A guide to buying a home based business

Home based business

Saved up some money and want to buy an instant home based business?

The internet has changed the way people do business and it is now easy to start a business, using the internet to reach a wide range of clients and customers.

It has also become easy to buy an already existing business because you have access to market places where business are listed for sale.

Buying a business is more attractive than starting one from scratch because most of the rigorous tasks have already been done.

All you then need to do is focus on expanding it and making regular profits.  Now that all sounds lovely, however if the business is for sale, then there must be a reason right?

Well, this is a two sided debate, because there a few things to consider when answering this question.  first of all, it could be for sale because the owner had a strategy to start a business at a low cost of say £5k, and sell at a higher cost of say £50k in order to put that money in to a property business.

It could be that the perceived yearly revenue limit of the business will not exceed the owners forecast of their new business venture.  If this is the case then cash in and use the money elsewhere.

There could be other reasons why they want to sell the business.  Maybe they turned that £5k in to £50k in period as short a 2 months, and therefore their Return on Effort (ROE) is so significant for the timescale and work they put in, that doing it again is a better use of time than running the business daily for a monthly wage.

If the website makes £5k per month, then the new owner will make their money back in 10 months, and will then be earning £5k profit (for the sake of the example let’s assume THe man holding a PDA and a credit card demonstrates how owning your own business might feelthe running and marketing costs are zero).

This to me is a very sensible business investment, but to the original developer, this is not a good use of their time.  If I was them, I would cash in and go and build another web based business to resell.

These are just examples of some of the instances why the business could be for sale, but essentially you need to do your homework because it can be easy to get caught out.

Another thing to consider is that it’s important to focus and streamline your search to the things that actually interest you, or things you think you can manage successfully. If you are getting excited about a business that you have no experience in, then be sure to have a strategy to develop your knowledge and skills along the way.

Let’s take a look at some of the best ways to find an internet business for sell, and then check out my 7 point research checklist to validate it’s potential earnings.


Where to look for your new business

Before you can buy a business, you need to know where to find one. This can be very challenging, and that’s the reason why we’ve prepared this list of four ways you can find business for sale online.

 

  1. Approach Businesses Directly

Sometimes, approaching a business directly may be the best method of achieving your ideal ready made business.  You never know the situation of the owner, and you never know, you may just end up with your favourite business at a great price.

After you have done your research about a particular company, you can choose to approach the business owner directly or through a middleman.

  1. Online marketplaces

One of the most obvious places to start your search for businesses for sale should be online marketplaces. This is because there are a lot of businesses there, and you get to see plenty of listings from different industries.

This helps to get a flavour for what is selling and what isn’t.  Look to see if the site is unique, or whether the marketplace is awash with similar businesses.

You’ll need to create an account with the online marketplace, scan the listings and start contacting sellers. The credibility of an online marketplace depends on the seller and brokers using it for their business and not on the website itself, so one can’t really say that one online marketplace is better than the other.

An example of an online marketplace would be rightbiz

  1. Check Auction sites

Searching for businesses to buy on auction sites is very similar to searching in business marketplaces. The only difference is that auction sites give you an opportunity to bid on any business you’re interested in.

On auction sites, sellers can decide to sell off their website without considering or knowing its value, while sometimes they can make more than it’s worth by placing the starting price high.

You’ll see lots of businesses listed on auction sites, and this gives you lots of alternatives to choose from. However, it is important to note that most of the businesses on auction sites haven’t been vetted; hence it is actually more risky to buy them.

Also, sellers may be crafty and give a false representation of their business just to attract buyers. Because of this, you need to be careful and approach auction sites with caution, especially if you aren’t one for taking risks!

  1. Website brokers

The best option you have when looking for online business to buy is to use website brokers. Website brokers are experts who have the knowledge, tools, expertise and connection to make all the necessary findings to determine the value and legitimacy of the business.

When a broker lists a new business, a degree of questioning will have been carried out prior to the listing, and therefore some of your homework has been done for you.

Brokers do the vetting of the business, and simplify the buying process for the buyers. They also offer professional advice and settle any dispute that may arise between the buyer and seller.

Brokers only get paid after the buying process has been completed. This is the reason why they put in so much work in curating only high-quality business listings, and ensure a smooth hassle free transaction. It is also necessary as a buyer, to search for trustworthy website brokers, and develop a good relationship with them.

Probably the most credible broker in the UK is businessesforsale or in the US would be businessbroker.

7 steps to researching an web based business

As well as reading the advert, you will need to do solid research before you even consider parting with your hard earned cash.

Make sure that you also write down the important criteria to you of running a business, and score the any potential businesses against the criteria you have set.

  1. An appealing website. How attractive is the website? Will you have to do major redesign to get it up to your standards, or is it “move-in ready,” so to speak? (Of course, keep in mind that sometimes, unattractive websites have substantial sales. If this is the case, don’t fix what isn’t broken.)

2. Reliable traffic trends. Use Google Analytics to review the website’s traffic history. How has traffic changed over time? Has it grown steadily, or have there been dramatic ups and downs? If you find anything unusual, ask the business’s owner to explain.

3. Multiple sources of traffic. A sustainable Internet site will have traffic coming from multiple sources, including online advertising, organic search, paid search and third-party sources, such as links from other websites or mentions in articles and blogs. If the website gets too much of its traffic from one source — such as organic search — a change in Google’s algorithms could cause traffic to drop dramatically.

4. An industry sector that’s thriving and growing. Not all sites are created equal. While sales of almost all types of products online are projected to rise, some sectors, such as clothes and electronics, are more profitable and have more growth potential than others. Make sure you’re buying into a site that is on an upward trajectory.

5. A mobile-friendly design. With mobile devices growing in importance and mobile online sales rising, you want to buy an Internet business that will not need major revamping in order to take advantage of mobile opportunities.

6. Strong customer service and engagement. Does the company have loyal customers, and how well is it serving them? Review customer support data and interactions with customers via email, chat and phone conversations to see what types of customer support the company has in place and how well it’s doing at providing satisfactory service.

Also review how many repeat customers the company has and how it engages with them via email and social media to make sure that the business has strong relationships with customers.

7. Ease of operations. Just because it’s an Internet business doesn’t mean it’s simple to operate. Talk to the owner to find out what he or she handles on a daily basis. Ask about systems, processes, employee manuals and other guidelines that will help you maintain consistency in operations.

How much technology know-how will be required of you? If you are not tech savvy, you should definitely partner with or hire someone who is to help you.

In conclusion, you have to pay attention to details when looking for an online business to buy. If you don’t have enough experience, using online marketplaces and auction sites may not be the best for you.

However, even when you have the experience, it is always best to seek the professional guidance of a business broker because their expertise will help this process.

As we have already mentioned you must invest the time to do as much research as possible.  Why not send a survey to your friends and family on Facebook, and ask whether they would use a site like the one you want to invest in.

Why not contact some of the competitors to your potential purchase, and pretend to a student doing some market research.  Ask them about the market, check how long they have been in business, and where possible check the financial situation of these competitors. Do whatever you can to understand the business you are buying, and the market you are entering.

If you would rather start your own business then read our guide here.

Colin Dickinson

High & Wise

 

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Author: highandwise

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