Six Types of People that Buy Online Businesses
Depending on where you are in your business, you might be thinking about the right time to sell. You might be thinking about how to sell—the process by which you find a buyer and get the deal done. But you probably haven’t thought about the types of people buying businesses like yours.
After all, why would anyone buy an online business when you can just build one?
People who buy businesses do it because, in many ways, it is a shortcut. They can leverage their capital into a business that is already profitable because:
- All those days and weeks spent doing niche research is already done; you’ve already proven the niche is profitable.
- They can use their skills and capital to rapidly expand the business. It is often easier to go from $4k per month to $8k per month than it is to start from scratch and make your first $1k in revenue.
- The return on investment (ROI) is wildly greater than traditional investments for their money, such as stocks, real estate, and other investment vehicles.
These three reasons alone make buying an online business look like an attractive endeavor.
Of course, those same reasons make it seem like you should keep your business and expand it even further, but if you are not into your business anymore or simply want out, it is often better to sell off the asset than to leave it to depreciate as you spend less time tending to it.
Or maybe you’re looking for a bit of leverage of their own. Collecting $600k in one large lump sum of cash in return for selling your online business can be a life-changing experience for most small business owners. That $600k can be used to purchase other businesses or as leverage for more competitive (and lucrative) markets.
Whatever your reason might be, before you can sell the business, you need to know WHO is buying these kinds of businesses. When you know where the buyer is coming from, you are going to be able to negotiate with more empathy for their position. A clear understanding of their goals allows you to position your business in the most attractive light, meaning they are more likely to buy within the terms you set.
Here at Empire Flippers, we have done over $483.6 million worth of deals—and counting. With all that experience, we have been able to distill the types of buyers into six main customer avatars. Each marketing avatar represents a type of customer with certain goals and habits; keep in mind, most buyers will change or evolve into another type of buyer as they gain more knowledge and experience.
We’ve also embedded videos from our Youtube channel describing the different buyer personas below but more from an actual buyer’s perspective rather than a seller’s perspective of these personas. If you like the videos, we’d love it if you’d subscribe.
Here’s the intro to the Youtube playlist:
Let’s dive into these buyer personas.
This type is where all business owners and investors begin—as newbies. At one point they didn’t know anything.
A Newbie Norm is probably still working their 9-5 and looking for a way to escape it. They view buying an online business as being the ticket to get them out of their situation. In many cases, they are right. We have seen people purchase cash flowing businesses that replace their job income from the moment the business is handed off to them.
As a newbie, these buyers have heard about doing business online, and they are excited by what it represents for them.
But remember… they are new at this.
That means they are looking for a cut and dried online business. They are turned off by overly complex businesses. Overall, they want to acquire a business for around $80k or less so they can get their feet wet. That amount is just small enough that they can afford it but big enough to be something real.
An $80k business will bring in right around $3k per month in net profit. While that is not always life-changing income, it is considered a good deal for most Newbie Norms just getting started in the online business world.
If your business in this range and know you’re talking with a Newbie Norm, focus on systems and support. The systems you developed to run the business will show the Newbie Norm that they can just apply your standard operating procedures to run the business.
Also, if you are willing to provide a good amount of support to them after the purchase (whether email, Skype, or a mixture), let them know that; it gives them more faith that they can succeed. After all, you are the expert in their eyes.
If you are unwilling to provide this support and have no systems in place to hand off to them, it might be best to deter a Newbie Norm from purchasing your business. One way to do so is to only accept a full cash upfront offer. If you rely on a payout, you may put yourself in a situation you really don’t enjoy, and the Newbie Norm certainly won’t appreciate how little support you showed them.
Always keep in mind, selling your business should ideally be a win-win for both you and the buyer.
Newbie Norms will eventually become DIY Daves, who are the kind of people who want to roll up their sleeves and do the work. Often, they’ve learned enough of one specific area to become an expert. Since they have become more specialized, they are also more comfortable with complicated businesses that may not have great systems yet.
Many DIY Daves will be interested in purchasing more valuable businesses (above the $100k range), though it all depends on if your business is lacking in an area they are good at.
A few common specializations for a DIY Dave are:
- Search Engine Optimization (SEO)
- Conversion Rate Optimization (CRO)
- Facebook ads & other paid traffic methods
A DIY Dave is hunting for an online business that is not performing up to their personal standards. Those standards will be different from one DIY Dave to the next, since it depends on what their real core skills are. Some will want a business that hasn’t even touched SEO despite having a ton of content on their blogs. Or they want an online business that is still using an out of the box Shopify store setup or one that isn’t utilizing Facebook funnels as well as they could.
These businesses are all diamonds in the rough for the DIY Dave.
DIY Daves know if they can find one of these businesses that is already profitable, they can take that business to the next level.
Once they actually take over the business, they do all the work themselves. It is rare that a DIY Dave has a team of any kind. They are still more or less a solo-entrepreneur, though they might have a couple of virtual assistants (VAs) that handle more mundane tasks.
If you can position your business where you proactively tell a DIY Dave where the business is lacking, such as in SEO or Facebook ads, you might spark their interest.
Flipper Freds are similar to DIY Daves in that they have a core skill specialization. For Flipper Freds, that skill is almost always CRO. The major difference is that Flipper Freds are not intending to keep the business they acquire.
