Purchasing an e-commerce business can be a great way to enter the online retail world without starting from scratch.
Instead of spending months or even years developing a store, you can leverage an established business with existing customers, revenue, and infrastructure.
But how do you evaluate and successfully acquire an e-commerce store?
This guide will walk you through the essential steps and other crucial info you need to know.
Why Buy an E-commerce Business?
Buying an e-commerce business offers you numerous advantages as outlined below:
You inherit an established brand and traffic: Acquiring an existing store gives you instant access to loyal customers, proven traffic sources, and brand recognition.
Immediate revenue: You also start generating income right away, bypassing the lengthy process of building traffic from scratch.
Reduced risk: Buying a proven e-commerce store with historical data helps you better evaluate potential profitability compared to starting from zero.
How to Buy an E-commerce Business
Purchasing an e-commerce business involves several key steps. Here’s a simplified breakdown to guide you through the acquisition process:
Step 1. Know what you want
The first and probably the most important step is understanding what your objectives are in the e-commerce world.
How to do that?
You simply ask yourself critical questions like:
What niche or industry am I interested in?
What is my budget? Your budget should cover not only the purchase price but also working capital for operations and marketing.
Am I looking for a passive income stream, or do I plan to actively manage and grow the business?
Once you clearly understand precisely what you want, you'll have an easier time narrowing down your search to the best e-commerce businesses that matches your specific needs and expectations.
Step 2. Find E-commerce Businesses On Sale
Next, you’ll need to know where to buy an e-commerce business. Luckily for you, finding e-commerce stores for sale is pretty simple.
There are several reputable platforms and marketplaces to explore.
Some of the most popular platforms include:
Flippa: This is one of the largest online marketplaces for buying and selling digital assets, including online stores.
Shopify Exchange: If you’re interested in buying a Shopify ecommerce business, there’s no better place to look than this platform's dedicated marketplace for such businesses.
Empire Flippers: Here, you’ll get to choose from numerous vetted e-commerce businesses. And while these are often listed at a higher price point, they come with more security.
FE International: This platform specializes in listing high-quality e-commerce and SaaS businesses.
MicroAcquire: This platform focuses on startups and smaller e-commerce stores looking to exit.
With all these platforms, you’ll have a variety of options if you’re looking to buy an e-commerce business online.
In other words, they have something for everyone, from low-cost stores to high-revenue businesses.
Step 3. Conduct due diligence
It goes without saying that you’ll need to conduct due diligence on the business you plan to buy.
No matter how good the deal appears or sounds, just make sure you don’t skip this critical step.
Thorough due diligence will ensure you’re getting what you pay for and help you uncover any potential red flags.
Focus on these key areas when conducting due diligence:
Check the financials: Review the store’s profit and loss statements, tax returns, and expenses. Understand the business’s cash flow and margins.
Check the traffic sources: Verify the store’s traffic data using tools like Google Analytics to confirm visitor numbers and acquisition channels.
Customer data: Check customer demographics, email lists, and social media followers.
Inventory and suppliers: For this part, you want to ensure that relationships with suppliers are solid and that inventory levels are well-managed.
Legal and compliance: Make sure the business complies with all legal requirements, especially regarding data privacy and intellectual property.
What to Consider Before Buying An Ecommerce Business
Buying an e-commerce business goes beyond finding a profitable store—it’s about selecting one that fits your skills and growth strategy.
That said, here are some helpful aspects to consider before you close that deal:
1. Decide the best business model for you
As you may already know, the e-commerce business comes in several models.
Each model has its pros and cons, so you ought to choose one that aligns with your expertise and risk tolerance.
The most common models include:
Dropshipping: This type of e-commerce business has low overhead and is easy to manage but usually outputs lower profit margins.
Private label: A private label business usually has higher margins, but involves sourcing products and managing inventory.
Affiliate marketing: For this kind of business, revenue is generated through affiliate commissions. Though it’s a low-cost business to acquire, it’s highly competitive.
2. Determine the value of the business
Establishing the value of an e-commerce business is crucial to ensuring you only pay for the business value and don’t overpay.
This process is not always straightforward. Most businesses are usually valued based on a multiple of their Seller’s Discretionary Earnings (SDE). This typically ranges from 2x to 4x.
Key factors that influence a business valuation process include:
Revenue and profit margins: Consistent revenue growth and high profit margins are good signs that boost valuation.
Growth potential: Businesses with untapped growth opportunities (e.g., new products, untapped markets) are usually valued higher.
Operational complexity: A streamlined operation with automated systems is more attractive to buyers.
Best Practices for Purchasing an E-commerce Store
Once you've found the right e-commerce business to buy, you’ll still have a few more steps to go to ensure a total ownership transition.
Here’s how to navigate the final steps:
1. Secure financing
If you don’t have the full amount upfront, there are several ways to finance your acquisition. These include:
Seller financing: Some sellers may offer financing options where you pay a portion upfront and the rest over time.
SBA (small business acquisition) loans: U.S. Small Business Administration loans are popular for financing business acquisitions.
Investors: You may also consider partnering with investors who are interested in e-commerce businesses.
2. Negotiate the deal
The negotiation involves not just agreeing on a price but also covers these equally important aspects:
Payment Terms: Consider structuring the deal with an earn-out clause, where part of the payment depends on the store’s future performance.
Non-compete agreements: Enter an agreement with the seller that they won’t start a competing business immediately after selling.
Transition period: Request a support period where the seller helps you transition operations smoothly.
3. Post-acquisition plan
Once the negotiations go through and you own the business, focus on scaling and optimizing operations.
For instance, you should invest in marketing strategies like paid advertising, content marketing, and SEO to help drive traffic.
You should also consider using tools that help you automate inventory management, customer service, and order fulfillment.
And most importantly put effort into customer retention. How? Focus on building loyalty programs, email campaigns, and personalized offers to retain existing customers.
Frequently Asked Questions:
Here are some commonly asked questions about buying an online shop:
How to buy an e-commerce business?
To buy an e-commerce business, first determine your goals and budget. Identify suitable targets, conduct thorough due diligence, negotiate terms, and (if need be) secure financing.
Where to buy an e-commerce business?
Some of the best places to buy e-commerce businesses include platforms like Flippa, Empire Flippers, and Shopify Exchange. All these avenues offer you a wide range of online stores for sale.
How to buy an existing e-commerce business?
Buying an existing e-commerce business involves evaluating financial performance, evaluating market position, securing funding, and planning for integration. Be sure to focus on due diligence to avoid costly surprises.
Key Takeaways:
Buying an e-commerce business can save time and effort compared to starting from scratch.
Conduct thorough due diligence to understand the business’s financials, traffic, and market position.
Use platforms like Flippa, Empire Flippers, and Shopify Exchange to find e-commerce businesses for sale online.
If need be, secure financing through options like SBA loans or seller financing.
Plan for post-acquisition growth by optimizing marketing, automation, and customer retention.
Looking to acquire an e-commerce business? We can guide you through the entire process, from selecting the best niche to optimizing and managing your new business for long-term success.
Book a free consultation here today to get started!
