Last Updated on Dec 18, 2019 by James W
Before you consider starting an e-commerce business from scratch, you should consider buying an established store that is already profitable. Purchasing websites is a standard business decision today, and, if you are good at spotting a great deal, then it can be a very rewarding financial decision.
Before purchasing a website, you have to do a ton of research, especially if you are investing a lot of money. But, whether the buying price is a $1000 site or tens of thousands of dollars, there’s no point in making rushed decisions, as you may end up squandering that $1000 or more. To help you make a smart purchase, read below to know the crucial things to consider before you buy.
1. Know the real business owner
It is not strange to hear of someone hacking into a web store then selling it off while they still have access. The outcome is that the new proprietor doesn’t indeed own the business and the money they paid is likely lost.
To know who owns the web store, make use of tools like whois domain history to view the history of ownership and if there are any strange activity in the past. Such tools keep an archive of changes on the site so if there is any alteration that is suspect it will easily stand out.
2. View the business history using the Wayback Machine
One thing you always want to avoid is to buy a general family-friendly site only to find out that two months ago it was an adult site or some terrible spam website. Using a tool like the Wayback Machine you can dig into the online store history. Analyze events and ensure that the website has never been used maliciously.
3. Analyze the SEO and other traffic signals
Before buying the business, dig a little more into the website traffic. For instance, you can load up SEMRush and keenly go through the backlinks, organic search, paid search stats and other traffic signals crucial to the business.
Look out for some red flags, for example, if the web store is ranking on the first page of Google for a decent keyword, yet it just has three backlinks, then something is obviously not right. They may be faked; one way or another, you’ll risk losing your high positioning on SERPs should those links disappear.
4. Points of interest of revenue and costs
Revenue and expenses are a critical aspect you need to pay attention to when looking for a business for sale, as are the income and expenditure reports.
Depending on the seller, the financial details may be quite detailed and carefully structured, or they may be presented simply. Regardless, you want to ask your bookkeeper or business advisor to crunch the numbers to ensure you haven’t missed anything.
The primary things you need to be informed about are:
• Where does the business earn most of its revenue?
Which products are the most popular and are you content with the sales levels?
• How steady and consistent is the business generating income?
• Is there a consistent flow of cash and how likely is the business going to generate the same levels of income over the coming months or years?
• Is the revenue genuine?
• Is the profit stable?
The hardest part is to know is whether the income generated is real. It’s effortless to edit income reports and screenshots using Photoshop and other photo-editing tools. Therefore, check whether you can get different sources and reports, you can also inquire as to whether you can log in to the backend and confirm the details yourself. This is especially important if you are looking at businesses in a local area. For example, if you are looking for a business for sale in Houston, see if you can cross-reference these numbers with those found in a business registry in the Houston area. .
A business generating income is an excellent thing. But if you’re making a monthly sum of $10,000 yet your Ad budget is $9,000, then that’s too significant a risk to take. It also means that you need to have advanced advertising skills to recoup your investment and get a profit. Make sure that you understand where the profits are coming from, and if you can make significant cuts on the expenditure, then you could improve the profits by a considerable margin.
In conclusion, the four factors above are very crucial when it comes to buying an e-commerce business. It’s a major risk to purchase a website that is making zero dollars and transform it into a profitable business. For beginners, its good practice to buy an online business that is established and generating some income.