Industry Articles

Buying a Startup Business: 3 Big Pros and Cons

September 8, 2023 by Paul W

Should I buy a startup business and save some money upfront or spend more buying an established business? There are many factors at play that will guide your decision. Some are personal, but most are strategic. In this article, we look at the most significant pros and cons to buying a startup business or an established one. We hope this discussion will help guide some of your thinking as you ponder this important choice.

startup business

Buying a Startup Business

Pros

Lower Initial Cost

Starting from scratch usually requires less upfront capital. Low startup costs demand a smaller initial investment, making a startup business accessible to entrepreneurs with limited capital. Businesses with lower startup costs often have simpler operations and infrastructure requirements, reducing the need for extensive initial spending. Starting with lower costs decreases the financial risk associated with a new venture, making it easier to recover initial investments and adapt to market changes.

Vision

You can shape the startup business according to your vision. Ensure that your business's goals are in harmony with your personal aspirations. This alignment helps maintain your passion and commitment. Most business plans include a vision statement that answers the "why" you exist question. Giving thought to your corporate identity will help you create a more compelling product for your customer and help rally employees around a common purpose.

Fresh Branding

You have the freedom to create a unique brand identity. Clarify your startup's purpose, values, and the problem you're solving. This forms the foundation of your brand identity. Design a memorable logo, choose a distinctive color palette, and select imagery that aligns with your brand's personality and message. Use consistent typography that reflects your brand's tone. This typography should be used across all communication channels. Develop a consistent tone of voice that resonates with your target audience. Whether formal or casual, your brand's voice should remain consistent in all interactions.

Cons

Uncertain Revenue

Generating initial revenue might take time. A startup business often requires time to develop products, build their customer base, and establish a market presence before revenue starts flowing. Investments in product development, marketing, and operational costs can outpace initial revenue, leading to a delayed breakeven point. Building brand recognition and customer trust takes time, affecting the speed at which revenue is generated.

Also, a startup business often faces a learning curve in identifying their target audience, refining their value proposition, and optimizing sales strategies, all of which influence revenue generation. It takes time for startups to stabilize their operations, streamline processes, and gain a predictable revenue stream.

Risk of Failure

New businesses face a higher risk of failure. A startup business often has limited financial and human resources, making it challenging to cover operational expenses, invest in growth, and weather initial losses. Entering a competitive market without a unique value proposition can result in difficulty attracting customers and gaining market share. Insufficient business planning, including lack of market research, financial projections, and contingency plans, can leave startups ill-prepared to face challenges.

Poor cash flow management can lead to an inability to cover expenses, pay debts, and invest in growth opportunities, ultimately resulting in failure. Inflexibility in adapting to market changes, consumer preferences, and technological advancements can render a startup business irrelevant over time. The inherently high failure rate among startups creates an environment where new businesses are more likely to face challenges and setbacks.

Unproven Model

The business model is untested and might need refinement. A startup business operates in a dynamic and uncertain market environment, making it challenging to accurately predict customer preferences and demand. Developing a successful business model is an iterative process. Startups need to experiment, gather feedback, and adjust their models to align with market realities.

New businesses need to validate their assumptions about the target market, customer needs, and value proposition to ensure their business model aligns with actual demand. Business models may need refinement as startups encounter challenges, competition, and changing market dynamics, necessitating adjustments to increase competitiveness and sustainability.

Buying an Established Business

Pros

Existing Revenue

An established business has a steady revenue stream. Steady revenue provides financial stability, allowing the business to cover expenses, invest in growth, and withstand economic fluctuations. A consistent revenue stream helps in forecasting and planning, allowing better resource allocation and operational efficiency. Reliable revenue supports expansion, product development, and market penetration, driving business growth.

Diversified revenue streams reduce dependence on a single source of income, lowering business risk and increasing resilience. A consistent revenue history enhances the business's value, making it more attractive to investors and potential buyers.

Existing Customer Base

You gain an existing customer base and reputation. An existing customer base means immediate revenue from loyal customers, reducing the need for time-consuming customer acquisition. The product or service has already been tested in the market, minimizing the risk associated with unproven concepts. An established brand and reputation contribute to customer trust and loyalty, enabling faster business growth. Access to existing suppliers and established relationships simplifies the supply chain and procurement process.

Buying an existing business saves time compared to starting from scratch, allowing for quicker returns on investment. The business comes with established processes, policies, and operational knowledge, facilitating smoother business operations. Access to financial records and performance history aids in making informed business decisions and securing financing. An existing customer base provides a foundation for introducing new products or services and expanding the business.

Proven Model

The business model and strategies are already proven. The business model has been tested and demonstrated to work, reducing the risk associated with unproven ideas. A proven business model comes with existing customers, generating immediate revenue. The business likely has an established brand, contributing to customer trust and loyalty. A proven business model often includes efficient operational processes and systems, leading to smoother operations.

Banks and investors are more likely to finance a business with a proven track record and established business model. Buying an established business with a proven model can lead to quicker returns on investment compared to a startup business. The business's historical performance and financial data provide insights into its potential future performance.

Cons

High Initial Cost

Purchasing an established business can be expensive. The cost might be justified by the established customer base and revenue stream, leading to quicker returns on investment. Existing operational processes and trained employees can justify the high cost by providing operational efficiency from the start. Despite the high initial cost, it may save money on start-up costs such as inventory and marketing, compared to buying a startup business or starting a business from scratch. The cost might be justifiable due to the existing goodwill, brand reputation, and customer loyalty associated with the business. Compare the cost of buying an existing business with starting or buying a similar business to determine the overall financial advantage.

