How to Buy a Shopify Store – Everything You Need to Know
Starting an online business isn’t easy. There is a seemingly endless list of decisions to work through before you even make your first sale.
You have to come up with a business name and create a brand identity, you need to source products to sell, you need to research your competitors and conduct market research, find reliable suppliers and plan your logistics… the list goes on.
This is a difficult challenge to tackle, especially if you are new to the eCommerce game.
What if I told you there was a way to bypass these difficult tasks and jump right into running a profitable business?
Buying Shopify stores for sale lets you skip the start-up phase and start generating revenue right away.
Buying a Shopify store is a great place to start, with merchants having sold over $175 billion through the platform in 2021 alone.
If jump-starting your eCommerce entrepreneurial journey appeals to you, then settle in to learn more about how to buy an existing Shopify business.
What is Shopify?
Shopify is a platform that allows entrepreneurs to set up an online eCommerce store and sell products through their websites.
The subscription-based software features an abundance of tools that help sellers build customized storefronts, showcase their products, engage with customers, and accept payments in a variety of currencies.
Launched in 2006, the trusted platform is used by over 1.7 million businesses worldwide and, after experiencing massive growth in 2020, is now the size of 40% of Amazon’s Marketplace.
One of the main drawcards of Shopify is that, unlike other eCommerce marketplaces like Amazon and Walmart, Shopify store owners have full control over their product listings, storefront appearance, and customer data.
Access to customer data allows sellers to better understand their target audience and build more direct relationships with their customers. It also helps them to create email lists and analyze valuable metrics to reduce unnecessary expenses and optimize product listings.
The easy-to-use templates and tools mean that you don’t need to be tech-savvy or know how to code to create an eye-catching storefront. Sellers can access all of their eCommerce website functions in one easy-to-use dashboard.
The Shopify Shipping feature helps sellers track and fulfill their orders via different mail classes and couriers like UPS and DHL.
To date, fulfillment through Shopify is not as hand-off as platforms like Amazon FBA, although Shopify’s recent purchase of Deliverr may improve their fulfillment options moving forward.
Merchants can also sell products in physical locations using Shopify POS.
The Benefits of Buying a Shopify Store
With so much earning potential on Shopify it’s only natural that you can’t wait to get started, but when building a business from scratch there’s a lot of setting up that needs to be done before you can open your doors.
By purchasing an existing Shopify business instead, all of the foundational work will have already been done for you, allowing you to start selling and earning revenue from day one.
Your business name and brand identity would’ve already been created, with a professional, branded website ready and waiting for you. What’s more, the business will have gained a degree of brand recognition and loyalty, a valuable asset that can only be achieved over time.
In most cases, the headaches of inventory management will already have been navigated, with tried and tested production processes, an established supply chain, supplier relationships, and storage solutions at your fingertips.
In short, many of the risks and obstacles that threaten the survival of new businesses will be eliminated by purchasing an existing Shopify store with a proven business model.
The Downsides of Buying a Shopify Business
As with any business, there is a learning curve that needs to be navigated. With Shopify stores, the main thing business owners need to come to grips with is the backend of the platform.
With a new store, the backend is in its simplest form, a blank slate waiting to be customized by the seller. A Shopify business that is a few years old, will have a more complicated backend, customized with various apps, integrations, and plugins.
Another challenge Shopify owners face is marketing. Shopify is not a marketplace. It doesn’t connect sellers to shoppers like platforms such as Amazon, eBay, or Walmart. Ecommerce businesses on marketplaces benefit from sharing traffic among similar products and brands.
As a Shopify store owner, you’ll need to drive organic traffic to your listings yourself. You can do this by optimizing your SEO and creating marketing campaigns via Google ads, Facebook ads, and social media.
Buying an existing store with a recognizable brand and pre-selected domain name leaves you little room to put your own twist on the products. Re-branding your Shopify store is an option, of course, but it comes with its own set of risks.
It’s important to do your due diligence when buying a business to make sure you don’t get any nasty surprises down the road. That said, no business is perfect, and you are likely to inherit a few problems like copyright issues or a poorly planned supply chain. While these problems may be a setback at first, they can be turned into growth opportunities.
Finally, having the foundational work done for you means that you will miss out on learning opportunities such as how to establish a product-market fit, how to source suppliers, or how to create a logistics management system from scratch.
Who Should Buy a Shopify Store
Buying an existing Shopify store is an excellent way for established business owners to expand their portfolios.
If you own a website in the sports niche, for example, you could purchase a Shopify store selling sports equipment and leverage your existing audience to grow the business. Or, if you own an Amazon store, you could purchase a Shopify store to expand into another sales channel without having to start from scratch.
Shopify affords sellers the ability to be independent, with the platform imposing fewer rules and restrictions than competing marketplaces like Amazon. While this allows entrepreneurs to be more flexible, it also means that sellers don’t have the safety net of fulfillment and PPC campaigns that FBA sellers have.
For this reason, buying a Shopify store may not be the right move for a first-time buyer.
That said, if you are willing to put in some time to learn how to navigate the Shopify backend and take on the challenges of marketing, a Shopify dropshipping business may be a good place for newcomers to start.
In the dropshipping business model, the seller sources the suppliers, then the suppliers manufacture the products, store them and deliver them to the customer. You, as the seller, never come into contact with the products and are not responsible for the fulfillment of orders. The seller earns a portion of every sale for marketing the product.
This means you don’t have to worry about logistics, and can focus on other areas of the business instead.
How to Buy a Shopify Store
When searching for a Shopify business to purchase, you’ll come across three different types of stores.
The first is a profitable, established Shopify store. This will be the most expensive option, but as the business has a proven earnings history and profit margins, it is likely to be well-optimized and easy to take over and run smoothly.
