Buying an eCommerce Business: Better Than Building From Scratch?

By now, I’m sure you’ve heard us say that eCommerce is taking over, it seems like every day we hear about another brick-and-mortar closing its doors for good. We also tend to exert a lot of energy explaining the ins and outs of creating and opening your own Shopify store from scratch. While it may be true that taking this route may cost less overall, the amount of time you have to devote to building a business from the ground up is completely bonkers. It could absolutely consume your life, at least for a good stint until you can take your store’s training wheels off.

If you’d rather not spend a lengthy period of your life broke and stressed out beyond belief. An excellent option to break into this unstoppable industry is to purchase an existing (preferably successful) eCommerce business. The best part is, as long as you do the appropriate background research, you’ll start profiting on the first day of ownership!

So, for today we’re going to take a break from detailing how to build your Shopify store from ground zero and focus on explaining the process of purchasing an existing eCommerce business, the pros and cons, and what to be aware of.

• Pros and Cons of Buying vs Building
  • Pros
  • Cons
• How to Secure Funding
• Where to Find eCommerce Businesses for Sale
  • 1. Flippa.
  • 2. Empire Flippers
  • 3. Aquire.com (previously MicroAquire)
• Business Background Research Checklist
  • Confirm the Businesses Accounts
  • How Does Their Supply Chain Work?
  • How Does the Business Gain Customers?
  • How’s Their Email List and Social Accounts Look?
  • Store Branding and Design
  • What’s Their Competition?
• Closing the Deal
• Frequently Asked Questions
• Wrapping It Up

Let’s get to it!

Pros and Cons of Buying vs Building

As with everything else in this world, there are positives and negatives to purchasing an existing business. I have my personal opinion about which is better (for my situation), but those are my reasons. I’m 100% positive that you are not the same as me, so let me take a moment to give you the skinny on the good and bad.

Pros

The most obvious and probably biggest pro with buying an eCommerce business is that the hard work is (or should be) already done for you. There shouldn’t be a need to spend a year of restless nights trying to figure out how to lift a new business off the ground. In most cases, you’ll begin making money from the first day you take ownership.

Cons

The most glaring downside to buying an eCommerce business is the cost. It can be quite expensive to purchase a successful online store. The other con is missing out on many valuable lessons that starting your own store can teach you. When you build from scratch, you learn absolutely everything about your store and how it all works, lessening the need to outsource various tasks that may arise such as store design and functionality. If you’re the one who put it all together, there’s a great chance you’ll know how to fix it.

Recommended: How to Buy a Successful Online Business and Secure Your Future

How to Secure Funding

What if you’re like me and are about as wealthy as Cletus the slackjawed yokel? Fortunately for people like us, there are many ways to get the funding to realize your dream of owning your own eCommerce business. 

Here are a few:

1. Shopify Capital: can provide funding for inventory, marketing, or staff without lengthy bank approvals or the need to relinquish ownership. Payments are made flexibly through a percentage of sales. (But not everyone can qualify).
2. SBA loans: offer more flexible limits, interest rates, and payments than traditional bank loans. They are often used for high-risk ventures and are most commonly used for securing funding for this type of purchase.
3. Standard bank loans: are guaranteed by the bank and usually feature varying interest rates and terms based on your credit and financial history. If you have a good history with your bank, good credit, and you’re not flat broke, this is a solid choice.
4. Rollover for Business Startups: this can allow you to borrow from your retirement fund, provided you have a strong retirement plan. This could be a great option if you’re thinking of your new eCommerce business as an additional investment opportunity.
5. Seller financing: a loan given by the seller of the business instead of an external lender. While this may be a possibility, and certainly never hurts to ask, this is a fairly uncommon sight to see in this particular scenario, just being real with you.
6. Crowdfunding sites: like GoFundMe, Kickstarter, and Indiegogo help startups get funding through public contributions. Just don’t be a sleaze-ball, be forthcoming and refrain from making up some sob story to get people to give you money, I absolutely detest that.
7. Business grants: may be available for certain demographics, such as veteran-owned, minority-owned, and women-run. If you belong to one of these groups, then by all means, take advantage!
8. Private investors: such as angel investors, friends, and family may also provide financial assistance, explore your own network for possible funding sources. It’s always best to try to do this on your own, after all, this is going to be your business. But, if you’ve exhausted all other options and you’re still a bit shy of your funding goal, then there’s no harm in taking a little trip to “the Bank of Dad.”