Limited Changes

Existing processes and branding might limit changes. The advantages of established branding include attracting customers and revenue, but changing it might confuse customers. Similarly, existing internal processes might provide efficiency, but altering them could disrupt operations. The decision to change these aspects depends on a careful analysis of how changes would impact the business's identity, customer relationships, and operations. It's essential to balance the benefits of established elements with the potential benefits of change, considering the overall strategic goals of the business.

Legacy Issues

There could be hidden problems or debts to resolve. Due diligence is crucial to uncover potential issues such as unpaid debts, misrepresented financial data, or undisclosed liabilities. Even with a thorough review, there's still a risk of encountering problems that were not initially apparent. Conducting comprehensive due diligence, including examining financial records, legal agreements, and business operations, helps mitigate these risks. It's advisable to involve legal and financial professionals to ensure a smooth transition and address any hidden issues before finalizing the purchase.

Each business acquisition option has its merits and challenges, depending on your goals, risk tolerance, and available resources. To get started, you can search established or startup businesses for sale through the Hatchit platform.

1st photo by RDNE Stock project. 2nd photo by Photo by Canva Studio. 3rd photo by Photo by RDNE Stock project.

Disclaimer: This page contains affiliate links to Hatchit’s broker-partner sites. If you choose to buy or sell a business through a brokerage site we link you to, Hatchit may receive a referral fee at no additional cost to you. Thank you.

5 Best Businesses to Buy in the Online World

August 7, 2023 by Paul W

As a business buyer, determining the best businesses to buy with solid financial metrics depends on various factors and can vary based on individual circumstances. Each model has its own advantages and considerations. The five main monetization categories of online businesses are typically lead generation, blog/content advertising, subscription/membership, ecommerce/dropshipping, and services. When comparing the financial differences between them, it’s important to consider the revenue models and cost structures associated with each.

Lead Generation Sites

Lead generation sites generate revenue by collecting information from potential customers and selling those leads to businesses. When considering one of these best businesses to buy, these sites typically earn money through a pay-per-lead or pay-per-click model, where they receive payment for each qualified lead or click they generate for the businesses they work with. The financial success of lead generation sites depends on their ability to generate high-quality leads and establish relationships with businesses willing to pay for those leads.

Financial Model

Lead generation sites typically operate on a pay-per-lead model, where businesses pay for each qualified lead they receive. The cost per lead can vary depending on factors such as lead quality, industry, and competition.

Common Financial Terminology

Conversion Rate: This metric measures the percentage of website visitors who take a desired action, such as filling out a form or making a purchase. It indicates the effectiveness of lead generation efforts.
Cost Per Lead (CPL): CPL calculates the average cost of acquiring a single lead. It helps evaluate the efficiency of marketing campaigns and allocate resources effectively.
Lead-to-Customer Conversion Rate: This metric tracks the percentage of leads that eventually convert into paying customers, providing insights into lead quality and sales effectiveness.
Return on Ad Spend (ROAS): ROAS measures the revenue generated from advertising efforts relative to the cost of those ads. It helps assess the profitability of advertising campaigns.
Click-Through Rate (CTR): CTR measures the percentage of people who click on a specific link or advertisement, indicating the effectiveness of marketing messages and campaigns.
Cost Per Click (CPC): CPC calculates the average cost for each click on an advertisement, providing insights into advertising costs and campaign performance.
Lead Velocity Rate (LVR): LVR measures the growth rate of qualified leads over a specific period, providing insights into the effectiveness of lead generation strategies.
Time to Conversion: This metric tracks the average time it takes for a lead to convert into a paying customer, helping optimize sales and marketing processes.

Affiliate Advertising Sites

Affiliate advertising sites earn revenue through affiliate marketing. In this model, the site promotes products or services from other businesses and earns a commission for each sale or action generated through their affiliate links. When considering one of these best businesses to buy, affiliate advertising sites can monetize their traffic by partnering with relevant affiliate programs and driving conversions. The financial performance of affiliate advertising sites depends on their ability to attract a substantial audience, effectively promote products or services, and drive conversions that result in commissions.

Financial Model

Affiliate advertising sites earn revenue through affiliate marketing programs. They promote products or services on their websites and earn a commission for each sale or action generated through their affiliate links. The commission structure can vary, but it is usually based on a percentage of the sale price or a fixed fee per action.

Common Financial Terminology

Net monthly sales: Net monthly sales indicate the average sales of the website. It helps provide insights into the expected sales for a particular month.
Earnings per click (EPC): EPC represents the average earnings generated per click. It is calculated by dividing the total earnings by the total number of clicks.
Sales per affiliate: This metric measures the number of sales generated by each affiliate partner. It helps identify top-performing affiliates and optimize partnership strategies [1].
Organic traffic: Organic traffic refers to the number of visitors who reach your blog through search engine results without paid promotion. It helps gauge the effectiveness of your content and SEO efforts.
Conversion rate: Conversion rate measures the percentage of visitors who take the desired action, such as making a purchase or signing up for a newsletter. It indicates the effectiveness of your blog in converting visitors into customers.
Average order value (AOV): AOV represents the average value of each order or transaction. It helps assess the value of each customer and the overall profitability of your affiliate marketing program.

Subscription/Membership Sites

Subscription sites offer premium content, products, or services to subscribers who pay a recurring fee. When considering one of these best businesses to buy, these sites generate revenue through subscription fees and aim to provide ongoing value to retain subscribers. The financial success of subscription sites relies on attracting a loyal customer base, consistently delivering high-quality content or offerings, and managing customer churn to maintain a predictable revenue stream.

