Many e-commerce entrepreneurs prefer purchasing an e-commerce business to creating their owno in order to save time, money and energy. E-commerce businesses are profitable enterprises since they provide high returns that are given annually. Successful e-commerce businesses need to have enough customers and willing suppliers. Therefore, every e-commerce buyer should consider several factors before spending his or her funds in buying an e-commerce business in order to avoid any losses.
Factors to consider when buying an e-commerce business
The first thing to look out for is the websites traffic. The key elements to look at here are traffic sources and trends. Google Analytics can be utilized to check the website’s traffic data while the trend can be checked in all the sources of traffic, both weekly and monthly sources. The movement of the traffic should also be checked to determine the traffic trend.
After obtaining the the traffic trend, you should evaluate the top traffic sources in social, referral and organic searches. Businesses with high search traffic need to be investigated for their keywords ranks. The ranks of each keyword should have a better ratio split of traffic. Sites such as SEMRush can be used as they offer a thirty-day free trial coupon. The backlinks can be reviewed using the Ahrefs website. Also, any signs for spammy or paid backlinks should be checked as well. The link profile should also be going up smoothly and slowly. In case of big spikes, careful examination of the links should be completed.
These are the arrangements done by the suppliers in terms of product concentration, terms, and length of the relationship. Therefore, when purchasing a business, those businesses with low concentration (from few suppliers), favorable contractually agreed rates (shipping and discounts) and long-term relationships with the supplier are the ideal businesses. All the terms agreed upon by the owner and the supplier should be transferable in case of change of ownership. Non-transferable terms may lead to the supplier not honoring the agreement.
E-commerce business financials
Selecting the correct business for sale highly depends on the expenses to revenue ratio as well as if they have been verified by an independent entity. The buyer should check at least twelve months revenue by in the monthly shopping cart reports. The revenue is then compared with the bank statements or the payment processor reports so as the money can be followed through to the profits of the owner.
Under business expenses, each credible business cost invoice should be accounted for. Relevant employee wages, stock purchase, advertising, email subscriptions and hosting invoices along with payment fees, chargebacks and refund reports should be verified as well. Thoroughly look for hidden or unpaid costs to ensure that there is nothing concealed, only to be realized later when the due date for payment has passed.
Customer care and engagement signals, both off and on site should be evaluated. This should also include the number of recurrent customers, the ratio of frequent visitors and the number of reviews of products on the site.
Under the service section, the customer support logs and amount of feedback, time of response and inquiries should be assessed. Problems might arise on the support side if there is a great number of chargebacks or repayments.
E-commerce business Management
The one buying the business is probably the one to run it as well. Therefore the business to be bought should be manageable. Every form of input required by the business should be carefully examined to see if the buyer can handle it by themselves or even outsource it. These include the amount of time the owner spent on the site, the stock ordered, customer support, management of social media and the required skills (cost of teaching or outsourcing it).
All paperwork should be in conformity with those visible on the website. The frequency of updating the system, the new products to be added or removed monthly, the responsivity of live chat, the number of suppliers and the period it takes to order stock should be noted too.
To conclude, it is enjoyable, profitable and easier to buy an e-commerce business than launching one on your own, especially with the help of a broker. In case of inconsistencies in the seller’s story, the business should be approached with caution. Otherwise, a transparent, detailed and open seller means a successful acquisition will be likely.