Have you always dreamed of owning a business? You don’t have to have a traditional brick-and-mortar location in order to have a successful business. You can have a successful business that is entirely online.
The Growth of Internet Businesses
The Internet has had a big impact on how we communicate and how we do business. With the growth of internet businesses over the past few years, the impact of the Internet has become even more important. According to a study by the McKinsey Global Institute, internet businesses contributed to over 3.4% of the GDP in 13 countries in 2011.
As internet access and consumer confidence continue to grow, there is great opportunity for growth for internet businesses.
Why Invest in an Internet Business
There are several opportunities to invest in offline businesses and even more opportunities to invest in online businesses. What makes it more beneficial to invest in an internet business as opposed to traditional ones?
- Fewer overhead costs
Online businesses, when set up properly, will have fewer expenses to maintain. This is especially true when expenses such as rent, distribution and production are nonexistent. Such businesses often have lower start-up costs as well as lower costs to run the website. They often have no physical assets. You can therefore focus your resources on running the online business, outreach and creating relevant content.
Although there are various different models for internet businesses, the general focus for these businesses is on online marketing. This may require a considerable investment. However, these resources are significantly lower than those required to run a brick and mortar business.
- Greater adaptability
One of the greatest benefits of having an online business is that it is easy to keep track of. The tools and strategies used for marketing provide invaluable data about customer engagement and allow you to fine tune your conversions. You can keep track of demographics and other statistics easily. With this data at your fingertips it is makes it easier to adapt to changes more quickly. You can easily change your strategies when the need arises.
There are also various channels for marketing to take advantage of. Unlike with traditional marketing, online marketing offers various platforms that are even more affordable to take advantage of.
- Lower risks
Online businesses offer lower risks to investors. They have lower initial costs and become profitable in a relatively shorter time. Although there is still a chance of failure with these businesses, carrying out proper due diligence can reduce the risks associated with investing in an internet business.
Finding an Internet Business to Invest in
Now that you’re interested in investing in an internet business, you may be wondering how to find businesses that are available for sale. There are four basic ways that you can find an internet business for sale. These are:
- The direct approach
Have you come across an online business that you like and have considered owning? It is sometimes worth it to approach such a business independently. This means that you have to do some research and prepare a proposal or business plan to show why you think you should run the business.
- Using marketplaces
There are many online businesses available around the world. One easy way of finding those that are available for sale is to check with online business marketplaces. The listings will tell you which businesses are available in different industries. You can even contact the owners for more information.
- Businesses on auction
Even internet businesses can be put up for auction and be sold to the highest bidder. You can bid your way to owning a profitable internet business by checking with auction sites. Sellers use these sites as a way of attracting interest and driving up the prices of their businesses. This gives them an opportunity to earn more for their businesses. These sites also give buyers an opportunity to get great deals on businesses that may have been undervalued.
One of the best ways of investing in an internet business is to use a website broker to help you. Brokers will have listings of internet businesses that have already been vetted and taken through due-diligence processes. They provide in-depth information on the business including whether it is legitimate or not, its value and income.
Using a broker makes the purchasing process much easier. You only pay the broker when the deal is done. They therefore have a vested interest in overseeing the entire process from beginning to end.
What to Look For When Buying an Internet Business
When you begin your search for an internet business to invest in, you’ll come across hundreds of thousands of websites that may look appealing to you. How do you know which one to select? How can you narrow down your choices?
The following are points to keep in mind when selecting a business to invest in:
Assess its Traffic
When choosing an internet business, traffic is one of the most important factors to consider. However, it is important to consider various critical components of the traffic.
- Diverse sources
Traffic to the website should be from diverse sources including paid, search, direct, social and referral. It shouldn’t rely heavily on any single source for traffic.
- Trends in performance
Look at the history of the website’s traffic. Pay special attention to spikes and what happens to the traffic when there are updates to search engines.
Carefully audit the backlink profile of the business. Note any anomalies in their link building strategy. You may need to work with a SEO expert to help you with this.
Income and Potential to Grow
Just as with any other business acquisition, it is important to take note of the financial status of the business. How much income does it currently make? Do the revenue trends indicate growth? Are there major expenses associated with running the business? Is the business spending too much on these expenses? Is there room for growth?
Is it Right for You?
This is a very important factor to consider. You don’t have to have experience in the particular industry to acquire the business. However, it is important to consider your skills, experience and interests in running the business.
Choose a business that you’re not only interested in, but also have the time to commit to running. You should also be able to afford it.
Purchasing the Business
Now that you’ve identified the business you’re interested in, it’s time to purchase it. It is advisable to work with a broker at this point. They will guide you through the process and ensure that everything is done right.
Make an offer and carry out due diligence on the business. If everything checks out, then your broker will prepare an Asset Purchase Agreement (APA). This is a contract for the transfer of ownership of the business. You should have your legal counsel go through it before signing.
Most brokers use Escrow for the transfer of funds. This protects both parties in case of any disagreements. Once the transaction is completed the seller will take you through training to help you get started with the day to day operations of your new business. This may take several weeks depending on the nature of the business.