The Subtle Benefits Of Buying An Online Business With A Strong Brand
Online businesses are great assets for any type of investor. They can offer almost-passive income, be run from anywhere in the world, and many are beginner friendly, so you can own one even if you only have the foundational knowledge of the business model and its niche.
When considering acquiring an online business, it’s important to understand that its strength as an investment asset is dependent on the strength of its brand.
A brand is more than just a reputation; it influences every aspect of the business. That’s why understanding how a high-quality and effective brand makes a business a good asset to invest in will help you identify one of these golden assets.
In this article, we’re going to cover all of the ways a brand influences its business so you can go out and find a brand that will generate secure and consistent returns.
The first valuable quality of a brand is its reputation.
Established In The Market (Everyone Knows Your Name)
The most obvious benefit of owning a business with a strong reputation is the amount of market share you can own.
Consumer trust is one of the most valuable assets a business can have. It’s why most people buy from the same brands again and again. The brand’s products have solved the consumer’s needs, so they keep coming back.
Because these brands have such large customer bases, they’re able to sell and market themselves everywhere, which makes them instantly recognizable within their industries.
Being recognizable enables a brand to dominate its market. For example, if you’re considering buying your first set of sports gear, there are likely only two or three brands you’d think of—Nike, Addidas, or Puma.
These brands are so big, that you likely wouldn’t even research which brands to buy from for your specific sports gear; you’d probably trust that you can’t go far wrong with Nike, Addidas, or Puma whatever sport you’re buying for.
The best brands also have a sense of identity surrounding them.
Sticking with the sports brands example, many people identify themselves as either a Nike, Addidas, or Puma person. They wouldn’t dream of being disloyal to their beloved brand by purchasing from one of their competitors.
This behavior stems from human psychology. It’s our primitive instinct to identify ourselves with a tribe for survival. Since we don’t need to identify with a warrior tribe as we did in past generations, we form our collective identity in other ways. Nowadays, one of those ways is to identify with the brands we buy from.
And it’s for this reason a strong brand is hard to compete against.
Defensible Against Competitors (A Moat Around Your Fortress)
When you’ve delivered on your promises with your products, your customers can trust you can provide what they need. That’s why current customers are 67% more likely to purchase than new customers.
For this reason, competitors will struggle to take your customer from you, limiting the amount of market share they can own.
Plus, once you have a customer, you also have their contact data, which will probably include their email address, but also their IP address if your site is using cookies.
With this data, you can remarket to your customers, keeping your brand top of mind when it comes time for them to make their next purchase. You could also encourage them to purchase other products you offer, increasing the number of sales the customer makes from your brand.
With this customer database and loyalty, not only will competitors struggle to take market share from your existing customer base, they’ll struggle to acquire their own share of the market.
Because your brand’s reputation is so widespread, it’s going to be one of the first brands seen by new consumers entering the market for the first time.
This idea taps into another psychological influence: recency bias. We’re much more likely to purchase from a brand we see first than one we see second. We believe there’s a reason the brand is so big that we saw it first and that sense of authority instills trust in us.
It’s not just consumers that have trust in a strong brand, either.
The Logistical Stronghold Of A Reputable Brand
When a brand has a number of years of consistently delivering high-quality products that satisfy customers, its supplier relationships become formidable.
Over this time of successfully selling products, the brand has generated a lot of business for the supplier.
Competitors will have a hard time taking this supplier away from the brand, especially if they have exclusivity contracts. If the supplier is the best in the industry, the competitor will have to settle for second-best or even less.
If the brand is selling on an ecommerce marketplace like Amazon, with its history of consistently high sales and customer satisfaction, the marketplace will give preference to that brand over others. It’ll show the brand’s products higher in search rankings and it may even provide it with customer-facing awards like an Amazon’s Choice badge.
Being in the good books with the ecommerce platform not only allows a brand to own a large portion of the market but the brand will also be treated with better care and be given more leeway to make mistakes, leaving them less susceptible to penalties.
When you don’t have to worry about the logistics back-end of a business or its storefront on a marketplace, then you can focus on its performance.
Strong Performance Metrics (More Money)
The best thing the most prominent brands have going for them is the money they’re making, which comes more than just from the volume of sales they make.
Let’s take reputable ecommerce brands as an example—they’re able to have high profit margins for a number of reasons.
First of all, because of their reputations, they’re able to command higher prices compared to other, less reputable brands. But their product costs don’t necessarily need to also be higher, even if they’re selling high-quality products.
Their cost of goods sold (COGS) can also be low. With their long-term supplier relationships, they’ll be able to get favorable pricing for their products.
Because of the number of sales they’re making, they’ll be able to order in bulk at a discount, also keeping COGS low.
Overall, they’ll have built an efficient and robust supply chain with few weak points. Their supply chains will have backup suppliers that keep products flowing when the main supplier has production issues. However, the majority of the time, the main supplier will be producing products on time, so the production line keeps flowing.
