5 Reasons You Should Buy An Online Business Instead of Building One From Scratch
You may be aware of the many life-enhancing opportunities that starting your own online business can grant you: location independence, financial freedom, and more personal time.
Whether you need to start an online business from scratch or you can buy an already-established business to get to that point depends on your current life situation.
Your budget is the most obvious as you’ll need liquid capital to be able to acquire and scale a business. It’s inadvisable to spend all of your budget on a business and not have the capital to invest in marketing to scale it because businesses don’t stand still for long—they’re either growing or declining.
Your goal with an online business is also important: are you looking for a fast way to invest some of your capital into an asset? Or are you trying to build another source of income to break free from your day job?
Buying or building a business can help with both situations, but building from scratch takes considerably longer to make any income. For example, if you wanted to start a blog and make money from affiliate marketing, you’ll likely have to build your site for at least six months before you even make a sale.
If you can’t wait that long, then building from scratch is probably not an option for you.
Your experience is less important because you can learn how to run any online business model. However, you definitely don’t want to acquire an online business without knowing anything about the business model or online business in general. That’s a good way to potentially lose a lot of money.
We’d advise you to learn the ins and outs of your chosen business model and digital marketing before making any acquisitions.
Outside of those considerations, the floor is open to acquiring an already-established business, and here are five reasons you should do that instead of building one from scratch.
1. Skip The Business-Building Phase
Doesn’t starting an entire business feel like a mountainous task?
There are many things to build and before you even get going you need to do a ton of research.
To launch a business successfully, you need to understand your target market to determine how you’re going to build your product to match consumer needs.
You need to research the market to understand what products are currently being sold, what the regulations are around those products, and who is the audience in this market. You also need to know who the current businesses are, what they’re offering, and how they’re branding themselves.
As you can probably imagine, this process takes months.
The next phase is product development. Once you understand your target market, you can start designing your product to fit into that market.
If you plan to sell physical products, then you need to find manufacturers and create and test prototypes. Then you need to build your supply chain to manage inventory and deliver products to customers.
If you plan to build an affiliate site, then you need to either write content yourself or create a content-production system and outsource your writing to writers. You’ll also need a search engine optimization (SEO) strategy to get your site ranked in Google, which could involve doing backlink outreach or guest posting onto other blogs.
The other element you’ll need for your business is an audience.
There are a few marketing avenues through which you can build an audience, including SEO, paid advertising, and organic social media.
The biggest hurdle you have to overcome when growing your audience is not having any reviews of your products or any authority within Google. It takes time to establish a reputation for your brand that you can leverage to scale.
All of these steps in the startup process take a considerable amount of time and resources to execute. However, when you buy an already-established business, you skip all of these stages.
Have Everything Built For You
When you buy a business, the owner has already carried out the market research needed to establish the business foundation. Because the business is built on that research and is generating profits, you don’t need to spend months researching the market. You can leverage the business information, including its sales history, marketing history, competitor information, and audience data to get a good grasp of how the business fits into the market.
Of course, you should do research on the market, but when you buy a business most of that research has already been done.
As for product development, the product is already selling, so you don’t need to do pre-launch research.
You also don’t need to test your product and do product development since all of that was done by the previous owner. You can use the product sales data to increase sales or develop new, shoulder products if you want to scale the business in that way.
Also, the process of finding and establishing relationships with suppliers and building up an inventory management and fulfillment system is done for you.
If you acquire a content site with a team of contracted writers or writer contacts, then that’s your established supply chain—no need to find and interview writers.
Any business you acquire should only require you to oversee the operations, not be in the business carrying out the day-to-day tasks. The business seller should provide you with standard operating procedures (SOPs) that outline the procedures so you can understand how the business operates..
When the business is operating without you being involved in the manual day-to-day, you’re able to spend your time on growing the business.
The marketing side of the business can also already be established. If the previous owner has been testing and running ad campaigns over a number of months or years and has got them running to the point where they require minimal management, then that’s more saved time for you.
The same goes for content production, social media posting, or email marketing. When the marketing systems in these channels are already established, then you can spend your time testing ways to scale them without having to manage them day to day.
2. Skip the Brand-Building Phase
A business and a brand are two subtly different entities.
A business is an organization that provides a product or service to an audience in a market. A brand is an entity that represents that business.
