Buying a successful eCommerce website is a great investment option for someone who has the funds and skillset to expand the business. While it’s important to expect a conservative return, you need to have a concrete plan to grow the business. Considering that the eCommerce industry is growing at a rapid pace, if you are not growing you are essentially falling behind.
However, before you can grow your investment, you need to build a solid foundation. That foundation is buying a great eCommerce site that’s already profitable and shows a lot of promise. Here are our 6 tips that will help you buy a healthy online business.
Go Through a Reputed eCommerce Business Broker
An eCommerce business broker is an independent company that looks out for the interests of both buyers and sellers. They take care of the paperwork as well as use sophisticated models to determine the value of the site being sold. Most of these firms also perform pre-qualification check to ensure they are only listing authentic online businesses and dealing with genuine buyers.
Figure Out Why the Site is Up for Sale
There are only a few good reasons why someone would sell a profitable website. One of them is they need the funds to invest in something even better. Some site owners also don’t want the trouble of managing their sites anymore and want to gather the funds for retirement. However, more often than not, sites go up for sale because their owners are faced with an unsurpassable hurdle. They try and cash in before their sites fail permanently. That’s why you need to figure out the real reason why the owner is selling the website.
If the owner has no real answer or offers too many trivial reasons, then it’s a cause for concern.
Go By the Numbers Not By the Sales Pitch
When judging the site, you should ignore any promises of how it will blow up in the future. If the returns were so assured and so massive, then the current owner wouldn’t have sold the site in the first place. Stop believing in the prediction fairy and go by the sales figures. Operating cost, net profit, and the average growth per year are better indicators than anything else.
Calculate the Break Even Point
Successful online businesses are not cheap and it will take you a while to recover your investment. Calculate your break even period going by the net annual profit. Simply divide the total investment by the average net profit. This will give you the number of years you would need to break even. Anything above 3 years is not a good deal.
Check Independent Customer or Client Reviews
A lot of times, owners sell their sites after a barrage of bad reviews. A simple Google search should reveal what people are talking about the business. Stay clear of any site that has nothing but a squeaky clean reputation.
Check Traffic Trends
You cannot expand an eCommerce website that fails to generate any traffic. A site that has poor traffic numbers would need significantly more SEO investment than ones that get a healthy amount of traffic every day. Google Analytics and other SEO tools offer an easy way to check a site’s traffic trend. If the line is going down, then it should be a dealbreaker.