Financial Model

Subscription sites generate revenue by charging customers a recurring fee for access to exclusive content, products, or services. The pricing structure can vary, with options such as monthly, quarterly, or annual subscriptions. The revenue is generated through the recurring payments from subscribers.

Common Financial Terminology

Average Revenue Per User (ARPU): The average revenue generated per user or subscriber.
Churn Rate: Churn rate measures the percentage of customers who cancel their subscriptions within a given period. It is crucial to track churn rate as it directly impacts the growth and profitability of a subscription business. Lower churn rates indicate better customer retention and business sustainability.
Monthly Recurring Revenue (MRR): MRR represents the total revenue generated from subscription fees on a monthly basis. It helps in tracking monthly revenue figures and understanding month-to-month differences in the subscription service’s performance. MRR is essential for financial forecasting, planning, and measuring growth.
Customer Lifetime Value (CLTV): CLTV is the total value a customer contributes to the business over their entire relationship. It takes into account the revenue generated from recurring payments and potential upsells or cross-sells. Tracking CLTV helps assess the long-term profitability of acquiring and retaining customers

Ecommerce/Dropshipping Sites

Ecommerce websites are online platforms that sell products directly to customers. These websites maintain their inventory, handle order fulfillment, and manage customer service. When considering one of these best businesses to buy, ecommerce sites generate revenue thrugh product sales, and their profit is determined by the difference between the cost of goods sold (COGS) and the sale price. Financial success in ecommerce relies on factors such as product selection, pricing strategies, marketing efforts, customer experience, and efficient operations.

Dropshipping sites operate as online retail businesses that sell products without maintaining inventory. When a customer places an order, the dropshipping site purchases the product from a supplier who ships it directly to the customer. Dropshipping sites earn revenue by marking up the product prices, and the difference between the wholesale price and the retail price is their profit. Financial success in dropshipping depends on effective marketing, pricing strategies, customer service, and managing relationships with suppliers to ensure timely order fulfillment.

Financial Model

Ecommerce and dropshipping websites generate revenue by selling products or services directly to customers online. They typically follow a transactional model, where customers make a purchase and pay for the products or services offered on the website. Revenue is generated through the sales made on the platform, and the pricing can vary depending on the products or services being sold.

Common Financial Terminology

Profit Margin: The difference between the product’s selling price and the cost price from the supplier.
Sales Conversion Rate: This metric measures the percentage of website visitors who make a purchase. It can be calculated by dividing the number of purchases by the number of sessions and multiplying by 100. A higher conversion rate indicates better performance in converting visitors into customers.
Average Order Value: The average amount of revenue generated per customer order. It is calculated by dividing the total revenue by the number of orders. Monitoring AOV helps understand customer spending habits and can guide pricing and promotional strategies.
Customer Acquisition Cost (CAC): CAC measures the cost of acquiring a new customer and helps evaluate the effectiveness of marketing and sales efforts.
Return on Ad Spend (ROAS): The revenue generated from advertising campaigns compared to the cost of those campaigns.
Cart Abandonment Rate: This metric measures the percentage of customers who add products to their cart but do not complete the purchase. A high cart abandonment rate may indicate issues with the checkout process or other factors that deter customers from completing their transactions

Services

Services sites can include anything from SEO services to MSP and IT services. Most ISPs are subscription-based, so we’re really including services here that are pay-as-you-go, non-recurring variable amounts. When considering one of these best businesses to buy, these services don’t have to be strictly online, but the transaction and interaction with the customer has to be online-based.

Financial Model

Service sites, which provide various services such as consulting, freelancing, or professional services, typically charge clients based on a fee structure related to the services offered. The pricing can be hourly, project-based, or retainer-based, depending on the nature of the services provided. Revenue is generated through client payments for the services rendered.

Common Financial Terminology

Revenue: Tracking revenue is essential to understand the financial health and growth of the business.
Gross Profit Margin: This metric indicates the profitability of the services provided after deducting the direct costs associated with delivering those services.
Net Profit Margin: It represents the percentage of revenue that remains as profit after deducting all expenses, including operating costs, taxes, and interest.
Average Revenue per Client: This metric helps assess the value generated from each client or customer and can provide insights into pricing strategies and customer segmentation.
Customer Acquisition Cost (CAC): CAC measures the cost of acquiring a new customer and helps evaluate the effectiveness of marketing and sales efforts.
Customer Lifetime Value (CLTV): CLTV estimates the total revenue a business can expect from a customer over their entire relationship with the company, which is useful for understanding the long-term value of customers.
Return on Investment (ROI): ROI measures the return on the investment made in marketing, advertising, or other growth initiatives and helps assess the effectiveness of these investments.

Best Businesses to Buy Summary

As you can see, the best businesses to buy in the online world will depend on what you value most. It’s important to note that the financial performance of each business monetization category can vary significantly based on various factors such as industry, target market, competition, marketing effectiveness, operational efficiency, and overall business strategy. Therefore, it’s crucial to carefully plan and execute the chosen model while considering the unique characteristics and challenges associated with each approach.

1st Photo by Andrea Piacquadio. 2nd photo by Pixabay, 3rd photo by Karolina Grabowska.

Flippa: The Investment Bank for the 99%

April 12, 2023 by Paul W

Just about anyone who has looked at buying an online business will be familiar with Flippa. With over 3 million users and a network that exceeds 600,000 buyers, Flippa powers more than 12 thousand deals annually. Founded in 2009 in Melbourne, Australia, the marketplace has become a juggernaut in the digital M&A space.

