendly experience are key components to a stellar web design.

When looking at a prospective eCommerce 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 giving yourself an opportunity to pinpoint any technical issues that need to be attended to immediately.

Fix the website

Often, when buying an eCommerce 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, take a 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 of these 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 – in fact, 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 eCommerce 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 act as a negative signal to consumers.

As an example strategy, consider adding videos to your landing page. Users look for engaging and animated content – and a video could easily catch their eye and help you stand out from competitors. Given that 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 a step 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.

eCommerce 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

Martin Bispel Success Story Flippa.com

Watch: Martin Bispels acquires eCommerce business Upper Park Disc Golf on Flippa Platform

Platform

Without an easy-to-use and useful platform, you limit what you can do with your eCommerce store.

When buying an eCommerce 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 own abilities when assessing the eCommerce 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 at and ask yourself 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 need to 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 fits into this process as well. 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 eCommerce business typically invites significant changes. If you find yourself questioning the sustainability of the current platform, 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 eCommerce business, in its current state, has relied on one platform for its entire operation. If you end up acquiring 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 do choose to 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.

Shopify eCommerce Guide Flippa.com

Nearly 9 in 10 merchants use Shopify to operate their eCommerce store. In fact, buying an eCommerce 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 eCommerce Guide Flippa.com

WooCommerce is another very popular way to create an eCommerce store and is a WordPress plugin. To use WooCommerce, you’ll first 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 ecommerce store. WooCommerce popularity comes from its flexibility and affordability.

Shift4Shop eCommerce Guide Flippa.com

Shift4Shop has a great set of website customization options – if you have a strong brand and aesthetic image in mind, 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 eCommerce Guide Flippa.com

https://zyro.com/Zyro has its own 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 eCommerce business. As noted, changing can make your brand appear inconsistent. When finalizing your decision, assume you are stuck with the platform for good.

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 eCommerce 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.

There are a number of tools 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 eCommerce website, you will not reap any benefits of a long-term SEO strategy. Luckily for you Flippa’s partnership and integration with makes it easy for you to judge a site’s SEO quickly.

Buying eCommerce Flippa.com

As you can see here, SEMRush pulls through website information such as:

  • Authority Score
  • Number of Referring Domains
  • Number of Backlinks
  • Total Number of keywords
  • Top Organic Keywords

If it’s an eCommerce business you’re particularly interested in you can purchase the premium insights report which covers an in-depth Traffic Analytics Review, Site Rank, Backlink Profile, Keyword Analysis, Referring Domains, and a Competitor Analysis. In all, over 150 data points are covered in each report, allowing for a comprehensive set of data.

SEO Strategy

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 eCommerce 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, organic traffic garnered through searches can only go so far. When buying an eCommerce 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. In fact, 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 really 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 start developing marketing campaigns.

Simplify the process using automation

After buying an eCommerce business, you will have to juggle a million different tasks – 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 campaigns.

Additionally, you should consider using software to automate your posting on social media platforms. Manually running your Instagram, Facebook, and Twitter accounts will eat up a lot of 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 eCommerce business will need to balance SEO, paid traffic, social traffic, and more to generate returns.

Email Lists

Prepopulated email lists provide advantages – but there are risks you need to analyze.

Starting an eCommerce company from scratch means having zero email subscribers. Thankfully, buying an eCommerce business eliminates this hurdle, as you will likely have an already-populated email list.

While this may seem unproblematic, you need to pay attention to 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 eCommerce 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?

As an example, how much money are you willing to spend on an email marketing system? Ask the eCommerce 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, you should write down a list of features you want your email marketing system to include – from flexible layouts to color selection to tracking – when buying an eCommerce business.

Automate your emails

As we said earlier, automating helps alleviate 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, trigger emails based on a customers engagement, or deliver targeted products to different segments of your audience based on what they’re interested in. As an example, they could receive a free informational pamphlet from you after they subscribe to your mailing list. This greatly helps warm up cold prospects, so they feel comfortable purchasing from you in the future.

Emails lists are a great perk when you opt to buy an eCommerce store instead of starting one from scratch. After all, you no longer have to spend time collecting leads without a subscriber base. However, you need to remember the risks involved and consider your needs when choosing an email marketing system.

Financials

Above all else, a healthy bottom line is essential to running an eCommerce company

You could have stellar marketing campaigns and the perfect business idea – but you need to find out how the eCommerce 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 businesses 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 number of sales in the past 12 months.

