Buying an online business is like investing in real estate

If buying an established online business sounds like a good option for you, it would be good to set up some criterion before starting your search so that you know exactly what you are looking for.

You must understand the industry you want to explore, how much money and most importantly how much time you can to invest to grow the business.

By setting specific criteria and goals, you can be more targeted in your search and steer yourself in the right direction.

Here are some factors to consider when setting up your criteria:

1. Online presence quantitative

Monthly traffic to the website, page speed, google ranking on specific keywords, social media followers, customer base.

Those numbers and trends will show clearly what stage the company is at right now.

However, you can also use free online site worth calculators to get a quick sense of the traffic and potential worth of the company website.

2. Online presence qualitative

Recognized brands and online reviews will show you a strong indication of how the brand is perceived by users and will likely drive more traffic in the future due to word of mouth.

3. Operating model

Buying an online business does not mean only buying the company website.

A valuable online business will come with a proven marketing system, a fulfilment ecosystem and an experienced team.

The more automated it is the more robust and scalable it will be.

By fully understanding the human resources structures — like how much involvement is needed from the business owners or how many full time or contracted staffs there are — you will have a better sense of whether this company is the right choice.

4. Technology and platform

For small businesses, most underlying platforms are built on top of some common system like WordPress or freemium site builder Wix.

These systems enable small business owners to maintain and make changes easily.

Hence, you will need to understand the underlying technology and if it is easy to maintain moving forward.

5. Business models

There are a lot of common business models used for online businesses, e.g. advertising, subscription to a service, brokerage, direct manufacturers selling products etc.

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It is good to understand how online businesses make money and how it is differentiated from other competitors.

6. Sources of revenue

Clearly, the sustainability of a business can be measured by the number of sources of income it has.

Is the stream of income recurring or non-recurring?

Recurring revenue will be able to reduce the cost of customer acquisition in the long run and provide the certainty of monthly income and underlying value.

7. Growth potential

If the business shows a strong growth trend, it is likely that the owners have already considered this in their asking price.

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Hence, if you can identify the business potential and ways to explore it, it might be good to consider businesses that haven’t had significant growth over the past few years, but still harbour great potential once something is fixed.

It will be great if you have the network, skill sets or funds to aid the company’s growth and realise its full potential.

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Buying an online business is like investing in real estate.

Online businesses are like digital editions of physical assets, and its values can increase and grow over time if you nurture it.

Owners can renovate their houses to increase the rental and its underlying value to potential buyers.

Similarly, business owners can improve their online businesses to increase the revenue and intrinsic value of its online assets.

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Image Credits: seamartini

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