Flippa is unique in that it offers something for everyone – from established, profitable businesses, to startups, domains, and other assets. It has also innovated with some sophisticated technologies, including an AI-driven engine for deal recommendations, a comparative market insights tool, and robust integrations that allow for automated listing updates and deal transparency. With price points ranging from $5,000 to $50 million, Flippa caters to a broad user base that includes “entrepreneurs, side hustlers, hackers and new-age small business owners.”

A Wide Array of Deals

valuable tools

Flippa’s primary areas of focus include websites, apps, domains, ecommerce, content, marketplaces, SaaS, services, Adsense, and Amazon. With regard to deal distribution, the “Websites and Online Businesses” and “Domain” categories are the most prevalent asset types on the site, each with over 5,000 listings. Approximately half of the websites/online business listings are revenue-producing with roughly 25% generating more than $10,000 in profit annually, and about 5% producing more than $120,000 in profit. Beyond websites/online businesses and domains, Flippa lists an additional ~175 Amazon stores, ~390 apps, and ~75 other online opportunities. About 2,500 deals are for “Auction”, following a bid/buy it now structure, similar to eBay. The remainder are “Classified.”

Flippa also lists on its site what the company refers to as “off-market” deals. The approach is similar to that taken by Zillow, Redfin and others in real estate, where site visitors can view and get estimated values for properties even when they are not for sale. Flippa includes off-market deal information on 74,800+ online businesses. This information is useful for comparative purposes and also provides a means for buyers to proactively approach unlisted businesses and domain owners. Flippa offers a service for buyers to engage an expert Broker Agent who will support buyers every step of the way, from initial outreach, to ongoing discussions and purchase negotiations.

Granular Searchability

While the site layout is simple and intuitive, it is also comprehensive. Flippa deals are granularly categorized, allowing sophisticated buyers the ability to quickly identify criteria matches. If Flippa’s fifteen industry categories aren’t sufficient, buyers can delve deeper into over 100 subcategories. Beyond industry, asset type, status, and financials, buyers can search by authority score, pageviews, and monthly users, among other specific criteria.

Once signed up with Flippa, a buyer can review high-level information, including a business summary, the monetization method, and benchmarking insights. Users can even toggle through eleven currency options when viewing financials. Some listings offer additional detail once a buyer signs an NDA, including direct data connectivity, a deal room for discussions, call scheduling, due-diligence options, legal services, financing, and integrated payment options.

Many Options for Sellers

Whether seeking to sell for-sale-by-owner or with help from a broker, Flippa is a great resource for business owners to gain visibility and drive buyer traffic to their deal. Sellers have flexibility to choose the type and level of support they need. The four pricing tiers, which reflect deal size, advisory and marketing support, and listing duration, include two components: (1) a one-time upfront fee ranging from $49 to $599, and (2) a success fee ranging from 4% to 10%.

The higher priced tiers include such services as a dedicated Flippa agent, free escrow, buyer retargeting, homepage promotion, a daily newsletter feature, third party syndication, an optimization report, and legal templates. With offices in Australia, Texas, and Amsterdam, and a team spread across the globe, Flippa can offer advisory support to business owners regardless of location. Their team can assist through each step, from business valuation, marketing, and deal flow management, to negotiation, document development, and closing.

Tech Innovation

flippa marketplace

This is a visual representation of how similar online businesses are to each other based on how prospective buyers interact with them.

Flippa incorporates a number of sophisticated technologies to support matching and information sharing. Their Recommender Engine is an AI-driven system to match listings with prospective buyers. The system assesses over 100 factors to determine a fit and relationship. When paired with notifications and automated emails, it promotes highly efficient connections.

Market insights

Flippa’s Market Insights is a comparative market tool available for every listing with an ask or list price over $5,000. The tool allows users to view performance and market data across similar companies. Data includes live and recently-sold listings, as well as benchmark indicators.

To promote trust and transparency, Flippa’s Integrated Data allows for integration between Flippa and online business service providers, including Amazon, Walmart, Magento, Shopify, Squarespace, Quickbooks, Xero, Wix, among others. The integrations enable up-to-date information to be automatically added to listings each month. Every listing with connected integration receives a Verified Listing badge viewable with the asset details.

Building Trust and Community

Flippa has taken a number of proactive steps to build trust and community among its users. The company has put in place a verifications team that reviews revenue and primary expenses for thousands of listings each month, marking those that pass with the “Vetted by Flippa” icon. They also provide a buyer funds verification option, so sellers can quickly identify serious buyers, and buyers can speed up negotiations by pre-verifying their funds.

Community-building resources include Flippa’s blog, podcast, discussion forum, and newsletters. Their blog provides a wide range of success stories, how-to guides, tips, stats, and informative articles. Their podcast, The Exit Podcast, has over 100 thirty-minute interviews with entrepreneurs who have bought and sold businesses, offering useful lessons while casting light on the world of digital M&A.

The Exit

The Flippa Discord channel and forum provides access to discussions, insights and the latest news on alternative asset investing. And lastly The Deal Newsletters highlight the best deals on the site in either daily, weekly, or monthly email installments.

Bottom Line

Flippa truly is “the investment bank for the 99%”, with deals that will appeal to first time digital entrepreneurs as well as experienced business buyers. Flippa offers buyers and investors a wide array of verified opportunities, and sellers a range of support options, resources, and a broad buyer network. The firm has a number of unique tools geared toward efficiency and transparency. If you are a website buyer, investor, or seller, you should definitely check out Flippa.