You can have the best-functioning business in the world that offers a fantastic service and solves a problem in a market, but if it doesn’t have a brand that tells its story, it’s limited in how much it will grow and how much market share it will own.
Establishing a brand for a business takes considerable work. It requires you to create a reputation, which involves attracting customers, getting reviews for your product or service, and marketing your business.
A brand is a less-tangible asset than a business, but there are tangible representations of a brand. For example, marketing materials, customer reviews, and Google search rankings.
Building these assets takes time and resources. You need to use your audience research to build marketing campaigns, product designs, and website designs.
Building a brand isn’t as straightforward as writing sales ads and marketing emails. You need to make your business unique with unique branding that sets it apart from all of the business’ competitors.
If you acquire a branded business, then you don’t need to do any of this phase.
You already have the brand assets: reviews, customer testimonials, marketing materials, and a website. You also have tons of data you can leverage.
The customer reviews and testimonials tell you all of the sales messaging you need for marketing campaigns.
3. Utilize A Customer Base
There’s a bit of a difference between building a customer base and an audience. A business can have an audience, but if none of the audience becomes customers, then it’s not going to earn the business any sales.
While a business’ brand creates its audience, effective marketing and sales convert that audience into customers.
It takes some work to get an audience to become customers. You have to establish trust that your product or service can deliver the solution it promises.
To earn that trust when your product or service hasn’t yet been used by anybody, you may have to offer it for a reduced price or even free so you can get customer reviews and testimonials to prove to others in your audience that your product or service can solve their problems.
If you acquire a business that already has a customer base, you skip these processes can focus on nurturing and growing your customer base.
The customer data you have can be used in a number of ways:
- Produce new products that are likely to sell
- Inform your marketing campaigns
- Improve your customer service
- Improve your service offering
All of these activities can grow your business.
Your marketing efforts will also be less costly when they’re supported by data collected from customers. When you’re advertising without any social proof in the form of reviews and testimonials, it’s very difficult to win sales.
Your customer base acts as the foundation for your brand’s reputation, which is what gets your business sales. With a strong reputation, you don’t have to pay as much in advertising and marketing campaign testing compared to a brand with no reputation.
Plus, your customer sales data can inform your marketing efforts in terms of which audience you target and on which channels, what you offer them, and how you position your sales message. Without a customer base, all of these activities are based on anecdotal information, so you’ll likely waste a lot of money testing campaigns.
4. Generate An ROI Faster
While it is the case that to acquire an online business you need to put a sum of capital down, there are many more opportunities to earn a faster ROI than if you start a business from scratch.
There are many assets a business comes with that you can leverage to generate an ROI:
- Sales data
- Marketing data
- Business operational structure
- Customer communications (including reviews and testimonials)
- Customer data
- Supplier relationships
Understanding how you can use each of these assets to increase profits will allow you to generate a healthy ROI.
The data collected on product or service sales can be used for the building of new products. You can see which products do well and look for potential upsell products that would accompany those products and increase average order value (AOV).
Looking at how often customers rebuy products you can create campaigns that remind customers when it’s time to buy more products.
If you notice customers buy from you monthly, you can offer subscriptions to increase customer lifetime value (LTV) and make more sales.
When you’re starting a business from scratch, you don’t have any of this data so any of these sales-increasing strategies would be based on ideas, not data.
Similar to using sales data to inform sales increasing strategies, you can use marketing data to inform marketing strategies.
Email and advertising data show you which types of campaigns and audience targeting have worked for the business in the past. You can build new campaigns around this information to increase the effectiveness of marketing.
An audience is a great asset to generate sales from new and existing customers.
Instead of building an audience from scratch as you do with a startup, you’re marketing your products or services to people who are already familiar with your brand, so you have a high chance of generating an ROI.
When you have a team running the business for you or the business operations are automated using tools, then you have the time to focus on business growth.
You can also explore ways to increase business efficiency with a 30,000ft view of the business operations.
Identifying areas of improvement in efficiencies can increase business output and performance, helping you get a fast ROI. You can also look for ways to cut operational costs, like negotiating supplier rates.
Customer Communications and Data
There are many opportunities hidden in customer communications.
The questions customers ask about products and services, and what they say in testimonials and reviews, all of this can be used to inform marketing and sales strategies to increase current customer sales and acquire new customers. Customer data can tell you how to improve your products and services and what new products you can sell and what services you can offer.