Where to Find eCommerce Businesses for Sale

There are countless places to browse eCommerce businesses for sale. If you’re old-school, there are some that can be found on Craigslist, the newspaper, word of mouth, etc. 

But, if you’re not technologically deficient, or if you’re having trouble finding the right fit using traditional methods, there are several platforms built to help you find the eCommerce business of your dreams. 

1. Flippa.

We recently did a full workup on Flippa. Here’s what we love about it, and just a few reasons why:

• High-traffic marketplace – Flippa is a humongous online marketplace with one of the largest selections of websites and domains available for sale.
• Professional buyers and sellers – You can expect to see a higher level of professionalism and due diligence from buyers and sellers on this platform.
• Security and protection – This online brokering system provides a secure escrow service to protect both buyers and sellers during the transaction process.
• Free valuation tools – Flippa offers lots of tools and resources to help buyers and sellers figure out the value of websites and domains.
• Knowledgeable support – The platform offers support and resources to help buyers and sellers navigate the process of buying or selling a website or domain.

If you’d like to skip the B.S. and take our word for it, hop over to Flippa and see for yourself why we consider it to be one of the best eCommerce and website marketplaces.

As with anything, there are some downsides to buying your business on Flippa. Buyers can expect to be charged an additional 10% of the final price in the form of fees. 

2. Empire Flippers

Another heavy-hitter in this game is Empire Flippers, these guys have been in this industry since 2013 and know the ins and outs of every facet of buying and selling online businesses.

What sets EF apart is its rigorous vetting process, if you want to sell your business on Empire Flippers, you can bet they’ll find out every last gritty detail.

This should make you feel some of those warm and fuzzies if you’re using the platform to buy your business because we can’t see any way to pull the wool over their eyes. Every listing on Empire Flippers is completely legit.

They also have a plethora of tools and resources available to both buyers and sellers alike, with one of the most simple, honest, and robust valuation tools on the market today.

Now, with that said, the real downside to buying with Empire Flippers is the sheer price of the business itself. These sellers are not messing around, and they’ve all proven that their businesses are profitable, so it’s not uncommon to see listings priced well into the tens of millions of dollars. 

As a buyer, you can expect to be charged a flat 10% success fee that is based on the sale price of the business itself. (I’m sure there’s some sort of payment processing fee involved as well)

Head over to Empire Flippers today and see for yourself why they’re the best marketplace for buying and selling premier online businesses.

Recommended: Empire Flippers: The Gold Standard for Online Business Brokers

3. Aquire.com (previously MicroAquire)

These guys are pretty awesome, acquire.com (previously known as MicroAquire) was started in 2015 with a focus on being the leader in smaller online business and software product marketplaces. They offer a vast set of services to both buyers and sellers, including brokerage, valuation, and due diligence services.

Like I just said, this is a great place to look if you’re searching for something on the less expensive side such as a startup, or even an app. But be warned, there’s no guarantee you’ll make money right away. If you buy a startup eCommerce business on this platform, be prepared to put in the work to make it actually profitable.

Acquire.com does not charge buyers a success fee, but you may be charged a payment processing fee. They work like a membership program, and while they do offer a free pricing tier, there are limitations to the services that are available. More serious buyers and sellers will pay between $380-$780 a year to take advantage of all of the services that acquire.com has available.

Again, if you’re willing to do the work to lift up one of the businesses listed here, the payoff could potentially be enormous.

Business Background Research Checklist

Most marketplace platforms will say that they take care of the background research for you. I’ve never been one to let anyone else tell me if it’s a good or bad idea to invest my hard-earned money, I like to research my investments myself.

So, if you’re like me, here’s how you’ll do this:

Confirm the Businesses Accounts

When you’ve found an eCommerce business that piques your interest, the first thing you need to do is examine its financial records. Although this may not be the most thrilling thing in the world, it is mucho serious.

A complete analysis of a company’s profit and loss statement provides insights into all of its revenue and expenses. To better understand the business’s actual profits, break down the statement into several sections:

1. Total Units Sold: This section will provide information on the number of units of each SKU that are sold each month. This data can help determine which products are generating revenue.
2. Gross Income: This includes all revenue generated across all income streams minus expenses such as returns and discounts.
3. Gross Profit: Gross income minus the cost of sales. This figure includes expenses like payment-processing fees, third-party fulfillment, and delivery. It provides a more accurate representation of how much it costs to deliver products to customers.
4. Expenses: This includes all of the operating costs associated with running the business. This may include web and domain name hosting, contractors and employees, and software.
5. Net Income: Gross profit minus expenses. This figure provides an accurate representation of the business’s monthly earnings and what you could expect to take home each month. The net income also shows whether the business is growing, holding steady, or in decline.

