When it comes to buying a business online, is money and enthusiasm all you need, or should you gain a few years of experience before investing in one? Let’s find out.
Starting a business from scratch isn’t the only means to get started. In fact, in order to hit the ground running, more and more people are buying online businesses these days.
What role does experience play in determining the success of these undertakings? In other words, how much experience should one have to own a business and run it successfully?
Let’s look at a success story.
Three years ago, former real estate agent Mr. Andrew Hill was looking around for something else to do, and he convinced himself that something was running an online business in the retail space.
While he considered striking out on his own, he realized he didn’t have enough experience about online retailing. Buying an established online business with a proven track record and a growing base of loyal customers seemed a better idea and he ended up buying an eCommerce business that was into computer accessories.
Andrew had no experience yet he succeeded to retain the existing customer base and grow it manifold in a short term.
He quickly recognized the importance of preserving the value of the goodwill the business was built on, and worked out what he needed to do in order to retain that trust and maintain the relationship with the customer. He was quite convinced that with a seamless change in ownership, almost all those customers would continue to buy from a new owner and it worked.
Realizing how important referral is for repeat business, he worked on improvising the existing marketing strategy to earn customer’s trust. He devised a simple marketing campaign that was all about good communication and keeping customers engaged with what he was going to do, and informed about what was happening there through the blog and a newsletter. Eventually, he stepped up the game by using more technology in the form of texts and emails to do it.
That was his secret of success.
Although he put down a lot of money into the business, he knew that trying to start up a business from scratch that he had no experience about would have cost him a lot more.
As Mr. Andrew’s case illustrates, owning a successful business doesn’t necessarily mean building a business from the ground up. Buying an online business through the marketplaces has certainly become a popular maneuver to go around the start-up phase completely.
It is particularly appealing to individuals who feel they have entrepreneurial instincts for growing a business that’s already doing well but do not feel they have the necessary skills and experience to run a business.
2. I have no experience. Can I Invest in an Online Business and Be Successful?
If you start up an online business with no experience, you’re actually faced with an intimidating challenge - neutralize all risks that come with starting up a business without no relevant experience of starting up one or managing one. Setting up new systems to establish the business and scaling it up is a whole new ball game altogether.
Buying an online business, on the other hand, is without doubt less risky. You don’t have to put in place new policies, procedures and set up new systems unless you don’t want to tamper with the successful formula that has been delivering great results. When you invest in an online business, you don’t have to face the challenge of building a growing base of customers, marketing the idea to your target audience, and establishing cash flow.
Having said that, there are quite a few things to keep in mind:
i. Securing the Property
Buying a business can sometimes be similar to buying a used car, in that the buyer always runs a huge risk of taking over the seller’s problems. More often than not, the sellers are not 100% transparent about things and things slowly start to fall out right after the deal has been closed. With so many things to take care of, the significance of having a systematic due diligence process cannot be overlooked.
Don’t let your lack of experience cause irreparable damages through mistakes such as accepting all data and information at face value without verifying them, overestimating the revenue and not negotiating with the seller on the payment schedules, failing to predict future cash flow and potential eventualities that might require you to put down more money into the venture etc.
Can you see why this business is worth pursuing? The success of an online business rarely has anything to do with the novelty of a business idea. Instead, it has more to do with whether or not you are able to understand what the key business strategy is and how it works so you can execute on that to accomplish desired goals. To a certain extent, luck and popularity of the existing business are huge factors, but they are not as crucial as execution. Figure out whether you are experienced enough and able to execute on the strategy set by the current business owners. Better yet, evaluate whether you are capable to understand the business idea and make it better by any means.
iii. Running the Show
Taking on a business and running it well, when you have no experience, is not always easy. Seizing a valuable investment opportunity is just one part of the puzzle. Understanding the systems in place and getting familiar with key aspects of running the business such as operations, marketing etc is another.
When you invest in a web property that’s already proven to generate a constant stream of cash flow and good profits, you need to develop the business acumen required to be able to steer the ship. A well established business per se doesn’t mean all these things are set to work on autopilot mode. It’s also important to put in a lot of work to make yourself acclimatized to the landscape of your business and figure out the key stakeholders. As such, there is a steep learning curve ahead of you.
Even if you do your homework and find a business with solid credentials, you might need a bit of guidance and advice on course correction should some things go wrong along the way. To that end, it is always helpful to have someone by your side that has already done what you’re intending to do. Successfully at that.
Do some research online and make a list of seasoned experts in buying and selling online businesses that you think may be able to aid you in your quest to take your newly acquired business to the next level. Talk to them to see how they can help you grow your business and make it more valuable to your customers. Discuss things you can work together on that can not only be a real game changer for your business but also boost up the valuation.
3. Summing Up
Buying an online business when you don’t boast of many years of practical, hands-on experience might seem risky at first sight. Give it a closer look and you can find that it has its own fair share of pros and cons. Nevertheless, there are things that you can do to make it to work favorably. With a laser-like focus, strong business acumen and a great desire to pick up skills and execute them as you go, you’ll add great value to the business that is already doing well.
Investing in an online business and running it successfully, irrespective of your experience, can be an amazing vehicle for achieving financial independence and personal fulfillment- but only for those individuals who recognize and master this very important distinction and figure out what is required to run a successful business online.
A lot of people think quite hard about novel start-up ideas but then realize that they actually don’t have any. They really don’t want to be the-smartest-guy-in- the-room, but they just want to run a business successfully.
If this is you, complete this questionnaire to see how experienced and ready you’re to buy that online business you’re looking for. In the last 5 years, BlackBook Investments has helped individuals successfully invest in high ROI online businesses and is currently working with many individuals just like you who are looking for the right acquisition.