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Why Buying an Established Online Business is Better than Starting from Scratch

March 25, 2023 by Paul W

Introduction

It’s a common problem - you’re an entrepreneur with a burning desire for success. Yet you can’t seem to get your business ideas off the ground, or scale them to the size you want.

Many entrepreneurs have realized that buying an established online business is often the smoothest path to running their own successful company. By buying existing digital businesses, you can gain access to companies that are already established and ready for the next level of growth.

When you start an internet business from the ground up, it can be a difficult process: time-consuming, overwhelming, and highly risky. To avoid these potential dangers, a smart alternative is to buy an established digital business.

In this blog post, we'll take a look at why purchasing an already established online business is often the better choice for savvy entrepreneurs who want to hit the ground running with minimal risk and time investment. From fully developed products and services to ready-made customer bases, learn why investing in an established online presence can provide powerful opportunities for long-term success.

buying an established online business

Should I Buy an Established Digital Business? Or Start My Own from Scratch?

If you're an entrepreneur looking into running your own business, you’re probably thinking of building a business from the ground up. Yet, have you ever considered buying an existing online business? By buying a profitable online business that’s for sale, you get instant access to loyal customers, consistent revenue streams, and established business processes. While each option has its own advantages, there are distinct benefits to buying an established online business. We explore a few below:

1. Leapfrog the business-building stage

Investing in an established digital business can be a great way to jumpstart your entrepreneurial journey and see the rewards of your efforts much sooner than if you had started from scratch. Buying an already existing web business means instead of having to develop something new, you can adopt and further optimize an established process that has already proven to be successful.

2. Reduce your risk

Many entrepreneurs and small business owners rarely consider growing their business through acquisition. Yet, buying an existing digital business can be less risky for an entrepreneur than starting a new business or product/service line from scratch. An established digital business has already gone through the initial stages of development, such as creating a brand, building a customer and supplier base, and developing products or services. It likely already has a track record of performance, including revenue and profits, which provides a level of predictability and reduces uncertainty.

You, as the new owner, can leverage the existing infrastructure and analyze existing data to identify trends and make better informed decisions about how to improve the business. This should save you the time and effort required to test new markets or product/service lines, fast-tracking your path to earning a return on investment.

3. Resources are already available

With a pre-existing business, the resources and infrastructure are already in place. This means that you don’t need to waste time attempting to build the back end of your business from the ground up. You can build from what is already in place.

When you buy a digital business, you also can review the product or service development plans and roadmaps they have in place. Being able to choose a digital business with a plan that you believe sets it up for success, or is adaptable enough to suit your goals for the business saves you significant time and effort. Someone else has already done the majority of the trial and error for you.

4. Leverage past sales & marketing data

The sales data of the online business you plan to buy is integral in understanding its historical performance and future potential. You’ll gain immediate insight into customer personas and potentially even past tactics they’ve tried which have both succeeded and failed.

Marketing data offers you a wealth of information regarding how prospective customers have responded to different marketing tactics. By buying an existing online business, you’ll get access to potentially years of data from trialling different strategies from day one. This will provide valuable insight into tactics that resonated with customers and those that didn’t, how to best penetrate target markets, access to industry-specific contacts, and how to best leverage customer loyalty.

5. Brand-building phase: Done

By buying an established web business, you know the brand-building phase has already been set in motion. You only need to continue building on established customer trust and reputation with customers and leads already familiar with the brand.

6. Marketing materials ready

Another advantage of buying an existing digital business is that they likely already have existing marketing plans and collateral. These can range from professionally designed and managed websites, blogs, and social media accounts to a library of content such as images, articles and email newsletters already prepared for you and your customers. Having these ready-made materials presents a consistent and coherent brand that won't need to be re-established, ensuring customers continue to receive consistent and clear messaging about your business and its purpose.

7. Established supplier relationships

The strength of existing supplier relationships should not be overlooked when buying an established online business. Taking on an internet business where relationships are already in place will allow you to benefit immediately from access to inventory, established ways of working and historical data. It’s much easier to negotiate favorable terms with existing than new network partners.

8. Live website and established SEO

When you buy an established online business, you are instantly getting access to a website that is already live. This saves you both time and money as it eliminates the need to build a functional website from scratch. Instead, you’re free to focus on business growth or expansion plans. The house is already in order, you can just focus on renovations.

A well-optimized website can also provide numerous benefits for online businesses, regardless of the platform used, such as Shopify, Squarespace, or WooCommerce.

Firstly, it means a better user experience, which can lead to increased engagement, longer session times, and a higher likelihood of converting visitors into customers. A professional and well-designed website can instill confidence in the business, increasing the likelihood that customers will make a purchase.

Secondly, this also means it’s likely to have already started working on its SEO strategy, which means it’s likely to rank higher on search engines, and make it easier for new customers to find their way to you. By buying a website with a track record of attracting organic traffic, you gain predictability and reduce uncertainty.

9. You know your customers

Access to key customer data can be incredibly valuable when buying an established online business. This data can provide insight into the behaviors and preferences of the business's existing customer base, allowing you, the new owner, to make informed decisions about how to market and grow the business. With this information, you can tailor their approach to develop new products or services that align with customer needs, and create more effective marketing campaigns.

Additionally, customer data can be used to analyze trends and identify areas for improvement, such as optimizing the user experience on the website or streamlining the checkout process. Overall, access to an existing wealth of customer knowledge can provide a powerful foundation for the future success of an online business.

