|All content presented here and elsewhere is solely intended for informational purposes only. The reader is required to seek professional counsel before beginning any legal or financial endeavor.|
I’ve been my own boss for years now, and let me tell you, I wouldn’t change a thing (well, I’d hire an accountant a lot sooner). Owning an online business comes with a huge slew of perks, from making your own hours to setting your own goals for the business's growth. That said, there are definitely some challenges along the way. If you’re interested in buying a business online and making it your own, you need to be prepared for the lows as well as the highs.
Buying a Business Online: What You Need to Know
- Buying a business online is a more convenient, time-efficient way to get a leg up in the business world.
- When you buy a business online, you do run the risk of entering into a scam, something that is less likely with in-person purchases.
- Working with professionals like lawyers, brokers, and accountants can help you pick the right business for your needs and budget.
Understanding Buying a Business Online
In today's digital age, the internet has transformed the way we conduct various aspects of our lives. What used to involve having multiple meetings with a huge team of lawyers, buyers, and sellers now involves a few docu-sign agreements that you can go through in the comfort of your own home.
Purchasing a business online offers a convenient alternative to traditional in-person transactions, opening up a world of opportunities for aspiring entrepreneurs. However, it's essential to understand the unique dynamics and considerations that come with buying a business online.
What Does it Mean to Buy a Business Online?
When we talk about buying a business online, it refers to the process of acquiring an existing business through digital platforms, such as online marketplaces, business-for-sale websites, or platforms specifically dedicated to selling these businesses. Unlike traditional methods that involve physical visits, negotiations, and face-to-face interactions, buying a business online primarily relies on virtual communication channels, online listings, and digital transactions.
The Pros and Cons of Buying a Business Online
Buying a business online is easy, sure, but it also can pose security concerns. In other words, the list of potential pitfalls when buying a business online is just as long as the potential pros of the whole transaction.
- Buying online is simply convenient: You can easily explore and access a wide range of businesses from anywhere, anytime when you shop online.
- There’s a global marketplace: Online businesses aren’t always limited to the U.S. Through global platforms, you gain exposure to businesses from all over the world, increasing your chances of finding the right opportunity.
- Listings often come with extensive information: Detailed listings provide comprehensive information about the businesses for sale, and offer a way to still reach out with other questions, making it unnecessary to ever meet face-to-face.
- Online buying is a huge time-saver: The online process often streamlines transactions, reducing the time required for negotiations and paperwork.
- There’s a limited physical assessment of the business: Lack of in-person visits may restrict your ability to thoroughly inspect physical business premises (if you’re looking at in-person options), equipment, or operations. This means a much higher potential for serious issues since you can’t verify the conditions.
- It can be challenging to verify the business: Ensuring the credibility and authenticity of sellers can be more challenging in an online environment where hackers run amok.
- There’s increased competition: Online platforms attract a much larger pool of buyers, potentially leading to increased competition for desirable businesses.
- You must be knowledgeable with digital tools: Not just anyone can buy a small business online. It’s best if you have knowledge of online communication, research, and management so you are 100% certain you can manage the business.
How to Buy a Business Online
While buying a business online is certainly easier to do, in many ways, than buying a traditional business, it’s a process that has quite a few steps. Know that even buying an online business takes time.
Identify and Research Your Target Business
Before diving into the buying process, spend time researching and identifying the type of business you're interested in. To narrow down your options, consider your:
- Personal interests
Online marketplaces and business-for-sale websites like BizBuySell provide a wealth of listings, allowing you to filter by industry, location, size, and other criteria. Take your time to explore and evaluate potential businesses that align with your goals and aspirations.
Determine Your Budget and Financing Options
Once you have identified your target business, next up is taking a look at your budget and exploring financing options, if necessary. How much are you looking to spend? $10,000? $100,000? And where are you getting the money to finance your purchase? Explore financing alternatives like business acquisition loans, investors, or crowdfunding sites. You might like to visit our list of the best business acquisition loans to find out more.
When making your budget, consider accounting for the following:
- Broker costs (if you’re working with a broker)
- Business licensing fees
- The cost of the business itself
- Ongoing expenses
- Employee salaries
Consider Hiring Professional Help
Now is where you’re going to want to ask a professional to help. Unless you know the in and outs of the buying and selling side of business, you’ll wind up having a ton of questions along the way. Consider engaging experts such as business brokers, lawyers, accountants, or consultants who specialize in business acquisitions. These professionals can provide valuable guidance, help you conduct due diligence (which is going to be our next step), assist with negotiations, and ensure compliance with legal and regulatory requirements.
Conduct Due Diligence
Due diligence involves a comprehensive examination of the business's financial, operational, and legal aspects. Aka, understanding the true business valuation of the company. You’ll work with an accountant and business broker to review financial statements, tax records, customer contracts, supplier agreements, and other relevant documents related to the business you’re interested in. This is also a time to verify the information provided by the seller and identify any potential red flags or concerns.
Understand the Legal and Regulatory Aspects
As with any business transaction, it's important to understand the legal and regulatory aspects of buying a business online. Familiarize yourself with the laws and regulations governing the business you’re looking to purchase. Consider both the state you live in and the state the business resides in (if they’re different).
Again, consult with legal professionals to ensure you’re meeting all legal requirements. They can also help you draft or review contracts and address any legal concerns that may arise.
Negotiate the Purchase Agreement and Finalize the Sale
Negotiation plays a crucial role in the acquisition process, as scary as it may seem. Paired with the right professionals, the negotiation process should be a piece of cake. Work with these professionals to carefully review the terms and conditions of the business purchase agreement and engage in constructive discussions with the seller.
Aim to find a mutually beneficial agreement that protects your interests while satisfying the seller's expectations. Once the negotiation is complete, finalize the sale by signing the necessary documents and transferring ownership.
Have an Integration Process in Place
Acquiring a business is exciting, but not always so for the employees who already work there, especially if you don’t have a plan in place. Make sure to develop a plan that smoothly merges the newly acquired business with your new initiatives. Establish clear communication channels and address any cultural or operational differences before they become issues.
Monitor Your Business’s Performance
Once the acquisition is complete and the integration process is underway, the only thing left for you to do is sit back and watch the business grow…almost. While doing that, you’ll also want to actively monitor and manage the performance of your new business. To do so:
- Establish key performance indicators (KPIs) to track the business's financial health.
- Check in with customers and read their reviews.
- Regularly review financial statements and sales reports.
- Make adjustments as necessary.
Acquiring a business online offers unique advantages, such as convenience and a huge pool of businesses to choose from. However, it's important to conduct diligent research, engage professionals when needed, and navigate the process with care because there’s a greater risk of scams online.