There are numerous differences between an online business and a business with a physical location. One commonality is both can be established from scratch or purchased.
Purchasing an established offline business or ecommerce businesses, is safer because the financial risk is much lower. Purchasing an online business is not as simple as a brick and mortar location. It is difficult to know who to trust or where to locate an online business for sale. One of the top providers for e-commerce business solutions is Shopify. The company created the Shopify Exchange Marketplace platform to help investors purchase or sell a Shopify store simply and easily.
The data comes directly from Shopify, the stores for sale are unable to change any of their data and the investor can be sure the numbers are correct. The listings are of high quality. Merchants with a history of bad customer relations or chargebacks are unable to use Shopify Exchange Marketplace for their listings. The transparency decreases the possibility of a negative experience. There’s a wide range of Shopify stores on the exchange from $1m businesses to starter stores that aim to help people get started straightaway with a pre-built online shop.
The best tips for using this marketplace and buying an ecommerce store are outlined below.
Consolidating the Requirements
There are thousands of Shopify ecommerce business website stores in the Exchange Marketplace for sale. It is important to narrow down your requirements as much as possible. You should know what type of store you are interested in and the financial commitment you are able to make. A budget must be established and the amount of the investment defined. There are fully functional sites for as low as $50 because no profit has been generated. Established websites can sell for hundred of thousands because they are generating hundreds of thousands per month. The bigger the profit generated by the store, the higher the asking price. You must be willing to spend time running your e-commerce business every day. Certain businesses such as a drop shipping store or business, practically run themselves. Other businesses require a lot of time for operations, marketing and PR.
You also need to figure out what type of product you feel comfortable selling. There may be a niche you would rather avoid or an area you are experienced with. You need to consider ethical concerns such as the suppliers some drop shipping businesses use for sourcing their products. Prior to looking for an online business on Exchange Marketplace, make certain you know which types of products you are interested in selling. This will enable you to find the right opportunity much faster.
The Preliminary Research
Once you have determined how much money and time you are willing to put into an online store and the kind of business you are interested in, the time has come to browse the Exchange Marketplace. Find the stores that match your criteria, then perform some preliminary research. The Shopify platform offers filters to browse the stores. These are:
• Asking Price
• Store Age
• Profit Margin
• Business type such as print on demand, inventory, dropshipping store, etc.
The Description Tab
Use your requirements to help locate the best stores for you to purchase. Once you have identified the potential candidates, look carefully at the provided data for each one to determine which stores look like a fairly safe purchase. There are four tabs above every store listed. This provides you with the key information and should be carefully studied and in depth. The description section provides you with:
• The business overview
• The reasons to purchase the business
• Suggestions regarding growing the business
• A history of the work performed for the store
• The time necessary to run the business each week
It is important to understand the existing owner provided this information. This may enable you to judge the character of the seller. You need to decide if the seller appears trustworthy and their motivation for selling. Their reasons may be genuine or they may just be interested in making some fast cash. If you feel you are dealing with a trustworthy individual after reading the ecommerce website description, start drilling down the performance figures.
The Performance Tab
This tab reveals the traffic and monthly revenue of the Shopify store. The seller cannot edit this data because it comes directly from Shopify. The Exchange Marketplace pulls the performance statistics right from the store.
The seller is not allowed to edit these figures. It is important to note revenue does not mean the store is profitable and traffic is not necessarily organic traffic. You to understand how the traffic is generated and the profit levels. This will provide you with a good idea of the performance of the site.
The Expenses Tab
This tab provides the businesses core outgoings to help you understand the average monthly profit of the store as opposed to the revenue. Look for high revenue levels with lower levels of expenditure.
Look for gaps such as missing expenses you know should be listed.
The Sale Tab
This is an overview of what the sale includes such as inventory, social media following, domain, email lists, after sale support, etc. This data can be used to make a fast assessment using two keys. The first is determining if you are being provided with everything necessary to successfully run the business. The second is how established and successful the business is according to the social statistics. These sections will enable you to decide if the store is worth purchasing.
The Due Diligence
Once you have located the best potential purchases, it becomes crucial to do your due diligence. You can establish a direct communication to the seller using an anonymous email. You should ask the following seven questions.
• Find out where the traffic to the site is coming from. There are two basic kinds of site traffic. The traffic generated using finances such as advertising and the free organic traffic. Organic traffic is much more valuable.
• Make certain you understand exactly where the traffic is coming from. Keep asking questions until you receive a comprehensive answer.
• If the traffic is being generated through paid advertising, you must be willing to replicate these efforts once you purchase the store. Ask questions regarding the mechanisms involved and the budgets until you have a clear understanding of the finances involved. A full overview of the after sales support and the process for the current advertising will be provided once you have purchased the store.
