With so much competition, getting into the ecommerce space can be challenging. Cutting through the noise and succeeding online requires a solid business plan, the right team, and the right platform.
But what if you don’t have the time or resources to start from scratch? One shortcut to success is buying an existing ecommerce business.
But before diving in, you should know a few things.
Why Buying an Ecommerce Business Is So Important
When it comes to ecommerce, the numbers don’t lie. In 2021, ecommerce sales totaled $960.1 billion, an 18.3% increase from the year before.
And it’s only going to keep growing. By 2040, ecommerce is expected to make up 95% of all retail sales worldwide.
The popularity of ecommerce is due to a number of factors, including the convenience of online shopping, the wide selection of products available, and the competitive prices. And it’s never been easier to start an ecommerce business online.
With a few clicks, you can create a professional-looking website and start selling your products to customers worldwide.
For aspiring entrepreneurs and seasoned business owners alike, ecommerce is a great opportunity.
But with so much opportunity, low barriers to entry, and a wide selection of products, the ecommerce space is more competitive than ever.
To succeed, you need to stand out from the crowd and offer something unique to customers–and starting from zero means that the odds are stacked against you.
If you aren’t sure what that “something” is, you can buy an existing ecommerce business with a loyal customer base, a great product selection, and a proven track record.
You could also buy an ecommerce business that has growth potential and is in a niche you’re passionate about.
Quick Tips for Buying an Ecommerce Business Today
For the most part, ecommerce is a long-term play that will require years of hard work to build a successful business.
That said, there are several things you can do today that can lay the groundwork for a successful ecommerce business purchase:
1. Educate yourself on everything ecommerce
If you want to buy an ecommerce business, it’s important to understand how the industry works. This means learning about the different types of ecommerce businesses, the key players in the space, and the various challenges and opportunities you’ll face.
You can start by reading articles (like this one), listening to podcasts, and attending webinars and conferences.
The more you know about ecommerce, the better equipped you’ll be to make informed decisions about which business to buy–and how to grow it once you own it.
There are a few different types of ecommerce businesses:
- Business-to-consumer (B2C): These are the most common type of ecommerce businesses and include companies like Amazon, Walmart, and Wayfair.
- Business-to-business (B2B): These businesses sell products or services to other businesses, such as office supplies or software.
- Consumer-to-consumer (C2C): These are businesses that allow consumers to sell products or services to other consumers, such as Etsy or eBay.
- Subscription: These businesses charge customers a recurring fee for access to products or services, such as Netflix or Birchbox.
- Digital goods: These businesses sell digital products that can be downloaded or used online, such as ebooks, online courses, and software.
There are also a few different players in the ecommerce space. The seven most important players in the ecommerce space are:
- Merchants: These are the businesses that sell products or services online, such as you.
- Platforms: These are the websites or software that power ecommerce businesses and enable them to sell their products or services (i.e. Shopify and BigCommerce).
- Payment providers: These are the companies that process payments for ecommerce businesses (i.e. PayPal, Stripe, and Square).
- Logistics providers: These are the companies that ship products for ecommerce businesses (i.e. UPS, FedEx, and DHL).
- Technology providers: These are the companies that provide the technology that powers ecommerce businesses (i.e. Amazon Web Services and Google Cloud Platform).
- Marketplaces: These are websites where multiple merchants sell products or services to consumers (i.e. Amazon, eBay, and Etsy).
- Affiliates: These are websites that promote products or services on behalf of ecommerce businesses in exchange for a commission (i.e. Rakuten and CJ Affiliate).
In addition to these three key players, there are a few other important players in the ecommerce space, but these are the most important ones to understand when starting out.
2. Have a clear understanding of the challenges and opportunities you will face
Now that you know the different types of businesses and key players in the ecommerce space, let’s look at some of the challenges and opportunities you’ll face as an ecommerce business owner.
The biggest challenge you’ll face is competition. As mentioned earlier, the ecommerce space is more competitive than ever before. To succeed, you’ll need to offer something unique to customers that they can’t find at any of the other thousands of online stores.
You could outrank them, market your product better, or solve a problem for a specific niche as well, but whatever you do, you’ll need to stand out from the competition.
Another challenge you’ll face is finding the right platform for your business. With so many options available, it can be difficult to decide which one is right for you.
You’ll need to consider factors like the cost of the platform, the features it offers, and whether or not it’s easy to use.
You’ll need to decide which platforms to advertise on as well. The most popular platforms are Google, Facebook, and Amazon, but there are many others to choose from. In many cases, affiliate blogs and partnerships are a great way to get started as well.
Once you begin selling products, you’ll face plenty of challenges when it comes to logistics. Shipping products can be expensive and time-consuming, so you’ll need to find a way to make it as efficient as possible.
If you buy a business, relationships with suppliers and logistics partners may be figured out, but managing existing processes instead of creating your own can also be a challenge. You’ll need to make sure you have a clear understanding of the business before making any decisions.
You’ll also need to consider how you’ll store your products. If you’re selling physical goods, you’ll need to find a place to store them until they’re sold. This can be expensive and difficult, especially if you’re just starting out.
If you’re selling digital goods, you’ll need to find a way to deliver them to your customers. This can be as simple as emailing them a link to a file, but it can also be more complicated, depending on the type of product you’re selling.
3. Learn how to handle money
Handling money as an entrepreneur is much different from handling money as an employee. As an employee, you have a steady income and you don’t need to worry much about where it’s coming from.