The second type of business is an established store that is not performing. These fixer-upper businesses could be a diamond in the rough or a money pit, so it’s important to do your due diligence. As a result of their poor performance, these stores are cheaper than profitable stores, though you’ll need to put a bit more work into them before you start earning a decent profit.
The final type of store is known as a starter store. This is a prebuilt Shopify dropshipping store, where all of the setup in terms of creating a Shopify store has been done for you. These stores are often built with a specific niche in mind and may even have some products loaded into the store, but no sales have ever been made.
Where to Buy a Shopify Store
Once you’ve identified the type of Shopify store you’d like to buy, you need to track down Shopify stores for sale.
The two most common ways to buy a Shopify store are through a private sale or via an online marketplace or broker.
Private sales can be faster, but sourcing Shopify stores for sale on your own is a difficult task. Marketplaces give you access to a large pool of for-sale Shopify businesses. In many cases, the marketplaces also vet the businesses before advertising them. This gives you an added layer of protection (but it is still crucial to perform your own due diligence).
Buying a business through a private sale eliminates the middleman and saves you broker fees, but juggling different deals on a variety of platforms can spread you thin. Marketplaces give you one point of contact and, in our case, give you access to a team of experts who will guide you through each step of the buying process.
How to Calculate the Value of a Shopify Store
Once you’ve found a business you like, you can start to negotiate with the seller.
This is where it’s a good idea to understand how eCommerce businesses are valued so that you know whether the asking price is fair or not. If the asking price is higher than average, or if the business has a few issues, you can bargain with the seller to lower the price.
Most brokers in the eCommerce industry follow a similar formula to calculate the value of a Shopify store. Here’s the valuation formula we use:
Calculating a Shopify store’s net profit is easy, but determining an appropriate sales multiple is a more intricate process.
When calculating a sales multiple, we look at a variety of factors, such as:
- Growth trends
- Stability and diversity of earnings
- Diversity of products
- Strength of the supply chain
- Level of owner involvement
- Business age
- Strengths of the email list and social media accounts
While some of these factors may seem unrelated, they give us insight into the strength and longevity of the Shopify store.
Once we’ve come up with an appropriate multiple, we multiply it by the net profit over a rolling 12-month period (to account for any fluctuations or seasonality during the year) to calculate the value of the Shopify store. The higher the multiple, the higher the listing price of the business.
The Buying Process
Once the seller has agreed to the sale, the next step is to pay for the business. While many business owners prefer to receive 100% cash up front, there are other options you can pursue, such as seller financing.
Seller financing is when the buyer pays a percentage of the purchase price upfront. They then “borrow” the remaining amount from the seller, paying the loan off as either a lump sum or as installments over a period of time. This method of financing, also referred to as an earnout, is particularly common in the sale of larger businesses valued at over $1 million.
Once the transaction is complete, the final step of the process is to transfer the business and all of its assets into your ownership. This is another area where using a broker like Empire Flippers comes in handy, as we take care of the migration process for you so that you can focus on preparing for your new role as a Shopify store owner.
Things to Consider Before Buying a Shopify Business
There is a wide variety of Shopify stores for sale. The sheer volume of options available to you can be overwhelming, so it helps to narrow down your choices by considering the following things:
What’s Your Budget?
As we’ve already discussed, there are different types of Shopify stores available at different price points. While you may have the available capital to purchase a top-tier Shopify store, remember to factor in additional costs over and above the purchase price of the business.
In many cases, inventory is not included in the price of an eCommerce business, so you’ll need to set aside some cash to replenish stock once you take over as the new owner. You’ll also need to take into account Shopify platform fees and subscription costs.
If you want to start growing the business as soon as you take it over, you will need capital for things like marketing campaigns, product development, and product launches.
Why Is the Business Being Sold?
When business owners advertise their stores for sale, they paint a rosy picture of how the business performs. Before you commit to buying a business, it is recommended that you set up a call with the seller to make sure you know the full story behind why the business is being sold.
Often, the seller simply needs capital for another project or wants to move on to something new.
In some cases, however, there may be underlying problems with the business that the seller is unable to solve. The problems could include legal issues or a surge of competition within the niche that the businesses can’t compete with. Problems like these are best avoided as they can be costly and difficult to solve.
Having an in-depth conversation with the seller also allows you to find out more details about the business, such as how the supply chain works, how many hours per week are required to maintain the business, and how the seller attracts traffic to their store.
Why Do You Want to Buy a Store?
This may seem like a really obvious question, but it will help you narrow down which type of Shopify business you should buy, and whether Shopify is the right eCommerce platform for you.
If you’re looking to replace your income, buying a proven, profitable Shopify store is probably the best bet. If you’re looking for a side-hustle, you may be better off on a more hand-off platform like Amazon FBA.
If you’re a content site owner looking to expand into eCommerce, Shopify is definitely the way to go as it can integrate directly into your existing website.
Identifying your motivations behind why you want to become a Shopify seller will also help you decide whether building a business vs buying a business is the right move for you.
You Don’t Have to Go Through the Buying Process Alone
Though the process of buying a Shopify store can be described in a few simple steps, in reality, it is a lot more nuanced. Purchasing a business is often a life-changing decision that is filled with emotion for both the buyer and seller.
With a lot of money and your professional reputation on the line, we recommend discussing your online business purchase with a qualified individual who can guide you through each step.
Our experienced sales advisers will take your unique requirements into consideration before recommending the Shopify stores that are most suited to your needs.
If you’re ready to begin the hunt for your future Shopify store, register an account on our marketplace to gain access to tools and features that will help you narrow down your search, and get one step closer to becoming a Shopify business owner.