The eCommerce business is booming like never before. Online shopping was merely a convenience, not too long ago, but has now become the first choice for a large number of people. The entire online ecosystem is thriving, and as a business person, it makes complete sense to want to be a part of this sector. There is always the option of creating your eCommerce store, but it is fraught with risks of failure. Moreover, building a business from scratch requires a huge effort and investment of capital as well as effort with low returns in the early stages. Instead, buying an already established eCommerce business for sale has become far more appealing for entrepreneurs.
Advantages of Buying an E-Commerce Business
Here are some of the key reasons why entrepreneurs have been eyeing eCommerce businesses for sale.
Some reports suggest that 15-20% of businesses fail within the first 2 years, while almost 50% have failed by the 5th year of their existence. This is a high risk, indeed. Buying an already established eCommerce business helps you skip the turbulent early startup phases. This significantly reduces the risk and increases your chances of running a sustainable business.
Apart from the high risk, the early stages of a business entail lower revenue, higher expenses, and eventually low income. When you buy a stable business, you are taking over an enterprise that is already making money. In other words, you start getting a return on your investment right away.
People and Processes
If you notice an eCommerce business for sale that has been doing well, you will find that it already has a team with the right skill set to manage the different functions. Moreover, it must also have a robust supply chain system in place along with vendors etc. By taking over such a business you can save a lot of time and effort involved in hiring new people for such roles and also the subsequent learning period for them to become fully productive.
Access to Existing Customers
Not only can you get a readymade team and set of suppliers, but you also get access to all the existing customers as well. This ensures a steady stream of revenue while you initiate your plans to build and scale over the existing platform.
Key Factors to Consider While Buying
Now that you are convinced that taking over an eCommerce business for sale is the right way to go for you, and you have the resources to do so, here are some important considerations to keep in mind.
Conduct a Due Diligence
With so many eCommerce businesses for sale, which is the right one for you? The answer to this question needs to be arrived at after thorough research and due diligence. This can involve creating a checklist and asking a series of relevant questions, such as:
- The reason the owner has put their eCommerce businesses up for sale
- The nature of the business and the market dynamics of the segment
- Current performance of the business and brand value
- Direct and indirect competitors
- Existing customer base, social media presence and business traffic
- Suppliers, underlying technical infrastructure, possible areas of improvement, and so on.
The answer to these (and many more questions) will help you establish the worth of the business and its future potential. Scalability must always be kept in mind keeping a futuristic perspective. After all, what works now may not work as well a few years down the line.
Verify the Financials
Once you have ascertained the general health of the business, it is time to enter into some form of an agreement with the owner and gain access to the essential financial information. Yearly sales, operating expenses, present liabilities and debts, are all significant aspects that need to be carefully comprehended. Not only the financial health but also the legal obligations, any pending litigations or rule violations need to be carefully assessed. Even the ownership structure (sole proprietorship, JV, partnership) should be evaluated to understand the ease of taking over this eCommerce business for sale.
Buying an eCommerce business can be expensive and requires a significant amount of effort. For investors and entrepreneurs new to the process of buying a business, it may be advantageous to employ the services of a consultant, a broker, or a professional acquirer. With their professional experience, they can coach you every step of the way through the identification, due diligence, verification, validation, and negotiation phases to ensure you get the best value for your money. Click here for a detailed guide on choosing the perfect eCommerce business for sale and the steps involved in buying it.