More people are working from home now than ever before. Many are looking to supplement their income with a side-gig and selling products online is a great way to achieve this. Of course, you can start a store on Amazon or Etsy. Or you can do what many other entrepreneurs have been doing over the past few years: buy an existing site.
According to BizBuySell, a site that tracks and facilitates the buying and selling of businesses, as well as tracking and facilitating merger and acquisition activity, sales increased 14 percent last year.
Experts say that e-commerce sales will account for more than a fifth of all retail purchases and will exceed $7 trillion by 2025. This is why buying an existing website with a history of selling products online is a great opportunity for entrepreneurs. To be their own boss.
“Think about all the buyers and sellers on Amazon and all the business owners using Shopify, BigCommerce, WooCommerce, WordPress, the list goes on,” said Blake Hutchison, CEO of online marketplace Flip. “You have this huge network of small business owners around the world. Small profitable businesses, under $500K to $10M in annual revenue still fresh assets. Savvy digital acquisitions that take the long-term view, see the obvious. Digital isn’t going anywhere.
One such savvy buyer is Hosey Orr, a Berks County entrepreneur who recently bought two online businesses — Body for Golf and Easy Golf. Orr, along with a partner, bought the two sites because he was “bored” and wanted opportunities. Orr loved golf, but that wasn’t his main motivation. He was looking to sell products online and take advantage of the growing number of paid newsletter subscription services. Both purchases met those needs.
“We started a small company and wanted to find small businesses that could support each other,” he said. “I had no experience buying a business before.”
Martin Bispels of Phoenixville tells a similar story. After running small businesses and consulting stints, Bispels, in the summer of 2020, found himself ready to launch into a new online venture. So he set out to “look” for the new job.
“The opportunity to buy a company and run it myself was exciting,” he said. “We [he and a partner] We looked at all kinds of businesses until we found one we liked. That business was Upper Park Disc, an e-commerce retailer of disc golf bags. “I’ve loved the sport for a long time,” he said. “And when we got the opportunity to buy a disc golf company, I jumped at it.”
Orr and Bispels examined several online marketplaces where entrepreneurs can buy and sell websites, such as Empire Flippers and Shopify’s Exchange Marketplace. Finally, they both sat on the Flippa platform. Regardless of the marketplace, online transactions often work the same way.
First, you’ll want to think about the type of online business you want to buy—it could be an e-commerce store, an auction site, a digital marketing or blogging site, or even an app or software-as-a-service platform provider. . As I mentioned above, you should evaluate what is available in the online marketplace. Once you’ve found a target, you’ll want to understand its competitors, market trends, and operating costs. You can do this by reading industry reports and discussing the business with others who do the same, and of course your financial and legal advisors.
Once you’ve found the seller (Flippa and other sites offer internal assistants to help facilitate message boards and conversations), you’ll want to — along with your advisors — review the site’s business financials and tax returns, customer base, and website traffic statistics. . You’ll want to interview company employees and review all key contracts and intellectual property agreements. You can use online tools to get an appraisal and discuss the purchase price with the owner.
All this is important. But for Bispels, something else was even more important: branding and online presence.
“I could start my own online company selling the same products,” he said. But if people were to search for my products, they wouldn’t find this, but the top disc is already available and ready for search engine optimization. The seller had been around since 2011 and had no time or money to continue building the brand. I decided to take my resources and experience and build it and he was very happy, because the site was his baby and he really wanted it to continue and be successful. As part of the deal, Bispels retained the previous owner as an equity partner for its advisory value.
Flippa’s “Top 100 Index” indicates that each year, the average online business generates more than double its net profit and 1.7 times its revenue. But transactions can go further than that.
In the first half of 2022, the small business utility app will sell for 5.45 times its annual net profit, the education platform will sell for 5.81 times its annual revenue, and the personal jewelry e-commerce business will sell for 4.62 times its annual net profit. ” says Hutchison. “We increased contract value to $561 million year-over-year, a 106 percent increase compared to the same period last year.” Flippa currently has 109,000 active buyers.
Buying an online business through an online marketplace is a relatively new model. But the basics are the same. Knowing the seller, understanding the numbers, reviewing the terms, getting an appraisal, and making a legally-reviewed purchase agreement are all important steps. Good online marketplace platforms verify sellers and provide templates and tools to help make the transaction easier. But at the end of the day, one person is selling a business to another.
“It’s important to have a good relationship with the seller and understand why they did what they did,” says Orr. “Founding a business is a different experience than starting from scratch. It’s important not to break what’s already working.”