10. Your customers know you

A solid customer base provides a foundation for the business and can be leveraged for future growth opportunities. By buying an existing business, you immediately gain access to an established customer base and can build upon it with their own marketing strategies. In contrast, building a customer base from scratch can be challenging and time-consuming. Furthermore, an established customer base provides a level of predictability for future revenue streams, making it easier to project financial performance and secure future funding, if required.

11. Positive customer reviews

Did you know that 49% of customers only buy from businesses they trust online? By reading what other customers have to say, aside from you, potential buyers are also provided with valuable insight into the business and its operations.

The quickest way to build that trust is by having good feedback and positive reviews about your business. These can prove invaluable to its growth, giving your company credibility, and generating organic sales through referrals.

When exploring a digital business marketplace for your options of established online businesses to buy, keep an eye on its existing customer-provided ratings and reviews. You’d be surprised by how much customer reviews mean for an online business’ long term viability!

12. Proven business model

A proven business model is one that has already demonstrated its ability to generate revenue and profits consistently over time. By buying an online business with a proven business model, you can leverage the existing infrastructure and established customer base, which can save time and resources compared to starting a new business from scratch.

Instead of spending your time working out the best way to start making sales, you can focus on building upon the existing business model by implementing new marketing strategies, introducing new products or services, or by expanding into new markets.

Ready to Fast-track your ROI?

Starting your own business can be exciting. However the path to success is often a long journey that involves a lot of hard work. While the cost of buying an online business may seem more than you’re willing to invest upfront, compare it to other costs traditionally involved in starting your own web business: hiring and training staff, testing different marketing strategies, designing your website and/or Shopify store, learning how to best set up your site to succeed within the algorithms….

Often, buying and maintaining an already profitable online business ends up being more time and cost-efficient for entrepreneurs. This means you can focus on optimizing an existing digital business with your specific skills and knowledge. By leveraging your abilities on an existing online business, you’re likely to see a faster return on investment.

Where to Find Established Online Businesses?

Researching your options is the first step in your business buying journey. Whether you’re looking to buy or sell established online businesses, aside from determining your needs and goals, it is important to ensure that you’re looking for your next web business on trusted marketplaces.

Hatchit, a global deal directory, allows you to search and filter across over 30 digital marketplaces and brokerage sites, on one platform.

What is a Business Marketplace?

Marketplace platforms usually feature a variety of businesses for sale, ranging from niches of e-commerce sites to content-driven blogs. Some popular platforms include:

Entrepreneur Networks

Another way to find established online businesses that are for sale is to network with other entrepreneurs in your industry or attend online business conferences and events. Don’t forget to do your due diligence before committing to a purchase though!

Buy-side Brokerages

Buy-side brokerages provide significant value in helping to match potential buyers and sellers. These platforms offer a marketplace where prospective buyers can browse and search for online businesses that match their interests and investment criteria.

By using a buy-side broker, buyers can get guidance in the search process as well as access to a wider range of online businesses for sale than they might find through traditional channels. This can increase the chances of finding the right business to purchase.

Buy-side brokerages also provide a range of services to help facilitate the buying process, such as due diligence, financial analysis, and transaction support. This can save buyers time and resources compared to conducting the process independently.

Additionally, buy-side brokerages often provide financing options for buyers who may not have the full amount of cash required to purchase a business outright. This can provide you with access to capital and make it easier to buy and start running your own online business.

What are the Risks of Buying an Existing Business?

It’s important to know that whether you buy an established online business or start one from scratch, there are always risks involved.

1. Accurate valuation

One of the biggest challenges when it comes to buying an existing digital business is accurately valuing the business. Business valuation is a complex process that involves assessing various factors, such as the business's financial performance, industry trends, market demand, and growth potential. It can be difficult to obtain accurate and reliable information about the business, particularly if the current owner is not forthcoming with details or if the business lacks detailed financial records.

When considering buying an online business, you need to ensure that its assets, liabilities, and legal obligations are properly evaluated and disclosed before the purchase. This requires a thorough due diligence process to identify any potential issues or liabilities that could impact the value of the business or pose a risk to the new owner. You also need to consider its sources of revenue - over-reliance on a single website traffic source, specific season or service, or revenue derived from questionable marketing practices may increase the risk of unsustainable long term revenue.

2. Reliance on current owner

Many online businesses are small and may be heavily reliant on the current owner's knowledge, expertise, and relationships. If the owner leaves the business or is unable to transfer their knowledge effectively to you, the business may suffer.

Make sure all processes are documented and you fully understand how a business handover will work.

3. Unclear Branding

Make sure you’re comfortable with the current branding, or have a clear plan to change or update it. Unclear or inconsistent branding can create confusion among customers, leading to decreased trust and sales. Additionally, rebranding an established business can be a challenging and expensive process that may require a significant investment of time and resources.

The potential roadblocks concerning unclear branding can be countered by thoroughly doing research as to whether if it can effectively be built on for success.

4. High Competition

Online businesses are particularly vulnerable to competition as the barriers to entry are relatively low, and there may be many competitors offering similar products or services. If the business you want to acquire is in a highly competitive market, chances are, you may struggle to attract new customers and differentiate your business from the competitors.

Buying an established online business means taking on its existing competition. While it may be profitable now, you need to be aware of your competitive environment and be responsive to changing trends and pricing.

5. Changes in technology or regulations

The online landscape is constantly evolving, and new technologies or regulatory changes can disrupt established business models. You need to be prepared to adapt and change quickly to remain competitive.

Further, web-based businesses may be vulnerable to fraud or cybersecurity breaches, which can damage the business's reputation, customer trust, and financial performance.

