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The Pros and Cons of Buying an Online Business
By Quiet Light
If you want to jump into the world of online entrepreneurship, buying an established business can be an attractive path to take. Before you make the decision to become a business owner, however, it is important to know the pros and cons of buying an online business. With the right knowledge and approach, you can make an informed and responsible acquisition decision.
In this article, we discuss:
- The benefits of buying an existing online business
- Common challenges when buying an existing online business
- How to overcome those challenges when buying an online business
- How to ensure a smooth purchase
Related Article: 4 Ways to Increase the Value of Your Online Business
The benefits of Buying an Existing Online Business
For the right entrepreneur, there are many benefits of buying an existing online business. These include measurable financial benefits as well as more intangible lifestyle benefits.
High ROI potential
Simply put, buying an existing online business represents an attractive financial move. If chosen and executed carefully, the right online business has the possibility to bring in a high return on your investment.
As a business owner, you can realize an annual ROI of 30–40% or more. Compared to other investment options such as real estate or index funds, it is easy to see why small business ownership is such an appealing choice.
Additionally, you have the option to grow the business over the course of several years in order to sell it for an even higher ROI.
“For the right entrepreneur, there are many benefits of buying an existing online business.”
Save time and energy and reduce risk
Compared to starting a business from scratch, purchasing an existing business can save you time, energy, and risk. Many business owners get their start by purchasing a business instead of starting their own.
The initial stages of starting a business often require a significant investment of time and energy. On top of that, every new business carries with it a significant risk of failure.
“Many business owners get their start by purchasing a business instead of starting their own.”
By purchasing a business with proven products and an existing customer base, you help to reduce the risk of failure. In addition, if you choose a business that has streamlined operations, you can minimize the time and energy commitment you will need in order to successfully run the business. As you manage the company, there will be many lessons learned. This allows you to continually streamline your processes.
Aside from the practical benefits that running a business brings, it can also allow you to reach your lifestyle goals. For starters, being a small business owner can be a fun and exciting endeavor, as well as bring an immense feeling of personal satisfaction. This is especially true if you choose a business model that aligns with your interests and passions.
In addition, you likely will have the option of working from anywhere, opening up exciting possibilities. With the right planning, you can also have more control over your schedule and work/life balance.
Common Challenges When Buying an Existing Online Business
While buying an existing business is an attractive option for motivated online entrepreneurs, challenges do exist. Common challenges include struggling to identify the right business and procuring the financial means necessary to purchase the business.
Identifying the right business
“For starters, it is crucial to select a business that matches your individual skill set.”
In order to increase your chances of successfully taking over ownership of an existing company, it is important to select the right business for purchase in the first place. The choice you make will have a large impact on your overall success or failure.
There are several aspects to think about when identifying the right business structure for your needs. For starters, it is crucial to select a business that matches your individual skill set. If you are a natural when it comes to creating content plans and building content, it may make sense to purchase a content site or other similar business that relies on this skill set.
Likewise, depending on your own motivational tendencies, it will likely pay to choose a business that aligns with your personal interests and passions. This will help you stay engaged in the work necessary to successfully run your new company and avoid burnout in the long term.
It is also important to think about what your goals are for the business. Perhaps you want to change up your work lifestyle in order to achieve more freedom. Or you may have specific financial goals tied to the performance of the business. Regardless of what your own goals are, it is important to think about this aspect beforehand so that you choose a business that helps you achieve your goals. Failing to do so will put you at a disadvantage.
Lastly, it is necessary to take some time to think about your relative risk tolerance. Every business venture entails some risk, although some are riskier than others. If you want to minimize risk, be sure to keep this in mind when analyzing potential businesses for purchase.
Depending on your financial situation and the size of business you want to buy, procuring the necessary funding to complete the purchase may present a challenge to you. For those who have available assets to invest in a business, this may not be an issue.
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However, even if you don’t have significant assets, there are funding options available. In this case, you may want to consider an SBA loan to help fund your investment. Any other form of business loan may also be an option.
Take your time
Buying a business represents a significant decision in your life, both financially as well as practically. The ramifications of this decision could impact you for many years to come. Given the stakes, it is important to make a thoughtful and informed decision when choosing a business to purchase.
Take your time, do your research, and seek the help of others when you need it. The time and energy you invest in the decision-making process will pay dividends down the road.
“Buying a business represents a significant decision in your life, both financially as well as practically.”
Overcoming Challenges When Buying an Online Business
While challenges exist when it comes to buying an online business, they can be overcome with a combination of the right information and a thoughtful approach.
Prepare your financial strategy
Firstly, it is important to get your financial picture in order prior to starting the process of purchasing a business. If you are self-funding the purchase, make sure you have adequate funds readily available. If you are seeking outside resources such as an SBA loan, it is important to secure this funding beforehand so it is ready to go when the time comes to make an offer.
Get clear on what you are looking for
Take some time to think about your goals for the business, both practical as well as financial. Additionally, be realistic about what your skill sets are and where your interests lie. By getting a clear picture of what you are looking for, you can zero in on a business that will meet your financial and lifestyle needs while at the same time make use of your interests and skills.
This will help you know where to look for the right match, as well as what to avoid pursuing in your search.
Get to know the seller
Lastly, it is important to take time to get to know the current owner from whom you may purchase a business. There are a number of reasons why owners sell their businesses. By getting to know the seller, you can get a better understanding of the business. Additionally, it will help you understand why they are selling and what you can expect after you take over ownership.
How to Ensure a Smooth Purchase
Not all purchasing decisions and transition processes go smoothly. You can, however, take some simple steps to help ensure a smooth purchase, especially if this is your first business venture.
“By having a business plan in place before taking over ownership, you can hit the ground running in order to make the most of your investment.”
Preparing sufficiently includes identifying your goals, thoroughly researching prospective businesses, and carefully weighing all possibilities. During this phase, it is important to evaluate any prospective business’s financial statements to verify the accuracy of their revenue, profits, and cash-flow figures.
Connect with the seller
Once you have made a purchasing decision and are moving toward the transition process, continue to focus on building a good relationship with the seller. In addition to just being the right thing to do, this will help create trust and good rapport should any wrinkles arise.
Hit the ground running
Once the purchase is complete, it is a good idea to take full advantage of the training period so that you can learn as much as possible from the previous owner.
Additionally, don’t waste any time getting started proactively driving future growth in your new business. By having a business plan in place before taking over ownership, you can hit the ground running in order to make the most of your investment.
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