How to Buy an Ecommerce Business

How to find an ecommerce business to buy

In order to understand what type of ecommerce business you should buy, the first step is to evaluate your current situation. Ask yourself the following questions:

What do you want to achieve?

Specify your goals at the beginning and ask yourself “is this ecommerce business buying opportunity going to help me achieve my goals?” Keep asking yourself this question throughout your search. Otherwise, you might end up looking at so many different business buying opportunities and lose sight of your initial goals.

If you are buying a business to learn as a beginner in online business, think of the money you spend on the acquisition as your “tuition fees.” Buy an ecommerce business that doesn’t cost you too much money, but has a fairly established process and an experienced and helpful current owner you can learn from. Each listing on Shopify Exchange has a “bio” of the seller that can help you learn about the sellers and how much experience they have.

If you are buying a business with the goal to help it grow with your skills and resources, make sure the business has the potential to be further optimized with the type of skills or resources you have.

If you are buying an online business so that you can be location independent and have the freedom to travel more, make sure you already have the skills and knowledge needed to run the business as it is, and that the business doesn’t take 80 hours a week for the current owner to operate.

What do you enjoy doing?

Make sure you will have fun working on the business you buy. Ask yourself “what do I enjoy working on based on my previous experience?”

If you are passionate about a certain topic or a group of people, for example, health and fitness, newborn babies and moms, robotics and drones, you will be more likely to enjoy working on the business as it brings you a purpose of helping others who have the same interest as you.

Same thing applies to your skillset. For example, if you enjoy optimizing website landing pages, look for an ecommerce business that is fairly strong in all other aspects but still has an opportunity to be further optimized in its user experience.

What are your strong skills and knowledge?

When buying an established ecommerce business, the bottom line is that you will be able to run the business as it is with your current skills and knowledge. It doesn’t mean you have to know everything about running an ecommerce business before you buy it, but it does mean that you need to at least have the knowledge base strong enough to support your necessary learning to take over the business.

For example, it is ok if you have never run a Pay-Per-Click (PPC) campaign with Google AdWords, but you need to at least understand how it works before you acquire the business. Otherwise you will have a hard time when you start evaluating the business opportunities.

If you have a strong skillset that can help you pursue obvious improvement opportunities in the business you buy, it’s even better. List all the skills you have, such as online sales, SEO, content marketing, social media marketing, user experience design, conversion rate optimization, business process automation, etc. Keep that in mind and find businesses that can be further optimized with your skillset.

Some ecommerce businesses do require special knowledge to run. It’s both a bad thing and a good thing. It’s a bad thing because it limits the types of ecommerce businesses you can effectively run, but it’s also a good thing, because if you do have specialized knowledge in a certain space, it’s going to be your competitive advantage. Think about what specialized knowledge you have. For example, with specialized knowledge in electronic engineering, you will be able to handle a Robotics ecommerce shop’s product inquiries and create related content marketing materials much easier than others who don’t have that knowledge.

What resources do you have?

Besides your skills and knowledge, your current resources can also form your competitive advantages. Think about how you can utilize your resources to maximize the business opportunities you are looking to acquire.

For example, do you own a social media account with a large number of followers? Think about buying an ecommerce business that sells products they might like.

Do you have a previous product supplier you have worked with that can dramatically improve the product quality or profit margin of an established ecommerce business buying opportunity you are looking at?

Do you have a large amount of cash flow that can be used to put into an ecommerce shop’s paid marketing campaign, if the business’s current cost of user acquisition is dramatically lower than its revenue per user?

Determining your business buying parameters

Once you answered the above questions, you’ll have a much better understanding of what kind of ecommerce businesses would be a “good fit” for you. You can specify your business buying parameters such as the niche, the type of obvious improvement opportunities within the ecommerce business, the time and skills required to run the business, etc.

The majority of the ecommerce businesses are either dropshipping, inventory-holding, or Fulfillment by Amazon. Different types of ecommerce business models will have different requirements on time, skills, and cash flow. Understanding the advantages and disadvantages of each model and determine which type you want to buy is another important buying parameter. You can read more about the comparison of dropshipping and inventory-holding ecommerce through this article: https://www.shopify.com/guides/dropshipping/understanding-dropshipping

One of the most important business buying parameter is how much you want to invest and what you can get with that price. Most ecommerce businesses in the low-end market are valued at 10x - 24x monthly earnings (we will talk about valuations in details later in this guide). That means if a Shopify business is making $1,000 per month in profit, it is likely going to cost you $10,000 - $24,000 to buy. If you have a specific budget you want to invest, you are likely able to specify the revenue range of the business you’re looking for with this formula.

If you are a beginner who wants to spend the least amount of money to buy an established ecommerce business which you can learn everything about how to run it, my recommendation is that you look for an ecommerce business with a monthly earnings in the $500 - $1,500 range with a good amount of monthly traffic (above 1,000 unique visits/mo). You’re likely able to buy those businesses with a budget of $6,000 - $36,000. Only invest the amount you can afford to lose if you are a beginner.

If the business is making less than $500:

  1. You might not be too motivated to work on the business since the financial reward is too low.

  2. The business itself might not be established enough so that you might not be able to learn all the aspects of running an established ecommerce business.

  3. The business is risky because the cash flow is too low.

Why $1,500/mo in profit in the upper range?

Based on my general observation of the lower end ecommerce business market, an ecommerce business with $1,500 earnings per month could have a well-established business procedure just like a business that’s making $3,000 per month. That means your learning experience could be the same with a lot less initial investment.

Once you’ve started your search on Shopify Exchange and have a couple of business buying opportunities in mind, you can use your business buying parameters to guide you through your search.

Keep in mind that you might not be able to find as many eCommerce business buying opportunities that fit your criteria as you would want to. In that case, you’ll need to drop or broaden some of your criteria so that more buying opportunities could fall into your range.

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