6. Overleveraging

Overleveraging occurs when a buyer uses too much borrowed money to acquire a business, and the resulting debt burden becomes unmanageable. Online businesses, in particular, are susceptible to overleveraging because they often have lower startup costs than traditional brick-and-mortar businesses, and you as a buyer may be tempted to take on more debt to fund the acquisition.

Overleveraging can also lead to a lack of flexibility in managing the business, as this may force you to make decisions that prioritize debt repayment over business growth. It can be damaging to the progression of your business and may take years to reclaim the money owed or accrue new funds. Therefore, it is essential to carefully consider the debt levels that you can realistically manage before acquiring any online business.

7. High Maintenance Requirements

It's no secret that having an online business requires a significant level of ongoing maintenance to ensure that your website or e-commerce business is functioning correctly, the content is up to date, and any technical issues are resolved promptly. Depending on the type of online business, maintenance can be time-consuming and will require specialized skills.

This may take away other necessary business activities and find yourself spending significant amounts of money and time on maintenance rather than investing in marketing and growth strategies for your newly acquired business. Ensure you have, or can afford, the required resources and skills to keep the business running online smoothly.

Buy Established Online Business Today

Buying an established online business can be a complex and challenging process, and you as a prospective digital business buyer need to carefully evaluate and mitigate these and other risks before making a purchase.

However, there are clear advantages to buying and scaling an already established online business. From existing customer and supplier relationships, recurring revenue, reputation, systems and historical data, you can leverage the expertise of the previous owner, avoid the steep learning curve associated with starting a new business, and ultimately grow the business quicker and more profitably.

Hatchit

If you’re looking for your next online business venture, Hatchit can help you by efficiently identifying opportunities that match your buying criteria and connect you directly to listing owners and brokers. Save yourself the time of building a business and brand from scratch - use your skills to bring an already profitable e-commerce business or website to its next growth stage!

Photos from Pexels.com: by Vlada Karpovich, Liza Summer, and Rodnae Productions.

Empire Flippers: A Highly Successful Tech-Enabled Approach

December 1, 2022 by Paul W

On the About Us page of their website, Empire Flippers writes, “Hmm, how shall we say it, we run things a bit, different.” Well, Empire Flippers is different – as much a technology company as a broker. Think of the firm as the Carvana of website brokerages. Like the disruptive online used car retailer, their purchase process features curated and vetted inventory, fair pricing, transparent online deal marketing, web-based tools and resources, and automation – removing friction from transactions.

Beyond their platform, Empire Flipper’s staff of about eighty is there to support and guide buyers and sellers through each stage of a deal. The tech-enabled approach has been highly successful. Empire Flippers has brokered over $400 million in digital business transactions and has appeared five times on the Inc. 5000 list of America’s fastest growing companies. They have sold over 73% of all businesses listed, with listings often selling in less than 2 months.

Empire Flippers team

Sophisticated Buyer Tools

With over 170 online businesses for sale on their website, and purchase prices ranging from $20k to $20 million, Empire Flippers is one of the largest brokerages in their space, representing a broad range of opportunities. Each deal is classified across a number of parameters, so sophisticated buyers can easily identify matches to exacting search criteria. In order to have access to the full extent of filtering available, buyers are required to sign up for the platform, which is free.

Once signed up, buyers can search across 18 “Monetization” categories, from Amazon Associates, FBA, FBM, KDP and Merch, to Display Advertising, eCommerce, and SaaS. In addition, opportunities are classified under one of 58 “Niches” that range from Advertising to Technology. Other search filters include financials, platforms, date created, country, SKU count, monthly unique visitors, and more. Everything is handled within a customizable dashboard. Sellers can manage all communications and see the progress of their business sale in one place. Buyers can create watchlists, get notified about new listings that match their criteria, and schedule calls with sales advisors and business sellers.

Inc. 5000 fastest growing companies

Vetting Serious Buyers

Once signed up, buyers can view basic company information, but in order to see the company URL, view detailed traffic and earnings reports, and ask the seller questions, a listing must be “Unlocked”. In order to Unlock listings, buyers are required to become “Verified”, proving identity and availability of funds. The verification process is entirely automated, and while it takes some time upfront, it ensures the team and seller can be focused on real candidates rather than tire kickers. Empire Flipper’s buyer network is a capable group with over $7 billion in liquidity. For smaller deals, the marketplace actually includes a “Buy It Now” feature, enabling a purchase at the click of a button. Empire Flippers also allows buyers to hold funds in an online “Wallet,” enabling them to lock in a deal faster, without the need for wiring funds.

A System Built for Sellers

Empire Flippers seeks websites with a solid track record, earning at least $2k net profit per month over a 12-month average. They typically list businesses for sale at 20x to 60x average monthly net profit, with the multiplier depending on a number of factors. Empire Flippers has developed a sophisticated online valuation tool so sellers can gain a clear sense of potential pricing on their sale. The tool is highly customized, taking a separate approach for each of the 18 Monetization categories, and its algorithm is programmed with data from the sale of over 1,900 businesses.

If a business owner decides to list a business, upload of company information is also automated and protected. The Empire Flippers system takes a business owner through a number of steps to gather personal data, site details, screenshots of financial data, and Google Analytics or Clicky data/access. Empire Flippers team members are available to help with the listing process, and once a deal is live, can assist with buyer calls, negotiation, migration, and other elements of the transaction. Fees generally range from 5-15% of the transaction value, depending on the size of the deal. Unlike some marketplaces, Empire Flippers does not include the URL with its public listings, helping sellers maintain confidentiality.

