4 Things to Consider Before Buying an Online Store

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Owning an online store can be very lucrative. Last spring, Oberlo reported on an entrepreneur that created a million dollar business in just eight months. I have personally known other online merchants that earned six-figure incomes from them.

It doesn’t happen overnight though. Growing an online store into a thriving business can take six months to a year or more.

If you want to own a successful online store, you have another option. You could purchase one on Exchange by Shopify instead.

Purchasing an online store isn’t a foolproof strategy though. You have to pay a premium for a successful business and need to be careful that you don’t get scammed by an unscrupulous seller.

buying online store
Shutterstock Licensed Photo – By Irina Adamovich

With that in mind, here are four questions that you need to ask yourself first.

How honest and transparent is the operator of the company being?

People will pay more for a successful online business. This means that sellers have an incentive to exaggerate or even lie about their success.

It is very important to verify both the revenue and the expenses of the company. Don’t simply take them at their word. Even screenshots aren’t perfect proof, because they can be easily faked.

Ask the seller to share a copy of the 1044 they filed with the Internal Revenue Service. You can verify figures on this form with the IRS to make sure they aren’t deceiving you.

How easy is it to continue the online store’s success?

After verifying that the seller’s revenue reports are genuine, you may be tempted to pull out your checkbook. However, you should be prepared for the possibility that you won’t generate as much money with the store as the seller was able to.

You need to take a hard look at their marketing strategy before committing to purchasing the online store. Many online merchants generate a substantial amount of traffic from social media. They may have a knack for engaging with customers that you don’t. You may not be able to sustain their social media marketing strategy.

Most ecommerce brands generate 69% of their traffic from SEO and AdWords. At least 80% of their sales come from these sources as well. Changes to the Google algorithm can cost you your organic search rankings overnight. If you don’t understand the logistics behind Google AdWords, you won’t be able to sustain that traffic either.

How long will it take to recoup your initial investment?

Owners of successful online stores won’t give them away for free. They will charge a steep premium, since they are assuming the opportunity cost of giving up years of potential revenue.

Many business owners will charge four or five times their annual profits for their store. You need to estimate how long it will take for you to break even. Make sure that your account for revenue growth, since you may have ideas to boost your cash flow.

Do you want to own this online store?

Some online stores are highly profitable because there is limited competition. One of the biggest reasons there may be a little competition is that few people are interested in the niche.

This can be a major advantage for you if you are willing to wake up and do the grunt work every day. However, you will need to except that few people are interested in for a reason. The niche may be too boring for most people, require long hours or force you to deal with miserable customers. The money may be enough of an incentive at first, but eventually you will get tired of it if it isn’t to your liking.

On the other hand, you may have unique interests. If you have an affinity for this niche, you may do very well operating the online store. You will need to be honest with yourself about the challenges you will face with it and whether you will get burnt out running this store soon.

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