Technology has not only made many tasks easier in recent years, it has also paved the way for innovation and trends. Over the last few years, the growth of online shopping has affected the bottom-line of several brick-and-mortar retail giants.
In 2014, the online business industry was valued at $220 billion. It is estimated that this year, it will be worth $370 billion.
As the world becomes more dependent on mobile technology, there will be greater demand for online businesses.
Why you should purchase a profitable online business
When you acquire a profitable online business, there is less pressure in building a brand and developing a system that works. Profitable online businesses are characterized as having consistent traffic. The business already has a solid base of end users and the capacity to create new markets.
The more important question is, how do you know which online business to buy?
Related: 10 Keys to Making Your Startup Profitable
How to purchase a profitable online business
Here are five valuable tips on how to purchase a profitable online business:
- Visit reputable online sites
If you’re not sure where to look for profitable online businesses for sale, you can go to Flippa.com.
The site provides key metrics so you can make an informed decision about an established website you are interested in purchasing.
- Utilize online evaluation tools
When assessing the viability of a prospective online website, there are four areas you need to look into:
- Website presentation
- Search engine visibility
- Website security
- Website performance
If you don’t have the experience of conducting a website evaluation, you can use tools such as this one by 1 and 1, which can take the hard work out of it for you.
Just enter the domain name of the website you’re interested in evaluating and you’ll get essential information within a few seconds such as the website’s visibility online, social presence, security features and more.
- Conduct extensive research
Don’t get lulled into a false sense of complacency just because the online business is a known and extensive brand. You should still undertake extensive research to find out the business’ prospects in the years ahead.
Your study should cover the following areas:
- Industry analysis
- Trends and developments
- Industry competitors
- Business’ position in the industry
- Business performance in the last five years
- Summary of monthly operating expenses
- Financial history
- Evaluate the current marketing campaign
Even if the proprietor of the online business has dazzled you with beguiling figures on market size and social media activity, take the time to evaluate their current marketing campaign.
- Find out how the business has acquired the leads or list of prospects
- Check the social media accounts and take note of the types of comments or responses the website receives. Are there more complaints? Are users getting frustrated with the lack of attention?
- Find out if the business issued any discounts and guarantees that have not been actualized but remain valid. There are businesses that offer guarantees that cover two to five years.
- Assess how you can secure or protect the business
Ensuring the profitability of your business goes beyond maintaining its stream of revenues and managing costs. There are aspects to the sale of a business that are overlooked and could have serious repercussions on your future performance:
- In the sales contract, include a provision for a non-compete clause. Remember, they have the experience to start a similar business from scratch. They know the ins and outs of your business and gain a comparative advantage
- Ask the proprietor to give you a complete list of everyone who has access to the backend of your website, plus passwords to accounts
- Make sure you have ownership and copies of the source code for the website
- Contract the services of a programmer and meet with the webmaster and developer of the site. Find out all the changes that were made on the website
- If it’s an e-commerce website, conduct an investigation on credit card processing. It’s possible you may have to post large personal guarantees with the merchant bank in order to process the outstanding balance of credit card payments
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If you decide to purchase a profitable online business instead of starting a new one, it may seem that the battle is half won. In truth, the battle for market share and profitability is still ongoing.
Acquiring a profitable online business is not a shortcut to a successful career as an entrepreneur. On the contrary, the challenge to surpass the achievements and exceed the standards that were previously set by the business then becomes even greater.
