7 Things to Consider When Buying an E-Commerce Business
E-Commerce Seller Financing • November 15, 2019
buy an existing e-commerce business rather than build one from scratch.here are many reasons why entrepreneurs may
There are many benefits to buying an existing e-commerce business, such as an already established client base and income from day one. However, you need to make sure that you buy a business that is worth it. Otherwise, you risk buying a lemon and wasting your investment money.
Here are a few things to take into consideration when you look for an e-commerce business to buy.
What to Look for When You Buy an Existing E-Commerce Business
1. How Much Traffic Is the E-Commerce Business’ Getting?
Even though website traffic does not guarantee that there are sales, there are definitely no sales if there is no traffic.
Make sure to verify traffic via a reliable source such as Google Analytics. Regardless of what platform the website is on, Shopify, WordPress, or something other, it most likely used Google Analytics to manage advertising, its results, as well as the success of the store.
When you look at the website traffic, see how it’s evolved. Is it continuously growing, or have there been dips that you may want to ask an explanation for? Don’t hesitate if you have any doubts. That can prevent you from having issues later.
Though it’s not always going to be the case, drastic dips in traffic may signify penalization. If you buy a penalized site, it means that the owner or their employees have made something that goes against Google’s policies. You may be able to remove the penalty, but you would need to work on the site as if it as a completely new one, meaning that your investment most likely wasn’t worth it.
2. Where Is the Traffic Coming From?
Not all traffic is good traffic. So, you should make sure that the traffic the e-commerce site is getting is people who would actually buy from you.
Look into the keywords that the site is getting traffic for and whether they are relevant to the business. If you’re getting traffic for keywords that have nothing to do with the products that the e-commerce business is selling, then the traffic is not valuable.
Also, look into where the site visitors are coming from. If the store is selling winter coats, yet most of the traffic is coming from Indonesia, then you’re likely not going to sell many coats.
Pay attention to backlinks, as well. Having many backlinks from spammy and irrelevant sites are a sign of “black hat” marketing and can hurt the business. Backlinks that come from comments, forums, irrelevant sites, overseas sites are often black hat links.
If these concepts sound foreign to you, and you’re not sure what to look for, you may want to consult a marketing or SEO professional. This will require some investment on your part, but it can prevent you from buying an e-commerce store that is not worth it.
3. How High Is E-Commerce Store’s Bounce Rate?
A website’s bounce rate shows how many of its visitors leave after having only visited one page. It is displayed in percentages. A high bounce rate is usually a bad indicator. For instance, if a site’s bounce rate is 62%, that means that out of every 100 visitors 62 left after visiting the page.
A bounce rate that’s about up to 40% is considered great. It’s natural for some of the visitors to leave a website, so don’t worry that not everyone stays.
40-55% is an average bounce rate, whereas 55%-70% is above average. However, if it’s over 70%, it is usually not a good indicator. The store is getting traffic, but the products do not satisfy potential buyers or are not what they are interested in.
4. How Much Is the E-commerce Business Earning and Spending?
Don’t be afraid to request the e-commerce businesses financial reports before buying it.
First of all, you must know if it is profitable. If it is spending more money than it’s bringing in, then that means that you will also be in the negatives if you buy this e-commerce business. Combining that with what you would have paid the business owner, this can mean a grand financial loss for you.
Secondly, look into what the business is spending its money on, such as salaries, subscriptions, tools, and an advertising budget. This will give you an idea of what you can get started with if you take over.
Finally, ensure that nothing is being hidden from you, such as advertising contract that is getting clicks, traffic, and backlinks, but isn’t generating sales.
5. Are Their Customers Satisfied?
Look for testimonials and customer feedback in reviews on the store’s website, social media pages, support ticket logs, or marketplaces, such as Amazon. You can also try searching for customer feedback through a Google search, though for smaller stores, this may not be available.
If the e-commerce business you are considering buying has many returning customers, that’s an excellent sign. That means that their buyers are satisfied with the products and their quality.
If you find many negative reviews or feedback, this means that you would need to work on repairing the business’s reputation, which can be challenging, costly, and require time. While you may be able to improve the store’s reputation, the Internet will still have a record of the mistakes its previous owner made.
6. Where Does It Source Their Products From?
Find out where the e-commerce store is sourcing its products from or who is manufacturing them. Then, determine what will happen to the agreements as the ownership transfers to you. Will they stay the same or will you have to renegotiate them?
Verify that the e-commerce business you are buying has the permits or licenses if those are needed. You don’t want to end up facing a lawsuit because you purchased a store that is selling Star Wars merchandise that they dropship from Alibaba without a proper Disney license.
7. Do You Have the Skills Needed?
Last but not least, make sure that you are ready to take on the operations once the e-commerce business ownership transfers to you. Even if the store makes sales, you will need to work hard to ensure it stays that way.
Find out what skills and tools are necessary. If you are not familiar with them, will you be learning them or hiring someone to handle that for you. Make sure to factor that into your monthly budget to make sure you stay cash-positive.
Are you considering buying an existing e-commerce store? Have you looking into its traffic and other data?
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.