By analyzing the accounts, you can determine how the business generates revenue and identify any red flags or opportunities for growth. Additionally, you can confirm the information provided by the business by accessing platforms like Shopify’s analytics.

How Does Their Supply Chain Work?

How are the products are delivered to the customer? This aspect is crucial for the continuity of the business after the ownership transfer.

To avoid nasty surprises, you should verify with the seller of the eCommerce site if their supplier relationships and contracts will be handed over to you. You do not want to end up with a supplier raising their rates post-sale, especially if the seller previously negotiated some pretty awesome terms.

Fortunately, most suppliers and manufacturers are willing to collaborate with the new owner of the business.

Make sure to ask about the product acquisition process, such as their country of origin. Many e-commerce stores acquire their products from China for a lower cost, although longer lead times can definitely impact inventory levels if not closely monitored. Asking about the possibility of introducing new products can also elevate the business to the next level.

The fulfillment process is a significant part of the supply chain that influences a business’s success. Employing a third-party logistics provider or similar service allows online store ownership to be accessible to everyone. Scheduling a call with the seller to discuss the operations of this aspect of the business is ideal. 

If a seller is unwilling to talk with you about any of these aspects, ditch the deal and run like hell.

How Does the Business Gain Customers?

As a potential buyer of an eCommerce website, you should be aware that there are various ways to drive traffic to the store, including:

• Search engine optimization
• Paid traffic
• Social traffic

Each of these traffic sources is valuable, and buying an established business gives you the marketing data that corresponds directly to the customer base.

While it’s not necessary to use all of these marketing strategies to run a successful eCommerce business, adding more traffic sources could really boost the business. If you lack the marketing know-how, don’t forget that you can always hire someone to help you.

To gauge the effectiveness of the business’s traffic sources, you’ll need to see a breakdown of them. Google Analytics (or the like) can give you this information. Knowing what’s working and what’s not is crucial, and will save you from wasting lots of time and money on ineffective methods.

Additionally, finding out where the traffic is coming from is essential. The country that generates the most traffic should be the focus for sales.

SEO: Implementing a blog on an eCommerce website can help maximize Google search traffic. SEO is a cost-effective online marketing strategy when done correctly, and it requires little maintenance once implemented. However, it can take some time to see results.

If a business relies heavily on SEO, be sure to analyze which pages generate traffic and look at the backlink profile to check if the traffic is legitimate.

Paid advertising: Google and Facebook ads are the most widely used forms of paid advertising. They do have the potential to be lucrative, but they can also eat away at profit margins if not optimized correctly. If a business is already using paid ads successfully, buying it can save you time and money. If not, implementing them can bring almost instant results.

Reviewing data on ad spend, cost-per-click, and conversion rates will give you an idea of how well-optimized the ads currently are and how much room for improvement there might be.

Social media: Social media can diversify traffic sources and make the business more stable. Buying an e-commerce business that has a substantial online following or adding social media marketing after purchase can be very beneficial.

The business you’re interested in buying may not be using the above methods to bring customers in, just make sure that whatever they’re doing is both sustainable and will not be harmed by implementing other forms of marketing.

How’s Their Email List and Social Accounts Look?

While we’re on the subject of social media, leveraging it and email marketing can be a valuable strategy. Social media is a highly effective platform for promoting products, sharing news, and building social proof. Through social media, customers can post about their experiences with your products, creating user-generated content that potential customers can see and be influenced by. Products that gain traction on social media can see some serious boosts in sales.

If the eCommerce business is not currently utilizing social media, it’s worth adding it to the marketing strategy. By doing so, you can maximize the business’s potential reach and engage with customers on a more personal level. 

However, it’s important to choose the social media platforms that are most relevant to your target audience and business niche.

Another powerful marketing tool that eCommerce businesses can use is email marketing. Building and monetizing an email list creates a direct line of communication with your customers, so you can market your products and services as you see fit. Remarketing is a particularly useful tactic for eCommerce businesses, targeting those customers who have already shown interest in your products.

Setting up an email form to capture customer email addresses is a relatively simple process. If the eCommerce business does not have an email list, add it ASAP to help drive sales and improve customer engagement. It honestly can’t hurt, and if an online business isn’t already doing this and has found success without it, you may have stumbled onto a gold mine.

