Acquiring an Online Business
In this article I will discuss how to buy a website.
After the real estate crisis, the IT business is booming again. Now, is the best time to invest in an internet business, and reap the benefits of rewarding outcome. The technology available today at your finger tips, simply allow you to run an entire business from your home. All this is possible today from your room, and all you require is a PC, an internet connect, and the needed skills.
Today, there is a large number of websites that are underperforming due to lack of SEO optimization. Therefore, there are many opportunities for a good webmaster who knows how to generate more revenue running these underperforming websites This could be anything like implementing google adsense, better SEO required, little design tweaks, etc… Moreover, making an online investment costs less and can generate more revenues than investing in real estate, volatile markets like Forex, alternative investments, etc…
Reasons For Buying a Website
Before making an investment in an internet business, make sure you have the right skills and time for managing the business. Following are the reasons for investing in an inernet business:
- Websites that are already making a profit, and have a healthy cash flow, are apparently fully-fledged businesses. Another major attraction is that a profitable website is already generating traffic, therefore there’s no need to start the whole process of SEO from scratch. Moreover, internet businesses are very cheap, as they are only sold for as little as 24 month worth of profit. We will shed light on the valuation of the website later in this article. Also, some websites have their own huge list of loyal mail subscribers. This alone could take you months to develop.
- Buying a forum with a massive number of registered users could be very rewarding. If you find out how to monetize it, you have probably found the goose that laid the golden eggs. A lot of forums were started as a hobby, and their owners are not aware how to make money out of it. This is where an entrepreneur comes in, with an easy massively rewarding business.
- If you already have your own offline business, it will make perfect sense to buy an internet business that sells/advertises similar products. Hence, you could advertise your own products on the website, and channel the already acquired traffic to your products. Moreover, this way you also eliminate competition.
- Other reasons include but are not limited to: buying a website/domain that ranks high in a highly competitive niche, buying underperforming websites with good content that require little tweaking to generate more traffic or profit, etc…
Finding an Internet Business
You can find a suitable website in auction websites like the following:
Flippa
businessesforsale.com
websitesforsaleworld.com/
affiliates4u.com
businessesforsale.com
ebay.com
What else to consider?
You have to consider many things before completing the transaction. The following are very important points to consider:
- Research the background of the website owner/seller. Sometimes this information is easily available. Websites like ebay have a rating system for website sellers. If you find that the seller has a good history rating, then the transaction is more likely to go smooth. Moreover, run a Whois query on the website, find the owner name. Research the owner name thoroughly to make sure he was never involved in any scam.
- Do your homework well and research the industry, the competitors, and the target audience of the business. Run a SWOT analysis, and find out more about your competition in this market. Study all the areas of the business like: Supply, Marketing, Sales, Supply, Product Development and their interrelation. Moreover, ask the website seller how the business is being run. What resources is needed, and how much time is required to run the business.
- Make sure you include the following clauses in the contract with the seller:
- Use an escrow service for making the payment and completing the transaction
- The seller will not compete with you for a fixed length time in the same market after selling you the website
- The seller must do a proper handover of all the necessary resources and information required to run the business.
- The seller must provide support for an agreed upon fixed length of time after selling his website
- Nobody else other than the seller has all the passwords required. Change the passwords immediately once you acquire the website
- The email subscribers’ list should be included in the package. This list will not be shared by anyone, and will not be used by the seller, after the acquisition.
- Investigate all the marketing campaigns of the website. Research the business website properly, and make sure the seller never indulged in any marketing scams. Moreover, make sure that email subscribers’ list was not collected through spamming techniques
The Valuation of the Website
If the seller is the one setting the price, then you should expect the price to be equal to the earnings of the last 18-24 months – total debt. Otherwise, if you are buying a website off an auction, you can still use the total earnings of the last 18-24 months. If you saw a missed opportunity in the website, that you think you can tweak, and exploit the business better, then you might need to increase your bid, to beat your competitors in case they also discover this missed opportunity as well. The 18 -24 months is the simplest method of calculation, but is not very accurate. There are lots of things that are missing from the equation like traffic is not always steady, depreciation of assets, missed opportunities, etc… A far more accurate method is to use the service of professional website evaluators. You can use the following website valuation services for free:
websitevalue.co.uk/
Compare the price you receive from a professional evaluator with the price of the seller, to determine if the price is overpriced or not.
The Investment Decision and Appraisal Techniques
The only reason someone buys an internet business is because he sees a value in it. An entrepreneur expects to make a profit after buying the website. To determine if the business is profitable or not, an entrepreneur must make assumptions based on the historical data available. This includes but is not limited to:
- Traffic data, and the Conversion Rate
- Financial statements (Balance Sheet, Cash Flow, Profit/Loss)
- The original business plan of the website owner
For the complete article click Buying an Online Business or Work from home for more resources.
