Acquiring someone else’s web business is a high risk-reward strategy. In most cases it doesn’t end particularly well and there are often a few regrets along the way. The goal for buying an established online business usually falls into two areas:
- Someone can see that a profitable website is for sale and they want to make those profits their own
- Or they acquire someone else’s web business because it’s linked to their own line of work. Here they can potentially cross-sell products, increase their subscriber base or merge the two sites together.
With lots of risks & investment involved, it’s vital you do your research and take over an existing web business which still has lots of untapped potential and no unforeseen problems. There are some fantastic investments out there, where talented people have run extremely profitable websites and need someone to take them on. Yet as the old adage goes – you won’t find the goldmine without first digging in the dirt.
Why Buy An Existing Website?
There are many reasons for buying an established online business, let’s take a look at a few of them:
You’re Getting A Recognised Brand – rather than starting from scratch, it may make more sense to acquire a business which has been in the market for several years. Here you might get a brand that people already know, which has had money spent on advertising in the past and will still benefit immediately from word of mouth.
You’re Also Capturing Their Assets – when you make an online acquisition it’s not just about putting your name above the door. What that business owns may also be incredibly valuable to you. Think about it, when taking over an existing web business you also get their website, the domain name (good ones a rare these days), their email subscriber list, Google rankings and any business relationships with suppliers. All of this may realistically take years to build up.
Save LOTS Of Time – if a profitable website is for sale, then as soon as you buy it you are in the market. Setting up on your own can take months before you are even at a stage to launch, never mind making a profit. Yet if you take on someone else’s then you may have some positive cashflow flowing into your accounts straight away. You can still make changes to the operations side and improve the website after you have bought it, boosting your profits further – but a lot of entrepreneurs start web businesses and never see them through to launch because of the time investment needed. This stops that from happening.
Where To Buy?
Picking the right website & brand is the hard part. Out of all the websites listed for purchase, the vast majority of them wouldn’t be a wise investment. As people generally list their websites because they have fallen out of love with their speciality, something better has come along or due to the fact they weren’t getting the returns they were hoping for. All of this will be reflected in the actual website you are taking on. That’s why it’s really key to do your research and make decisions based on business data rather than the aesthetics of a site. There are plenty of platforms though which will help you take over an existing web business:
Flippa – is an auction based platform where people list their sites. There is a long list of datapoints that sellers have to provide on each website, which also has to be legitimate.
The Shopify Exchange – if you are after an ecommerce site, then Shopify have their own meeting point for buyers & sellers of Shopify sites. This is a particularly good option if you are wanting to setup a drop shipping business with minimal risk.
Online Business Brokers – essentially the estate agents for business websites. Brokers provide a much more personalised approach and can help you find exactly what you are looking for. You do have to pay them a cut, but two of the bigger players are Digital Exits & FE International.
Of course, when buying an established online business you can go direct to the owner with your proposition. This has many benefits and significantly reduces the competition you may face using any of the above options.
Sharpen Your Eye For Detail
Finding a truly profitable website for sale is no easy task. After making contact with the owner, you need to spend several weeks looking at the following:
- The website analytics
- Their sales record since inception
- Demographic data on their core users
- Any legal issues & important contractual obligations
There is no winning formula for acquiring someone else’s web business, a lot will depend on where you want to take it. However, we feel these 4 rules below will help you in your analytical quest to find a rough diamond in a sea of mediocrity:
Rule #1 – their traffic is growing each year and the majority of clicks come from higher-quality traffic sources – such as Direct, Organic Search & Referral
Rule #2 – the site has a good overall conversion rate, somewhere over 1.5%. Low converting sites should be immediately disregarded.
Rule #3 – the cost per acquisition of new customers is well below the average order value for their sold products or service. This varies from industry to industry, but I like to look for a 4:1 ratio – meaning if the website in question sells £100 experience days, then the cost of winning a new customer would be just £25.
Rule #4 – the business justly owns all the site content, images, product rights, email lists and any IP. Plagiarism of any kind or cutting corners should be a huge red flag.
There are certainly more details to think about, but we hope this gave you some additional insight on why buying an existing website can be a good option, and what items you carefully need to look out for.