4 Reasons to Buy an Existing E-Commerce Business
E-Commerce Seller Financing • November 11, 2019
uilding a successful and profitable e-commerce business takes lots of time, effort, and money. On many occasions, it can be impossible for an entrepreneur to invest enough of those to ensure consistent business growth.
Things can get even more complicated if your e-commerce business is your side hustle, you already have a day job, a family to take care of, and very limited time.
Should you simply give up on the idea that you could have a thriving e-commerce business?
We don’t think so.
Though many people who build successful and profitable e-commerce businesses, there are also those who start and for one reason or another, give up mid-way. Some may not have enough time to manage it. Others may discover that they aren’t passionate about it, or simply get a better opportunity.
What does that mean for you?
You can buy an existing e-commerce business rather than start one completely from scratch.
The practice isn’t actually new. It’s not uncommon for established businesses or entrepreneurs to acquire others. For instance, Microsoft bought LinkedIn, Facebook acquired Instagram and WhatsApp, and popular entrepreneur Elon Musk wasn’t actually the one to founded Tesla. He joined the board of directors and became its CEO after investing $30 million in the company a year after it was founded.
There are multiple benefits to acquiring an existing e-commerce business. Let’s take a look at a few of them:
Benefits of Buying an Established E-commerce Business
1. Income from Day One
If you buy an e-commerce business that is already making sales, you can start gaining income immediately after you complete the purchase, and the business officially becomes yours.
So, even though you lose out on some money making the purchase, it eventually pays off and keeps generating you money.
So, if you’d like to quit your day job and be a business owner, buying a profiting e-commerce store can allow you to do that without needing to wait several years to start generating livable profit.
2. Established Customer Base
Having a great product does not guarantee that it will sell. You need to ensure that the people who would like to buy it see it.
You can do that through SEO, advertising, and other means. However, that takes time, effort, and skill. It will require you to invest your money and perhaps even hire a specialist or consultant to assist you with certain aspects of your business.
There is also an established competition that you need to take into consideration.
If you buy an established e-commerce business, it already has a customer base and is generating sales. all you need to do is just keep growing the business, satisfying the exiting buyers, and attracting new ones.
3. Lower Risk of Failure
It takes a business, on average, two years to start generating profit. What that means is that within approximately two years, most businesses become cash positive.
That does, however, not mean that the income will be enough to sustain you and your family yet. It may even take longer for you to reach the level when your e-commerce store reaches a level when it will cover all your business expenses and enable you to live off of the remaining profits.
Sadly, eight out of every 10 businesses fail, limited cashflow being one of the primary reasons why that happens.
No business is ever immune to failure; however, you will have a higher chance of success if you buy an e-commerce business that has already proven to be able to attract and satisfy customers.
You need to keep working to make sure that the e-commerce business keeps succeeding; however, you can base your efforts on a business model that has proven to work.
4. Easier to Gain Financing
Many new e-commerce business owners seek financing to improve their business operations and up their sales. However, it is much harder for start-ups to secure financing than it is for established businesses. Your interest rates can also be a lot higher.
If an investor decides to lend you money, they need to ensure that they will gain it back. If they invest in a weak business that fails or goes bankrupt, then that ultimately means a failure for them too. Therefore, on many occasions, investors prefer to invest in businesses that already make sales. While things can still go wrong, the risk is lower than investing in a completely new business that they cannot surely predict the future of.
However, if you approach an investor with a business model for how you can grow an already profiting business and show metrics proving the fact that the business is indeed making sales, your chances of securing the loan will be much greater.
You will still need to pay it back; however, your stress levels will likely be much lower, knowing that the e-commerce business that you buy is gaining money.
Have you ever considered buying an existing e-commerce store? Did you go through with it? Why or why not?
If you would like to buy an existing e-commerce business, but need some financial assistance, check out how E-Commerce Seller Financing could help you.