Store Branding and Design

When buying an eCommerce business, it’s important to understand how the store was created and built. The platform used, whether it’s a popular eCommerce platform like Shopify or a custom-built design, will absolutely affect how you manage and operate the business. 

Having the relevant skills (or hiring someone who does) is essential for managing the technical aspect of the store.

To get a better understanding of how the previous owner ran the business, it’s important to ask them about their experience. Did they use any employees or freelancers? If so, who were they and what tasks did they handle? 

Hiring a virtual assistant can be beneficial for simple tasks such as customer support and order fulfillment, allowing you to focus on improving the business. If the seller is leaving the eCommerce industry, they should be willing to provide you with the contact information of the people who helped them run the store.

(This is another one of those things where if they aren’t willing to talk to you about the fine details, then it’s probably time to leave the negotiating table). 

When evaluating the website design, try to view the website from the perspective of a potential customer. Is there any room for improvement in terms of functionality, navigation, or design?

While you are buying an already established business, this doesn’t mean you can’t take it in a new direction. Analyze what is currently working and what areas can be improved upon to make the business more successful.

What’s Their Competition?

While analyzing the eCommerce company you’re interested in buying is crucial, it’s equally important to evaluate its competitors. Even if the company you want to buy is the market leader, there may be smaller businesses that offer better prices or higher-quality products. In today’s competitive eCommerce landscape, every online retailer is vying for the attention of discerning customers who are always on the lookout for the best deal.

To evaluate competing companies, start by identifying their strengths and weaknesses. Are they offering a larger selection of products than your target company? Do they have a more user-friendly website or a stronger social media presence? Take note of all these factors and compare them to your target company’s offerings. It’s important to assess each competitor’s unique selling points and how they differentiate themselves from your target company.

Next, put yourself in the shoes of a customer and ask yourself which company you would purchase from. Consider factors such as pricing, customer service, shipping policies, and overall brand reputation. This will give you valuable insights into the customer’s decision-making process and help you make informed decisions about how to position the company in the market.

Remember that analyzing competitors is an ongoing process, and it’s important to stay up-to-date with their latest offerings and strategies. By regularly monitoring your competitors, you can identify potential threats and opportunities, and adjust your own strategies accordingly.

Closing the Deal

After you’ve thoroughly researched all aspects of the business, and you’ve negotiated with the seller, it is time to finalize the purchase. This is where the purchase agreement comes in, which is a legally binding document that both parties must agree to before transferring ownership.

To ensure the agreement is fair and comprehensive, we recommend getting some help from a lawyer who can review and/or negotiate on your behalf. This way, you can be certain that all aspects of the deal are covered, and there are no surprises after the purchase.

Once both parties agree to the terms and conditions of the purchase agreement and sign it, the lender (or you) will put the agreed-upon funds in escrow. This is a safekeeping account where the funds are held until the closing date.

After all legal documents have been signed and submitted by both parties, the funds will be released from escrow and transferred to the seller, and you’ll officially become the new owner of the business!

BOOM!

Now, listen carefully. After closing the deal, it is important to follow up on transferring the necessary titles and licenses to your name. This is an essential step to ensure that you are legally recognized as the owner of the business and can continue to operate it without any legal obstacles. Which personally, are my least favorite types of obstacles.

Frequently Asked Questions

Wrapping It Up

Purchasing an existing eCommerce business can be a wise decision if you’re looking to enter the market or even expand your existing operations. While it may require a significant investment, the benefits of having an established customer base, proven revenue streams, and pre-existing systems and processes will usually outweigh the risks.

When considering buying an eCommerce business, it’s important to conduct thorough research, including analyzing financial statements, customer data, and industry trends. It’s also a good idea to work with a trusted broker and attorney to navigate the buying process and ensure all legal and financial requirements are met.

There are several resources available for finding eCommerce businesses for sale, including online marketplaces, brokerages, and industry associations. Once a suitable business is identified, it’s crucial to negotiate a fair price and ensure that all necessary documentation and agreements are in place before finalizing the deal.

If you’re willing to put in the effort to research, negotiate, and manage the transition effectively, and take the time to carefully evaluate potential opportunities, you can position yourself for long-term success in the competitive world of eCommerce.

Just don’t forget to remember us “little people” when you get to the top!

---

Make sure and check out our bi-weekly online business round-up where we’ll be hand-curating and digging up the most profitable eCommerce opportunities currently up for grabs – See you there!