How to Make The Transition into a Successful Internet Business
You have to love the online business model, as it is surely ideal. You can set up a business with little or no inventory, no receivables and just a few employees. Every single facet of the business can be easily outsourced – except of course, your customer support, and to start out you don’t even need to have any technical expertise.
It takes very little to set up an online business. Buying an Internet business can be very quick and inexpensive. You can run the business from anywhere, at anytime and this can be highly advantageous if you’re not ready to take the plunge into your own “bricks and mortar” operation. It’s great to think that you can work remotely and casually if you want to.
If you’re willing to put in the time and effort, buying an Internet business can reap enormous dividends related to the actual time involved. While it’s not all fun and games by any means, you should spend time on the operational side of your business each day.
Bear in mind when buying an Internet business that the multiples may be higher than traditional small business valuations due to the associated benefits. It will be easier for you to delve into the financials of most internet concerns, as generally sales in almost all transactions are conducted via credit card.
If you’re looking at a website business for sale, consider the following:
• Don’t ever let anyone lead you to believe that if you just set up a website, you’ll be home free. All of your potential clients will have to come across some means of finding you before they can even think about the goods and services which you have available. Even the most successful organization in the world couldn’t turn a profit if they opened a brand new store on a deserted island in the middle of the ocean. The biggest discounts ever won’t make any difference as customers simply won’t travel to the store. Marketing is absolutely everything to a business, and you have to work out an effective way to get lots of people to visit your site on a daily basis.
• Niche products can be very successful in this environment.
• Find out as much as you can about the competition, the industry and products but remember that this process can prove more difficult than researching a local “brick and mortar” operation.
• It is vital for you to have a large balance of sale as part of any deal and you must have a bulletproof non compete clause with the seller. It is just so easy for them to open up a competing business under another name or in another country.
• If you want to buy a business which involves a particular type of product or service, you need to be sure that you will be able to buy these products and services from the supplier involved after closing.
• Be wary of businesses that rely on e-mail marketing campaigns and check out their list building and prospect-getting procedures. As spam is so pervasive, you can be sure that there will be heavy regulation down the road and you should have your house in order with regard to e-mail marketing.
• Be wary of any “overnight sensations” or fads, or anything that may be adversely affected by future governmental controls.
• Make sure that you are not signing up for liabilities or guarantees that may have been offered by the previous owner. You should make sure that you have access to software records relating to all site versions as you will need to know, for example, if there was a five-year guarantee offered in the past. Make sure that you get the owner to indemnify you and that you have a mechanism to offset any future claims against that large balance of sale.
• Change all passwords when you take over and make sure that you have access to a list of individuals who may have had prior access to the site.
• Bring in outside experts to evaluate the existing site from a technical perspective. If the seller has developed the site you need to check the programming. A patchwork of programming fixes may be in place and you may need some help to unravel it.
• Source code must be available for the site, with proof of ownership.
• You do need to make friends with the webmaster, especially if you are not doing the work yourself. A lasting relationship will certainly benefit you.
• At an early stage, talk with the relevant merchant banks to ensure that you do not need to put up any significant personal guarantees when it comes to credit card processing.
There are quite a few websites available which specialize in internet businesses for sale, and they can assist you greatly when you’re ready to purchase an Internet business. Carefully look through several dedicated databases but – as always, be diligent. An online business venture, when established correctly, can be one of the best models available. The key to success – as always, is to supply a really profitable service or product within a well organized, easily sustainable operation.
Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation – The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream of buying a business.
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