How to Buy an Ecommerce Business

How to find an ecommerce business to buy

In order to understand what type of ecommerce business you should buy, the first step is to evaluate your current situation. Ask
yourself the following questions:

What do you want to achieve?

Specify your goals at the beginning and ask yourself “is this
ecommerce business buying opportunity going to help me
achieve my goals?” Keep asking yourself this question throughout
your search. Otherwise, you might end up looking at so many
different business buying opportunities and lose sight of your
initial goals.

If you are buying a business to learn as a beginner in online
business, think of the money you spend on the acquisition as
your “tuition fees.” Buy an ecommerce business that doesn’t cost
you too much money, but has a fairly established process and
an experienced and helpful current owner you can learn from.
Each listing on Exchange Marketplace has a “bio” of the seller that
can help you learn about the sellers and how much experience
they have.

If you are buying a business with the goal to help it grow with your
skills and resources, make sure the business has the potential to
be further optimized with the type of skills or resources you have.

If you are buying an online business so that you can be location
independent and have the freedom to travel more, make sure
you already have the skills and knowledge needed to run the
business as it is, and that the business doesn’t take 80 hours a
week for the current owner to operate.

What do you enjoy doing?

Make sure you will have fun working on the business you buy. Ask yourself
“what do I enjoy working on based on my previous experience?”

If you are passionate about a certain topic or a group of people, for example,
health and fitness, newborn babies and moms, robotics and drones, you
will be more likely to enjoy working on the business as it brings you a purpose
of helping others who have the same interest as you.

Same thing applies to your skillset. For example, if you enjoy optimizing
website landing pages, look for an ecommerce business that is fairly
strong in all other aspects but still has an opportunity to be further optimized
in its user experience.

What are your strong skills and knowledge?

When buying an established ecommerce business, the bottom
line is that you will be able to run the business as it is with your
current skills and knowledge. It doesn’t mean you have to know
everything about running an ecommerce business before you buy
it, but it does mean that you need to at least have the knowledge
base strong enough to support your necessary learning to take
over the business.

For example, it is ok if you have never run a Pay-Per-Click (PPC)
campaign with Google AdWords, but you need to at least understand
how it works before you acquire the business. Otherwise you will have
a hard time when you start evaluating the business opportunities.

If you have a strong skillset that can help you pursue obvious
improvement opportunities in the business you buy, it’s even better.
List all the skills you have, such as online sales, SEO, content marketing,
social media marketing, user experience design, conversion rate
optimization, business process automation, etc. Keep that in mind
and find businesses that can be further optimized with your skillset.

Some ecommerce businesses do require special knowledge to
run. It’s both a bad thing and a good thing. It’s a bad thing because
it limits the types of ecommerce businesses you can effectively
run, but it’s also a good thing, because if you do have specialized
knowledge in a certain space, it’s going to be your competitive
advantage. Think about what specialized knowledge you have. For
example, with specialized knowledge in electronic engineering,
you will be able to handle a Robotics ecommerce shop’s product
inquiries and create related content marketing materials much
easier than others who don’t have that knowledge.

What resources do you have?

Besides your skills and knowledge, your current resources can
also form your competitive advantages. Think about how you can
utilize your resources to maximize the business opportunities you
are looking to acquire.

For example, do you own a social media account with a large number
of followers? Think about buying an ecommerce business that sells
products they might like.

Do you have a previous product supplier you have worked with
that can dramatically improve the product quality or profit margin
of an established ecommerce business buying opportunity you
are looking at?

Do you have a large amount of cash flow that can be used to
put into an ecommerce shop’s paid marketing campaign, if the
business’s current cost of user acquisition is dramatically lower
than its revenue per user?

Determining your business buying parameters

Once you answered the above questions, you’ll have a much better
understanding of what kind of ecommerce businesses would be a
“good fit” for you. You can specify your business buying parameters
such as the niche, the type of obvious improvement opportunities
within the ecommerce business, the time and skills required to run
the business, etc.

The majority of the ecommerce businesses are either dropshipping,
inventory-holding, or Fulfillment by Amazon. Different types of
ecommerce business models will have different requirements
on time, skills, and cash flow. Understanding the advantages and
disadvantages of each model and determine which type you want
to buy is another important buying parameter. You can read more
about the comparison of dropshipping and inventory-holding
ecommerce through this article: https://www.shopify.com/guides/dropshipping/understanding-dropshipping

One of the most important business buying parameter is how much
you want to invest and what you can get with that price. Most
ecommerce businesses in the low-end market are valued at 10x -
24x monthly earnings (we will talk about valuations in details later in
this guide). That means if a Shopify business is making $1,000 per
month in profit, it is likely going to cost you $10,000 - $24,000 to
buy. If you have a specific budget you want to invest, you are likely
able to specify the revenue range of the business you’re looking for
with this formula.

If you are a beginner who wants to spend the least amount of money
to buy an established ecommerce business which you can learn
everything about how to run it, my recommendation is that you
look for an ecommerce business with a monthly earnings in the
$500 - $1,500 range with a good amount of monthly traffic (above
1,000 unique visits/mo). You’re likely able to buy those businesses
with a budget of $6,000 - $36,000. Only invest the amount you
can afford to lose if you are a beginner.

If the business is making less than $500:

  1. You might not be too motivated to work on the business since
    the financial reward is too low.

  2. The business itself might not be established enough so that
    you might not be able to learn all the aspects of running an
    established ecommerce business.

  3. The business is risky because the cash flow is too low.

Why $1,500/mo in profit in the upper range?

Based on my general observation of the lower end ecommerce
business market, an ecommerce business with $1,500 earnings per
month could have a well-established business procedure just like a
business that’s making $3,000 per month. That means your learning
experience could be the same with a lot less initial investment.

Once you’ve started your search on Exchange Marketplace and have a
couple of business buying opportunities in mind, you can use your
business buying parameters to guide you through your search.

Keep in mind that you might not be able to find as many eCommerce
business buying opportunities that fit your criteria as you would
want to. In that case, you’ll need to drop or broaden some of your
criteria so that more buying opportunities could fall into your range.

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