Business valuation formula

Tools and Resources

The company has put significant effort into developing a library of content and other useful tools and resources for its 250k users. From hundreds of searchable blog entries, 720 episodes of “The Real Money. Real Business Podcast,” the 98,462 downloads of The Opportunity Podcast, to the nearly 100 videos on their YouTube channel, the firm offers a wealth of information from which buyers and sellers can draw. What’s more, their offerings extend beyond users to their industry partners, with an automated referral program and a robust API for easy listing syndication. These partner tools strengthen ties with industry players and place Empire Flippers at the center of deal and buyer activity.

Empire Flippers Capital

EF Capital

For entrepreneurs and investors seeking a passive-income opportunity, diversification, or just to dip their toe into the water of online business acquisition, Empire Flippers last year launched EF Capital. The platform pairs top web businesses for sale with capable operators, leveraging the power of crowdfunding to allow accredited investors to invest in high-growth internet opportunities. A new EFC round just launched with operators seeking financing for deals that include Amazon FBA, FBM, KDP, Affiliate, Display Ad, and E-commerce businesses. Deal sizes range from $1-$3 million, and the minimum investment is set at $25k.

Shopify Exchange Customers

As many in the online business acquisition community know, after 5 years in business, Shopify closed its Exchange Marketplace on November 1st, 2022. As a result, Shopify users no longer have access to a dedicated marketplace to sell their store. Empire Flippers is offering a 25% discount on their brokerage fee for Shopify stores that list with them prior to December 31, 2022.

On a Personal Note

Not long after our founding in 2019, Empire Flippers founder Joe Magnotti took the time to meet with the Hatchit team to learn about our startup marketplace. We are fortunate that Joe supported our efforts right from the start, advising us, and helping us gain an early foothold. The entire Empire Flippers team has demonstrated a collaborative, professional, and (despite their success) humble approach to business. It has been a pleasure working with them.

bottom line

Bottom Line

Whether it’s a 5-figure deal or an 8-figure deal, Empire Flippers is equipped to facilitate a smooth, efficient transaction. They offer buyers and investors a wide array of vetted opportunities, and sellers a sophisticated platform, capable team, and extensive buyer network. The firm’s tech-enabled approach – from granular filtering and useful tools, to automated vetting, valuation, and sign up – helps streamline the process. If you are a website buyer, investor, or seller, you should definitely check out Empire Flippers.

Latona’s: An Exciting Array of Income-Producing Websites

October 26, 2022 by Paul W

With over 80 website, e-commerce, and SaaS businesses for sale, boutique mergers and acquisitions firm Latona’s has grown to become one of the top brokerages in the digital space. The firm is focused on cash-flowing businesses with purchase prices ranging from $15k to over $12 million. Latona’s team of five brokers assists sellers through the entire sales process, from valuation, financial assessment, and positioning, to marketing, negotiation, deal closing, and owner transition. Their high-touch approach helps attract premium listings, and drives interest from financially capable investors, aggregators, and entrepreneurs.

puerto rico

An Early Start

While the company’s official start was in 2008, Latona’s founder Rick Latona was in the business well before that – as a domain broker. His brokerage was hit hard in the 2007-08 global financial crisis, given investments in premium domains and other speculative assets. In the midst of the recession, and facing significant losses, Rick secured a spot at Harvard Business School and used his remaining savings to pay for attendance. At HBS, with input from his professors, Rick conceived of the framework that would become Latona’s – an online brokerage focused on income- and cash-producing web properties. As it turned out, the pivot paid off and the firm became one of the pioneers of M&A in the digital business space.

A Wide Range of Online Properties

Latona’s now offers a broad array of income-producing websites. These include traditional e-commerce, Amazon FBA and Shopify stores; content, lead-generation, and membership sites; domain portfolios; and software-as-a-service (SaaS) businesses. Listings are searchable on the site by revenue stream, as well as by location, age, visitor traffic, financial metrics, and more. The Latona’s website is one of the most easily and granularly searchable of online business brokerages.

webmaster's podcast

Tools and Resources

In addition to its wide array of listings, Latona’s offers buyers and sellers a number of other useful tools and resources. There are five valuation calculators available on the site to assess cash flows for Amazon FBA, eCommerce, Lead Gen, SaaS, and other businesses. Additionally, Latona’s podcast “Web Masters” showcases some of the world’s most successful internet entrepreneurs, how they built and managed their companies, and what we can learn from them.

Host Aaron Dinin, serial internet entrepreneur and teacher at Duke, has posted over 90 podcasts, most recently “Marc Seriff @ AOL: The Network Engineer Who Introduced the Internet to Everyone.” Finally, Latona’s blog covers a range of relevant topics such as “How to Create a Drop Shipping Business Plan” and “Do I Need a Business License to Sell Online?”

Bottom Line

If you are an internet buyer or seller, you should definitely check out the Latona’s site. The website brokerage offers buyers an array of online acquisition opportunities at a variety of price points, along with useful tools and resources. If you are seeking to sell and your business has a minimum of $25,000 in net annual profit, consider Latona’s services. Their experience, know-how, and buyer network can help streamline the process and optimize the price and terms of a sale.

Read about our next broker in the spotlight.

We hope this information is useful as you consider your options for selling your business. We operate Hatchit, the global deal directory for brokered and for-sale-by-owner web-based businesses with valuations ranging from $25k to over $20 million. Using our extensive industry knowledge, we offer a broker match service to help you find the right assistance for your seller needs.