Practical Steps to Buy a Profitable Online Business

As an online entrepreneur, you can start from scratch and build an online business from the ground up. That involves figuring out your niche, setting up a website, building an email list and market to it, writing blog posts and other content, and creating products or promoting affiliate products (or use the drop shipping model).

It will take time before your new online business will actually start making money and become profitable, or you can buy an established business that has been put up for sale if you have the spare cash.

If you choose the latter option, there are a few things you should consider before jumping in with both feet.

What to Look for When Buying an Online Business

To be clear, you’re not just buying a website. You’re buying a complete business with products and customers, proven marketing methods to generate leads and make sales, a social media presence, ongoing ad campaigns, an email list, and possibly employees.

Hopefully, this is a turnkey opportunity that you are taking over. After you buy it, you can let it run as it was before or attempt to increase profits by making changes—perhaps you recognize something the current owner is not doing that could boost sales.

The online business should have a track record of sales and profits you can see before you buy the business, so always check out the financials before pulling the trigger. Don’t rely solely on what the seller tells you.

You also shouldn’t buy an online business for sale solely because it is a big moneymaker. While that's important, you should have an interest in the niche too.

Ultimately, you have to determine whether paying the price is worth not having to build a complete e-commerce business yourself. Successful sites will be quite pricey, costing in the tens to hundreds of thousands of dollars, although it's possible to find full-fledged online businesses for a few hundred or a few thousand dollars, too.

How Much Should You Pay?

How do you know if the price the seller wants you to pay is a fair one? A good rule of thumb is to multiply the annual profits of the business by two or three times. You should also factor in the value of assets, a good domain name, a recognizable brand, a large amount of quality website traffic, a good social media presence, and a large email list of responsive names.

Ultimately, a business worth buying will have five elements:

1. It is growing
2. It has multiple streams of income and doesn’t rely on just one product
3. It gets traffic from a variety of sources
4. It has revenues that are consistent from month to month
5. It has systems in place for marketing

Where to Find an Online Business for Sale

There are plenty of e-commerce sites for sale out there, and plenty of places to buy them, too. Keep in mind that just because a site is listed for sale on a reputable platform doesn’t mean it’s completely legit. The seller may have inflated his numbers as far as traffic or sales, so you will need to do you research and request documentation to prove their claims.

Online marketplaces feature lists of online businesses for sale, usually organized by market niche with statistics like revenue and profit, web traffic, and email subscribers included. You can quickly scan dozens if not hundreds of sites for sale. If you see one or several you like, first check it out online, then just send a message to the owner through the marketplace’s messaging system.

For example, the popular e-commerce platform Shopify has a marketplace where you might find the ideal online business for sale for you. Shopify gives its own valuation for how much they believe a web business is worth and a look at its revenues in easy-to-read chart form.

Sometimes you’ll encounter brokers running the sale on behalf of the owner. As you correspond with the seller, you can also start bargaining. Send them a lower price offer—sellers often are flexible, especially if a website has been on sale for a while.

How to Buy an Online Business at an Auction Site

You can get a bargain on an online business by going on an auction site. Like a regular online marketplace, you’ll find long lists of e-commerce sites for sale. But instead of paying the list price or contacting the seller and negotiating, you bid using the auction process.

Just like any auction site for consumer goods or collectibles, you enter in what you’d be willing to pay for the online business. Other potential buyers might put in a higher bid, and you decide whether to increase your bid. Auctions are run for a limited time, and whoever is at the top wins and gets to buy the site. Beware of "shill" bidders who act on behalf of the website to drive up the price.

Buying Through a Broker

Website brokers facilitate the buying and selling of e-commerce businesses. Perhaps the seller doesn’t have the time or inclination to deal with potential buyers, so he hires a broker to put the site up on the online marketing places or auction sites and handle any inquiries.

There is a bit of security here because the broker has vetted the site before agreeing to try and sell it, and doesn’t want his reputation ruined if his client scams somebody. At the same time, they’ll have lots of questions for you to make sure you are a serious buyer with the money to buy the site.

Another advantage of using a broker is that they are experienced. They know how to conduct this transaction and the exchange of money. And they can handle any problems that pop up. Brokers only get paid once the sale is final, so it’s in their best interest to make sure everything runs smoothly from beginning to end.

Buying Directly From the Website Owner

This last technique is a bit bold. Basically, you make a list of e-commerce businesses in niches you are interested in. You might know them because you are a customer or you’ve seen their ads online, or you might check out Facebook pages and forums related to your niche to see what sites pop up in the comments.

Using available tools like Alexa.com, you can figure out these sites’ website traffic, and you can understand its marketing campaign by signing up for its email lists and Facebook pages. A simple Google search might yield all sorts of information, including some hints of how it’s doing financially.

By looking the site up on Whois.com, you can find contact information and reach out to the owner directly to tell them you are interested in buying their website. Be polite and show you are serious, but there is no need to make an offer at this point. They might get back in touch with you, or they may not.

Next Steps for Buying the Perfect Online Business

Now you’re ready to find your new online business. Give all the methods above a try and see what e-commerce sites look most attractive and which offer the most bang for the buck.

Remember that before you put in offers and certainly before you buy something, you must do your due diligence and run the numbers to make sure the financials, traffic, and other important features of the business are accurate.