Steps For Purchasing an E-Commerce Business

by Susan Paige on April 19, 2018 · 0 comments

commerce

It can be tough opening an e-commerce business as it requires time and energy to launch a website, source products, and market and brand these products. Therefore, buying one will save on the complicated launch procedure despite the risks involved. These risks include buying a brand that has its status damaged beyond renovation or the owner claiming some percentage of the business’s profit after the sale. While it is easier to buy an existing e-commerce business than starting one, the following are the steps to follow when buying an online store.

Step one: Look for a business under auction

This is the most difficult step. Look at platforms that have third-party integrations in its businesses for sale.  Despite the listing charges, third party marketplaces enables these forms of trades.

The following factors will help in selecting the best business to buy:

  1. There should be a momentum in the site’s traffic
  2. There should be familiarity with the niche of the products to make the branding and marketing more efficient.
  3. Know why the business is up for sale. It is probably not as good as it seems.
  4. The business should indicate growth potential and should be healthy in terms of financial information.

Step two; In-depth research the business

It is important to check the seller’s claims by performing thorough research on the business because the sellers will always paint their business in the best possible light. Websites such as SimilarWeb have profound analytics for websites and can be used to assess the positioning of the business. The site’s bounce rates, referrals, traffic, and backlink profile should be paid close attention in order determine the site’s health. Sufficient information about the site will help in decision making during bidding.

Google reviews can also help in recognizing sites with untrustworthy and low-quality brands. If a business had already been damaged, recovery will be difficult, and it’s not worth purchasing such a site unless you are planning to rebrand it completely. Rebranding, however, will only rise the initial-year onboarding costs of the business. Instead, it is better to choose a different store or start an e-commerce from scratch rather than buy a damaged one.

Step three: Calculate the onboarding budget

The payment made during bidding is a just a single portion of the total cost. When buying an online store, it may seem that a lot of expenses are incurred on the surface. But you might land in a deeper hole that earlier speculated when calculating the overall costs to be paid in the first year of the business

The potential costs to be paid include:

  1. Costs for redesigning the website for optimum purchasing procedures.
  2. Costs for adding supplies or warehouses to improve the supply chain.
  3. Costs of expansion to influence new customers.
  4. Costs of creating new marketing campaigns on social media and search engines.
  5. Cost of streamline performance or automated software.

Step four; Bargain a relatively fair bid to the seller

After picking a business, completing research on the business and calculating the total cost, make a fair bid for the business to the seller. A buyer is free to make an offer below the seller’s asking price as the seller expects negotiation as well.

The formula that can be used for bidding is:

Fair bid= annually predictable return of the onboarding cost

For example, if $200 is expected to be spent on monthly advertisements and $400 for buying a new website and it currently makes $400 monthly, the fair bid would be $4800 minus $2800. Therefore, a fair bid would be $2000.

The negotiation methods should be in accordance with your view on the value of the site against the acquisition risks. The original bid might be lower than the counter offer but will highly depend on the negotiation skills applied.

It is recommended that an attorney look over the sales agreements. Sites such as the Law Depot can be utilized to create business sales contracts if the interested party not written a legal document before. Also, site ownership and all the associated logical assets should be fully bestowed upon the buyer. This will leave the original owner of the business no room to claim the business’s prospective earnings.

At long last, an e-commerce business has a new owner. It is the duty of the owner to protect their assets and themselves from red flags and scammers. Keep all of the tips above in mind when purchasing an e-commerce store and you will well on your way to running a highly successful online business.   

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