Purchasing An E-Commerce Business – 4 things You Must Know

Today I received the Business Broker Press© release of the ten top selling businesses. At the top of the list was E-Commerce. E-Commerce refers to web based business that sells products online. This can be anything from cosmetics and clothing to automobiles and dating services to meet the future mother of your children.

Up until World War II middle America bought its products primarily from the small merchants in town. Then after the war the Big Box stores started. When the internet became popular the trend away from people making their retail purchases from “brick and mortar” store became more and more popular.

Brick and mortar is referring to stores located in building. The internet does not require having a ‘brick and mortar” location. Non- “brick and mortar” selling did not start with the internet. It started with catalog sales in 1893’s with Sears and Roebuck©. When the internet started taking off, the catalog stores, stop printing catalogs and used websites to host online catalogs to show their wares. This industry has been growing by leaps and bounds and is now called E-commerce.     

Online Businesses have additional considerations when doing Due Diligence

In the course of being hired to assist buyers in doing “due diligence” to purchase an E-Commerce business, I learned quite a lot about them. The most important being, “No matter how good the business looks, there is more to know then meets the eye. Here are just a few things you need to look at if you want to buy one of these:

1. Where on the first 3 pages of a Google search is it located? Remember that “today’s champion is tomorrow’s has been.”
2. How did it get to be a champion? By paying Google thousands of dollars to be on top of the page?
3. What are its analytics? That means, what are its statistics to us old timers?
4. Everyone looks at the total sales income and the gross profit. (Sales less the cost of the merchandise sold) What some people forget, but is a must to be known, is that the operating expenses are just as important to know as the sales and gross profit. Be aware that this information is not always made available to a potential buyer.

When buying a business, any business, you need an advisor that knows where to look and what to ask about your prospective business acquisition.

If you have had any experience in this matter, please email us with you thoughts or experiences.

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