Also, Flipper Freds may not be a solo-entrepreneur; they may have a team that works with all the businesses they acquire.
Flipper Freds are looking for businesses that are underperforming in areas they are experts in. When they find a business with “low hanging fruit,” they purchase it, knowing they can grow it significantly. In 12-24 months, after the changes have increased the net monthly profit to a reasonable amount, Flipper Freds will sell their online business.
Flipper Freds make their profit by selling the business, so they are likely going to be tougher negotiators during the purchasing process. Their initial cost to buying the business is important if they are going to sell it for a significant profit in just two years time. They have probably bought several businesses before, so they tend to be pretty good at negotiating.
They absolutely love systems, and usually, they have created their own, which could be as simple as a CRO checklist that they run every acquired business through or a complete overhaul of everything from how a business sources products to SEO and customer service operations.
More than anything, Flipper Freds are looking for a good deal since they plan to flip the business later for a much higher value than what they bought it for.
If you can position your business as being that good deal, then you are more likely to sell to a Flipper Fred. However, you will likely have to be more willing to negotiate and be flexible on your terms with them.
A Strategic Sally might be running multiple businesses, but they have one business that is their main earner. All of their businesses are somewhat related to each other as well, and Strategic Sallys use them to support each other.
Their ultimate goal with any acquisition is to buy a business that can help grow their other businesses. Or they might see an online business that their other businesses can significantly help to grow.
Let’s say, for example, the Strategic Sally does fitness coaching and also sells an online video course about personal training. In this situation, they might be interested in buying a site that sells fitness equipment.
All three businesses are different models, but all three are marketing different products to more or less the same market. Their coaching clients and video course students all are potential customers. Or they might use the more massive appeal of the website to serve as the initial funnel to upsell those customers into their video course or even their one-on-one fitness coaching.
If you can position your business as a way that will help them lift their other businesses to new heights, you will have a foot in the door with a Strategic Sally.
While Strategic Sallys are a bit rarer than other buyer personas, they do exist. Some sellers will create a list of buyers that might be interested in purchasing their business. Many people on this list will likely fit into the Strategic Sally category.
Portfolio Pauls own many different kinds of online businesses. They may have several e-commerce stores, affiliate content sites, or even pieces of software. Their goal is to diversify their income as much as possible; they are most interested in hands-off, maintenance mode businesses that span several different kinds of niches and monetization methods.
They may choose to proactively grow one or two of their businesses, but the others are supplying steady income month over month. Portfolio Pauls are dedicated to good systems, project management, and creating standard operating procedures.
A Portfolio Paul could be a solo-entrepreneur, but even as a solo-entrepreneur with zero employees, they’ll still have a few VAs doing the maintenance tasks required for each business.
Some portfolios can be quite large, consisting of dozens of online businesses. In this case, a Portfolio Paul might bring on project managers to help them systemize everything in their portfolio as much as possible.
Their perfect online business is one with high net profits and minimal maintenance required to keep the business working smoothly. An Amazon FBA business, for example, might be more appealing because of its minimal upkeep, though they will not shy away from full-blown e-commerce stores as long as those stores can be systemized up to their standards.
Show the Portfolio Paul how your business can fit into their overall goals of diversifying their income and fitting into their systems, and they will show an interest in your online business. For example, if you work with us to sell your business, our team will create a strategy to showcase how well your business would fit a Portfolio Paul.
Investor Ivans are similar to Portfolio Pauls in that they typically have their hands in several businesses. Out of all the buyer personas, Investor Ivans tend to be the ones with the largest pool of capital to spend. In fact, frequently, many investors will pool their resources together so they can specifically buy online businesses in the seven and eight-figure ranges.
One of the major differences from a Portfolio Paul is that an Investor Ivan is not interested at all in running the business. Usually, they have an operator who will make all the decisions for them.
Investor Ivans are looking more for dividends to be paid out to them on a monthly or quarterly basis without working inside the business. Because of this hands-off approach, Investor Ivans often will partner with Portfolio Pauls or DIY Daves, or sometimes even a Strategic Sally, to meet their goals.
Want a Profitable Exit? Know Your Market.
There are A LOT of reasons why you might want to sell your business.
In order to have that big profitable exit though, you need to know who is in the market for purchasing it. Understanding the wants and needs of each persona can help you sell your business to the right buyer for maximum profit.
These six buyer personas are a useful framework to keep in mind. When you’re dealing with a potential buyer, ask yourself: which one of these personas do they fit the most? It might be a mix of several of them. Knowing their intent, their goals, and how they want to go about operating the business are advantages that will help your negotiations.
This understanding can be the difference in getting your full asking price or even receiving the entire payment upfront instead of a small upfront payment followed by a longer payout.
More and more people are going online to look for online businesses to acquire. Many online businesses are becoming powerhouse assets in their own right. You may even own one right now that investors would gladly spend several six-figures to acquire and run for themselves.
If you’re curious what your online business is worth, check out our free valuation tool. It will give you a ballpark range on what your store’s value is on the open market. That number should help guide you on whether it is the right time for you to sell the business, and whether you should go through a private deal or a brokerage/marketplace like us.
Now you have an idea of who the target market is if you want to make a profitable exit.
Ultimately, the decision to sell is up to you. But the opportunity is there, waiting.
Photo Credit: Syda_Productions