Supplier and Affiliate Relationships
One of the fastest ways to reduce costs with an ecommerce business is to ask your suppliers for cheaper rates.
If the business has a good history of generating sales of their products and the previous business owner has a good relationship with them, then you have good bargaining power in your favor.
The same goes for a content site that has good relationships with affiliate partners—you can ask for better commission rates. This is especially effective in increasing profits if you negotiate a contract whereby if you increase affiliate sales they will offer you a higher commission.
Leveraging all of these assets is a great way to generate an ROI on your investment into an online business—assets you don’t have when you’re building from scratch.
5. Take On Less Risk
An established customer base is something the business’ income can rely on. When starting from scratch you don’t have that revenue coming in, so you’re in the red. When you’ve got a small, new customer base, there’s a higher chance the customers will leave you for another brand than if your business has long-term relationships with its customers.
Another asset that reduces business risk is a trademark. These protect the brand and product from competitors.
An established supply chain protects a business. You’ll already know how reliable your suppliers are, as opposed to when you’re starting a relationship with a new supplier and don’t know whether they can deliver products to standards and on time, which is important to know for effective inventory management.
When you’re learning how your supplier operates, there can be unexpected events happen with deliveries and supplies, which can lead to loss of sales. This is especially detrimental when you’re first building out your customer base. You don’t want to be disappointing your new customers with poor service as it’ll be difficult to overcome those poor experiences to get new customers.
One of the biggest assets is the business’ revenue. When a business is earning consistently you can reinvest into the business to keep it alive. When it’s not yet making money, then you have to find capital from other places to invest in its growth.
An asset that’s especially important for content sites is its authority in Google. A site with reputable backlinks and a strong SEO structure is more formidable against Google updates than a new site without any authority.
There you have it! Five reasons you should buy an online business instead of building one from scratch.
If you’re convinced that buying an online business could make sense to you, then you might be interested to learn how to identify the right business for your life situation and personal goals.
Finding the Online Business That’s Right For You
There are a few considerations to take into account when choosing a business; the first being your experience.
You don’t need experience with an online business to be successful in acquiring and running one, but your experience in other areas will tell you which online business model you’re most likely to have success with.
For example, if you’re an avid writer or you read a lot of blogs, a content site might be most suited to you as written content is the core of this business model. Understanding what makes a good article will go a long way in helping you be successful with this asset.
Plus, if you enjoy writing then you’ll have extra motivation to work on this type of business.
Content sites are ideal for anyone with expertise in a particular area. For example, if you are a firefighter then you could acquire a site on fire safety. Your topical knowledge is a strong strength as the best sites are built on professional expertise. Unfortunately, there are many content sites out there with articles written by non-experts, so just having experience in the niche puts you at an advantage.
Engineers tend to do well with Amazon fulfilled by Amazon (FBA) and ecommerce businesses. What they learn about building systems and mitigating risks serves them well with these business models.
We’ve also had real estate investors do well with these business models; being able to identify growth opportunities in assets and to manage processes makes this type of buyer ideally suited to ecommerce.
If you have experience with data engineering or IT, then you might do well with a software as a service (SaaS) business that requires coding knowledge.
Even if you don’t run the day-to-day operations of any of these business models, your knowledge is transferable. You can use it to identify growth opportunities, product and service improvements, and operational improvements.
After you’ve identified which business model is most suited to you, then you want to choose which specific business you want to acquire.
A few factors you should consider are:
- The business niche: do you have experience in this industry or knowledge about it?
- The price: what’s within your budget? Make sure you leave room for investing in growth.
- The business structure: are the operations organized so you can come in and run it easily?
- The growth opportunities: are there any areas you can use your skills and expertise to grow the business?
There are also many safety factors to consider when acquiring an online business. It’s important to be aware of the red flags for an untrustworthy asset.
That’s where an online business broker can help.
At Empire Flippers, we’ve sold over 2,000 online businesses on our vetted marketplace. Over 91% of online businesses submitted to our marketplace are rejected because they don’t pass through our rigorous vetting process where we confirm the legitimacy and quality of businesses.
We’re a team of 80+ employees, including a buyer department that works one-on-one with business buyers to help them find the right asset for them.If you’d like us to help you find an online business for you and hold your hand through the entire acquisition process, then schedule a free discovery call with one of our expert business advisors. Get free, expert advice with no obligation to buy a business with us.