In fact, the whole supply chain from manufacturing, through to storage, to final delivery will be functioning well, which means there will be few product losses, damages, and perishments, saving unnecessary costs for the business.
The product quality will also be high, so there’ll be few product returns or complaints.
Other online business models also achieve impressive business metrics when they’re supported by a good brand.
Well-branded content sites tend to rank highly in Google for keywords that generate the most revenue. These keywords are known as “money keywords”; examples for a kitchenware blog would be “best blenders 2023” and “best kitchen knives for cutting vegetables”.
Consumers searching these keywords are looking for products to purchase, so they convert into sales more than consumers searching informational keywords like “how to use a blender to make a smoothie” and “how to sharpen a kitchen knife”.
A content site that’s ranking for money keywords generates a high amount of income because its visitors are actively looking for products to purchase.
Also, because the site is well-branded, its visitors will trust the information it provides and will be comfortable making purchases based on its recommendations. For example, because the blog Tech Radar is an established brand, its visitors trust the legitimacy and standard of its product reviews, which means a large percentage of its audience makes purchases through the site.
The same goes for SaaS businesses—the more trust a SaaS brand has in its niche, the more consumers who see the brand for the first time become customers and the more loyal its current customers remain.
This high consumer-to-customer conversion rate enables these businesses to earn high amounts of revenue from their marketing efforts, which makes them highly profitable assets
Not only do strong brands earn the most profit, but they’re also the easiest businesses to run.
Efficient Operations (Easy to Run)
Because big brands have been operating for a good amount of time, they’ve established efficient operational systems which will mostly be run by employees and software tools and thus will require minimal input from the business owner.
If the brand pays for the software tools per user, they may have negotiated fair rates with the provider to gain more value from the tool than other, smaller brands paying a flat rate.
Also, because the brand is able to afford software to handle complex operations, a large portion of the business work can be outsourced.
A reputable brand also has the ability to attract and retain special talent, giving it an advantage over competitors in how effectively it runs and low employee turnover.
The knock-on effect of having a strong team of employees and software tools running a business is it’s deserving of the best suppliers and affiliate and advertising networks to source products and generate revenue.
With all of these assets in its foundation, a brand is able to be scaled to new heights.
When you acquire a brand, your number one goal is to increase its size to generate an ROI. To do that, you need leverage.
Big brands have many assets you can utilize to expand and generate more revenue.
One of these assets is its audience. You can use the brand’s audience data as a research resource to launch new products and content; see what types of products and content generate the most sales and create new varieties that will have a high chance of selling.
For example, if the business is an ecommerce brand selling trainers, and its customers have made a number of requests for different colors of a particular trainer, that intel is all you need to be confident that launching that trainer in a new color will add an extra revenue stream for the business.
Another example is if you have a SaaS business that has received a lot of requests for a new feature. You can ask the customers about how they’d like this feature to be built so they help you create a new profitable feature.
Another asset a strong brand has is a high amount of capital to reinvest into new products, content, and marketing campaigns for growth. And this capital doesn’t have to come from the business itself; brands with high growth potential can attract capital from investors, widening your scaling opportunities.
Another quality of your new brand that’ll make it attractive to investors is its low risk of failure.
Low Risk Of Failure
Everything a strong brand has built is a wall that defends it against the market and competitors.
With its large, loyal audience and customer base, there’s a low chance of the brand losing sales to competitors.
With its strong connections with reliable suppliers and affiliate networks, there’s a low chance of its revenue sources failing.
With its well-built product, software, or service, there’s a low chance of its sales waning due to customer dissatisfaction.
With its solid operational systems, there’s a low chance of it failing from the inside in not being able to deliver its product or service.
These are the key points of risks in a business and a strong brand usually has them all covered. They’re what make a business generate high amounts of profits consistently, and that’s what investors want their assets to do.
Now you know how a strong brand supports a business, you might be wondering how you can find one of these secure, scalable, and highly-profitable assets.
Find A Strong Brand to Acquire Today
There are many benefits of acquiring an online business, including the freedom to run it from anywhere in the world, the ability to scale it quickly, and the low number of assets you need to be responsible for. For example, a content business can be made up of just a website and a few software accounts.
The added benefit is you don’t need to be experienced in online business to acquire one. As long as you understand the fundamentals of the business model and the industry it’s in, you can outsource the maintenance tasks to skilled professionals and software tools.
However, finding high-quality online businesses also requires foundational knowledge of how online business M&A works. That’s why it’s best to seek professional advice or to outsource most of the acquisition work to an online business broker.
For example, at Empire Flippers, we have teams dedicated to every stage of buying an online business, from helping you find the right business for you, then advising you on making your initial offer, right to transferring the business over to you when the sale is complete.
If you’d like some free, no-obligation advice on how to acquire an online business, schedule a call with one of our expert business advisors today.Or, if you prefer to dive in yourself and have a look around, create a free account and use our 40+ search filters to narrow in on your ideal business in minutes instead of days.