Starting an eCommerce business can be a life-changing opportunity. You can chase your entrepreneurial dreams of building a successful eCommerce company from the ground up. However, building a company from scratch might not be your cup of tea. Or you may have built an existing company already, and are looking to expand your business. In such cases, you can consider buying an existing eCommerce business.
There are several advantages and advantages to buying an existing eCommerce business. Therefore we suggest that you seek out experienced business brokers to help you make an informed decision. A business broker can evaluate these advantages and disadvantages for you. Here are some of the pros and cons that you must discuss with them to find an ideal eCommerce business to purchase.
Advantages of Buying an Existing Ecommerce Business
The Market Response to the Products and Services
When you buy an existing eCommerce business, you can understand how the market has reacted to the products and services. Almost all eCommerce businesses have a review system. Following the reviews can tell you what the customers feel about the products and services offered by the eCommerce platform. That is why it is essential to include internet research of the company in the due diligence before you consider buying a business. However, all reviews are not organic, so you can contact your broker to find out more about the company’s market presence.
You Can Reduce the Startup Time
When you purchase an existing eCommerce business, you will reduce the startup time significantly. Almost all aspects of the business are ready and might need minor modifications before you can take over the operations. Some of the areas where you can save time are:
- Introducing the products and services in the market
- Training the staff
- Formulating and setting up standard operating procedures.
- Selecting suppliers and establishing a relationship with them.
When you buy an existing business, you can focus on personalizing and improving the existing infrastructure and operations instead of having to build everything from scratch.
The Brand Is Pre-Established
Establishing a new eCommerce business these days can be tough because almost every company has an online presence. Creating a customer database from scratch can be challenging and competitive. When you buy an existing eCommerce business, there will be an existing customer database that you can take over. That will help you start and gain momentum for your marketing strategies. Make sure that your broker negotiates the purchase of the brand’s market share along with the business.
Easier to Secure Financing
An existing eCommerce business can be of considerable advantage if you require financing to start the business or obtain additional working capital. The finance institutions would want to look at the business accounts and financial statements before they consider financing your business. When your broker negotiates the deal, make sure that they take a close look at the books before you finalize the deal. You can also hire a business analyst to evaluate the revenues, assets, and profits.
Disadvantages of Buying an Existing Ecommerce Business
You Get What You Pay for
The success of an eCommerce business would usually determine the price you have to pay for it. That means if you want to purchase a thriving company, you will have to pay a substantial amount to buy it. Therefore it is advisable to compare the asking price of the business with the cost of startup. However, remember that costs can build up over time to establish a business, so consider them too.
The Business Might Need Substantial Changes
Before you purchase an eCommerce business, make sure that all the aspects are up to date. Or you may end up spending more time to modify the business than starting one from scratch. Examining the intricate details of an eCommerce might be difficult before your start operations. Some of the problems that can exist are:
- Employee problems, such as high attrition rates or low job satisfaction
- Irregular or unprofessional suppliers
- Outdated logistic systems
- Outstanding revenue problems or debts
- Hidden Legal issues
You might add to the problems when you try to rectify them as well. For example, new employee policies might make the existing workforce unhappy, and they may quit. You may have problems adapting to the business model as well, as it might not match your vision or work ethics. Changes to a business can add to the costs and increase your initial investment.
Therefore ask your broker to find out as much as they can about the business before you finalize the deal. Business brokers have many inside contacts, which give them access to information that you might not be able to get hold of. Take your time and consider every possible aspect before you buy an existing eCommerce business.
