Bear Den Country Store & Shopping Blog

Great Tips for Purchasing a Booming Internet Business

It's difficult not to love the online business model, as it's nearly perfect. You operate a business with very little or no inventory at all, no receivables and just a few essential internet based employees. Every piece of the business can be outsourced entirely - even customer support if you'd like, and to get going, you don't even need to have any technical expertise.

It takes very little to set up an online business. Buying an Internet business can be very quick and inexpensive. You can run the business from anywhere, at anytime and this can be highly advantageous if you're not ready to take the plunge into your own "bricks and mortar" operation. It's great to think that you can work remotely and casually if you want to.

If you're willing to put in the time and effort, buying an Internet business can reap enormous dividends related to the actual time involved. While it's not all fun and games by any means, you should spend time on the operational side of your business each day.

Bear in mind when buying an Internet business that the multiples may be higher than traditional small business valuations due to the associated benefits. It should be fairly easy for you to inspect the financials of most internet businesses, as in the vast majority of instances, transactions are made with credit cards.

If you are thinking about buying an Internet business consider the following:

- Don't believe that if you just build a website, you are home free. Your clients will need to find you before they can even consider your goods and services. Even the most powerful company in the world can't turn a profit if they open a new store on an island in the middle of the ocean. The largest discounts ever will not work as customers will not make that trip to the store. Marketing is absolutely everything, and you need to find ways and means of getting large numbers of people to visit your website.

- Niche products can be very successful in this environment.

- Find out as much as you can about the competition, the industry and products but remember that this process can prove more difficult than researching a local "brick and mortar" operation.

- It is vital for you to have a large balance of sale as part of any deal and you must have a bulletproof non compete clause with the seller. It is just so easy for them to open up a competing business under another name or in another country.

- If you want to buy a business which involves a particular type of product or service, you need to be sure that you will be able to buy these products and services from the supplier involved after closing.

- Be wary of businesses that rely on e-mail marketing campaigns and check out their list building and prospect-getting procedures. As spam is so pervasive, you can be sure that there will be heavy regulation down the road and you should have your house in order with regard to e-mail marketing.

- Be very wary of any "get rich quick schemes", fads, or anything that might be adversely impacted by future governmental regulations.

- Make sure that you are not signing up for liabilities or guarantees that may have been offered by the previous owner. You should make sure that you have access to software records relating to all site versions as you will need to know, for example, if there was a five-year guarantee offered in the past. Make sure that you get the owner to indemnify you and that you have a mechanism to offset any future claims against that large balance of sale.

- Change all passwords when you take over and make sure that you have access to a list of individuals who may have had prior access to the site.

- Bring in outside experts to evaluate the existing site from a technical perspective. If the seller has developed the site you need to check the programming. A variety of programming patches, fixes and minor tweaks could be in place, and you might need quite a bit of help to unravel everything.

- Source code must be available for the site, with proof of ownership.

- You do need to make friends with the webmaster, especially if you are not doing the work yourself. A lasting relationship will certainly benefit you.

- At an early stage, talk with the relevant merchant banks to ensure that you do not need to put up any significant personal guarantees when it comes to credit card processing.

Many websites specialize and can help you when buying an Internet business. Check out dedicated databases but, as always be diligent. An online business venture, when established correctly, can be one of the best models available. The key is to provide a profitable service or product within a sustainable operation.