If you are thinking about buying an online business, it is normal to feel a bit of apprehension. When purchasing a traditional brick and mortar business, you are able to visit the office, the warehouse, meet the employees, and touch base with the customers who walk through the door. Online businesses are digital, which makes it more challenging to see exactly what you are buying.
If you are thinking about buying an online business, and you want to be sure that you are making the right decision, there are a few important things to look at. Here are the 3 most important things to look for when buying an online business.
#1 Online Traffic
With a brick and mortar business, you can see how many people walk past the store and how many walk in. With an online business, you need to focus on the site’s traffic. There is more to looking at the traffic than just checking how many people visit the site.
• Diversity: A successful online business will have online traffic from more than one source. The traffic should be a mix of search, social, direct, and paid. If the company relies too heavily on just one source, it can be very risky. Due to Google’s algorithm updates, 50 percent of search traffic can be wiped out. This can cause the business’ profits to take a huge hit. This is why diversity is essential.
• Backlinks: All search engines value relevant and natural backlinks. This can successfully link one site to another. If the website owner has chosen poor backlinks trying to work the system, they have set themselves up for loss. If you purchase the business, you will be the one taking the hit.
• Performance history: Doing your research on the website’s performance history is essential. You should check things like did the site get hit negatively by a Google update? Has the site’s traffic declined recently? Are there traffic sources that the current owner has failed to pursue? These are all critical questions to ask before buying an online business.
#2 Business Financials
It is always important to check the business’ financials before buying. This is true with both online and offline businesses. However, with an online business, there is more to dig into than the books. Before buying the company, you should look into the following.
• Trends: It is essential to look into the trends in revenue over the life of the business. Did the company really peak in the first few months and then start to die down? Does most of the income come during the holidays, but not the rest of the year? Looking into the revenue trends is essential when buying a business.
• Business expenses: It is best to purchase a business with low business expenses. You should look at the cost for domain renewals, website hosting, marketing, and web content. If the business owner’s expenses are very high, you should first look into reducing these expenses. If you don’t think it is possible, buying the business might not be the wisest business decision.
• Growth potential: The goal of a successful business is growth. You should look at the long-term trends and the competition. To get a good look at the growth potential, you can hire a Conversion Rate Organization, who can give you an accurate look at how the company can grow after you acquire it.
#3 Personal Fit
When you own a business, you need to be passionate about it. If you don’t have that passion, you will never be successful. You also need to make sure that the business will be a good fit for you. To do this, there are a few questions that you should ask yourself.
• Can you see yourself working on the site?
• Do you have the time necessary to make the website successful?
• Do you have the money in your budget to take a minor financial loss when you are first starting out and learning about the business?
Before buying an online business, you need to do your research. Doing your due diligence is essential in purchasing an online company that has the potential of being incredibly lucrative.