Screen Shot 2021 09 07 at 10.07.31 am
Screen Shot 2021 07 13 at 9.06.59 pm
You can find out more about the integrations offered from Flippa and what to look out for as a buyer in our First Time Buyers Guide.

Figure out how the company makes money

On a basic level, you need to figure out how much money the business actually makes. And revenues alone will not cut it – take a closer look at margins. For every sale, how much money does the firm actually 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 better understand how the company’s budget feeds into its profits.

Analyze the company’s income statement

When buying an eCommerce 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 – and income statements are the foundation for financial analysis.

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 eCommerce owner in these discussions to get a complete picture of their financial situation.

Find a platform to manage your finances

When buying an eCommerce business, you also want to figure out how to manage your finances moving forward. If you inherit a workforce from the business, you want to make sure you can pay them in an appropriate manner. Moreover, you want to always 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 eCommerce 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 have to say with a grain of salt and make an objective determination on your own.

Legals

Buying an eCommerce business presents legal challenges – from registering it to filing taxes.

From a legal standpoint, purchasing an eCommerce store can seem complicated. After all, the seller will transfer their ownership of the business to you – and how does that impact the legal ownership of the entity? More importantly, how will your ownership of the business 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 sale clearly. 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 future.

Flippa Legal

If you’re at all unsure about the legalities of a sale we suggest using our Flippa Legal service. You can purchase eCommerce 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

Before purchasing an eCommerce business, it’s important to do your due diligence.

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 do 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 eCommerce business.

Check the eCommerce 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. Moreover, when purchasing the store, are you also buying any trademarks they may have? These business assets should be listed in the sale documents.

Work with a professional

Once you take ownership of the eCommerce business, you likely have little idea of how to approach the legal issues surrounding a purchase. Instead of constantly searching for information, consider collaborating with a legal professional. That way, you can avoid inadvertently breaking any laws and can cover your trademark and copyright bases.

Although the legal nature of buying an eCommerce 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 eCommerce topics, you need to determine the appropriate purchasing price.

The previous steps provide a solid foundation for properly buying an eCommerce business. Yet you have to remember: the owner of the store 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 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 eCommerce 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 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 an extremely thorough and solid understanding of what to look for when buying an eCommerce business. Now, convert your thoughts into actions – find the right eCommerce store for you, start contacting suppliers, develop your supply chain, coordinate with third-party providers, and more.

Most Frequently Asked Questions

Questions Asked When Buying an eCommerce Business

Is buying an eCommerce 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 eCommerce business could limit flexibility and cost a lot initially.

Yet remember a critical point here: you are purchasing an eCommerce business that has proven profitable already. 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 eCommerce 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 eCommerce business vs. buying one?

Starting an eCommerce business typically includes high fixed costs, from subscription rates for different software to paying risk premiums on new supplier contracts. Moreover, it costs a lot of money to secure customers without a preexisting audience. Yet buying an eCommerce business similarly costs a lot of initial money.

As established, purchasing an eCommerce site typically costs 1 to 3 times its yearly profits. For businesses of a larger size, this can really add up. You will also have to incur the immediate costs that come with the eCommerce 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 equally prioritize the amount of time you have. Both options undeniably have high costs initially – but starting an eCommerce business will require your complete attention. When answering this question, try figuring out what your next best alternative would be if you did not have to start the business from scratch. What would you do with the additional time?

Finding the right online businesses for you

When looking to find 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 eCommerce websites generating revenue for sale on Flippa. There’s many ways to filter Flippa’s search results, all of which are explained in our First-Time Buyers Guide.

Conclusion

If you managed to get this far, you are clearly serious about buying an eCommerce 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 eCommerce business that has opportunities to grow using your skill set.

An already established eCommerce business has essentially cut out all of the growing pains that come with 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 really want to do with your professional career?

If you have bought any eCommerce 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.

Ready to find the right eCommerce business for you? Start your search now!

#1 global online platform
Flippa is the #1 global online platform to buy and sell digital real estate, such as websites, SaaS, eCommerce stores, apps, and online businesses. We help millions of small business owners to exit and millions of entrepreneurs to grow through acquisition.
Join Flippa now and Own Your Future
Get a FREE Valuation for Your Online Business in 5 Minutes
Join over 360,000 subscribers.
Subscribe to our newsletter!

Fill out the form below to receive updates and latest news from us.

Share This Article
Share on linkedin
Share on twitter
Share on facebook