As an entrepreneur, you need to be much more careful with your money. You’ll need to track your expenses carefully and make sure you’re making enough money to cover your costs.
You’ll also need to think about how you’re going to grow your business. Reinvesting profits back into the business is a good way to do this, but you’ll need to be careful not to overspend.
Even if you’re making $30,000-$40,000 per month in profit, spending that money can be detrimental to your company’s future. If you want to invest in new product development, double down on ads in the months leading up to a big event, or hire new employees, you need to have the money to do so.
And if you spend it like a regular person would, you’re out of luck–even though you’re rich on paper.
4. Weigh the pros and cons of buying a business vs. starting one from scratch
There are pros and cons to both buying an existing business and starting one from scratch.
If you’re buying a business, the biggest pro is that it’s (usually) already up and running. This means that you don’t need to worry about some of the early stages of starting a business, like building a website, developing a product, and acquiring customers.
But remember that you’ll need to maintain these things and continuously make updates and track your progress to ensure the business is still successful.
The biggest con of buying a business is that it can be expensive. If you’re not careful, you could overspend and end up in a worse position than you were before.
And while you are taking ownership of something that someone else already built, you are at the mercy of the processes they built.
Their internal processes, software, and production and logistics relationships are all yours now. You will need to learn and adapt to these, otherwise, you risk running the company into the ground.
Starting a business from scratch has its own pros and cons as well. The biggest advantage is that you’re in control from the very beginning.
You get to build the business exactly how you want it, without worrying about someone else’s processes or systems.
But starting a business from scratch also means that you have to do everything yourself. This includes building a website, developing a product, acquiring customers, and all of the beginning work.
And while this isn’t that difficult, you will also be responsible for scaling it up every single step of the way.
But, keep in mind that buying an ecommerce company poses some of these risks anyways. It’s not a completely passive investment, and you will need to put in the work to make it successful.
Long-Term Strategies for Buying an Ecommerce Business
If you decide to purchase an ecommerce business, you need to think about a lot of things.
Here are some of the most important long-term considerations when buying an ecommerce business:
1. Have a plan for how you’re going to scale
Remember how we mentioned that starting your own company means that you will need to set up a website, develop a product, acquire customers, etc.?
That’s the easy part.
Running a few ad campaigns, selling a couple of products, and creating a usable website are all things you can do in less than 72 hours.
Scaling your business into an actually valuable company, on the other hand, is a lot harder.
You need to have a plan for how you’re going to acquire new customers and keep them coming back. You also need to think about how you will develop and release new products, handle customer service, and manage your finances.
And the whole time, you need to make sure that you have enough money to do these things. Keeping the lights on in a business that only sells a few products here or there is considerably easier than one that’s constantly growing.
Let’s take a look at an example:
You’re thinking about buying an ecommerce business that sells luxury pet beds.
The company has a few solid flagship products, but they’re not selling that well.
To make this company successful, you will need to focus on a few things:
- Research to understand your customers’ true relationship with the product
- Product development to execute on your customers’ unmet needs
- Your go-to-market strategy
- How you plan to market the products in order to reach the best audience
All of these require money, so you will need to have a plan for how you’re going to finance this growth.
You could take out a loan, bring on investors, or use your own personal savings.
And you’ve already spent money buying the business. So, you need to ensure you’re comfortable with the level of risk you’re taking.
2. Clearly understand your business goals
Some people buy businesses with the sole intention of flipping them.
They’re not interested in the company’s or its employees’ long-term success. All they want to do is make a quick buck and move on.
Others want to buy the business and scale it as a ten-year investment or a lifetime commitment.
And there are a lot of people in between these two extremes.
Each way of thinking requires a different approach:
If you’re looking to flip the business, you’re going to want to focus on streamlining processes, automating as much as possible, and increasing margins.
You’ll also want to be sure that the products are high-quality and in-demand but not so niche that it will be hard to find a buyer.
And when you’re looking for a business to buy, the ideal one:
- Has a lackluster website with some SEO issues
- Is not currently running ads, or has a very limited performance marketing budget
- Still manages to get decent sales metrics
- Has a good product that you can see yourself marketing
- Operates in a space where you can find keywords with a low CPC
For those who plan to flip a business, these issues represent opportunities to quickly scale the business.
But your needs are much different if you’re looking for a long-term investment.
You’ll be more interested in the company’s overall growth potential and competitive landscape. Something that grows over time without needing to be revamped every few years is ideal.
A business in a quickly growing industry with room for multiple players is usually a good bet.
Someone looking to buy a business and hold it for the long term might be interested in companies with:
- A strong team in place that can be built on
- A good work-life balance and some autonomy
- An efficient process for handling customer service inquiries
- A strong brand and repeat customers
3. Do your due diligence
You would never buy a house without a home inspection first, right?
The same goes for buying a business. This is arguably the most important part of the process, and it’s one that’s often overlooked.
When you’re looking at ecommerce businesses to buy, you need to be sure that you understand:
- The business model and how it makes money
- The target market and who the customers are
- What the competition looks like
- What growth potential exists
- What challenges need to be overcome
And you can’t take the seller’s word for it. You need to do your own research to verify everything they’ve told you.
If you’re thinking about buying an ecommerce business, now is the time to start doing your research.
Talk to other entrepreneurs who have gone through the process. Read as much as you can on the topic.
And when you’re ready to start looking at businesses more closely, keep in mind the things we mentioned above.
Ready to get started? Check out our blog post on the best ecommerce platforms to run your new business on!