• If the seller claims the traffic to the site is mainly organic, ask for a report from Google Analytics for confirmation. Ask to be temporarily added to the Analytics account of the seller as a read-only user. This will provide you with direct access to the statistics. This decreases the unlikely chance the seller is attempting to give you doctored PDFs to provide evidence of nonexistent organic traffic search results.
• When you are investigating organic traffic, it is always a good idea to check the store’s backlink profile with a tool such as Ahrefs. Backlinks are the sites external links. This is one of the best indications the site provides good organic search results. You can check the backlink profile of any domain by entering it into the Ahrefs software.
• If the store does not have a lot of backlinks, you may want to reconsider purchasing the store. A lot of low quality or spammy backlinks should also make you question purchasing the store. Although this type of building practice may boost the performance of the site temporarily, they are almost always seen by Google’s algorithms. This can cause the traffic to the site to drop significantly overnight.
• If the store has a significant number of high quality backlinks, this is generally a strong indication the store will perform extremely well in the search results.
The Cost of Running the Store
Your next step is understanding the financials of the Shopify store. You must be extremely clear as to the cost of running the store. Always ask for a full list of expenses. You should ask about numerous different expenses including:
• The inventory
• Marketing expenditures including offline and online expenses for paid advertising
• SEO expenses
• PR expenses
• Any other expenses pertaining to the business in any way
Your goal is to have a conversation with the seller about the costs of the store. You need to have a full understanding of how much the seller spends for the headline results they placed on Exchange Marketplace. Ask the seller exactly which assets they have included in the sale. Whenever possible, all of the assets listed below should be included in the sale.
• The domain
• Mailing lists
• Social media accounts
• After-sale support
• Overviews of the current process
All of these assets are important, but the most important of all is the domain name. This is especially true if the store you are purchasing generates sales through organic traffic. You need to understand if the seller retains the domain, they additionally keep every single backlink pointing to it. One of the most critical aspects of good search results are the backlinks. You will be losing a great deal of traffic right from the start if you do not acquire the domain.
The Mailing Lists and Social Accounts
The combination of subscriber lists and social followings are incredibly important for consumer awareness of new services and products as well as generating repeat business. This means they must be verified as legitimate. You can ascertain the quality of the social followings by looking at the profiles included with the sale of the business. Look at the engagement rates and the number of people interacting with the posts. Look closely at the follower selection to determine if they are fake accounts or real people. E-newsletters are critical for driving sales.
You need to have full confidence the mailing list you are receiving with the sale is high quality. You can check the click-through and open rates and ask the seller for access to the analytics reports to verify the mailing list is quality.
Ask the seller how they captured the data. This is especially important during the GDPR era. You need to be sure the processes the seller used for getting the consumers on the mailing list are legal. A good example is a seller who obtained their list of addresses off the internet or purchased them from underhanded suppliers. You can end up in a situation where the results from the list are poor or you are legally prohibited from using the list. Unsolicited mail is a common result from a low quality list.
The Importance of the Individual Selling the Site
Despite the importance of due diligence and using the statistics and metrics already discussed to determine if the Shopify store is worth purchasing, there is another critical aspect. The qualities of the person selling the store must be carefully considered as well. The store is being sold by a real person as opposed to an algorithm. It is extremely important to determine the character of the seller prior to giving them a lot of your hard earned money. Take the time to think about all the conversations you have had with the seller.
You must decide if you believe this individual is trustworthy. You have to decide if the seller will be willing to provide support for any questions you may have once your purchase is complete. Since people are just people, it can be hard to receive satisfactory answers to your questions. If the seller appears as shady, will not reveal an honest reason for selling the business or does not provide you with meaningful and honest answers to your questions, you need to be extremely cautious about purchasing this online business.
The Behind the Scenes Look
If it is even in the realm of possibility, ask the seller for a behind the scenes look at the online store. This can be accomplished with access to read-only software and analytics or by using screen shares. The better your comprehension of the business mechanics, the easier it will be for you to make a well educated decision as to whether or not the business is worth purchasing. You should also consider the fact a seller willing to provide you with insight is more than likely someone you can trust to do business with.
Using Your Capital for Advantage
Once you have made the decision to invest in a business, it is always a good idea to get legal and financial advice prior to making a purchase. Purchasing an online store has the potential to be a great investment. The Exchange Marketplace through Shopify provides you with a nice opportunity to locate and purchase your own online store. Your personal circumstances may signify there is a better way to invest your funds. Prior to making a large financial investment in a store, talking to a financial adviser beforehand makes sense. Talking to an attorney as well will not do any harm either. Once you have completed all your research, due diligence and browsing, you may decide the time is right to purchase your own Shopify store. At this point, you will need to begin the transaction process.
The Escrow Method
One of the biggest advantages of purchasing an online store through Exchange Marketplace is the partnership between Shopify and Escrow.com. This will protect the seller and purchaser throughout the process and help decrease the risk of fraud. As the name suggests, this is why Escrow.com is so important. The payment method they use is called escrow. This is when a third party protects the money until the conditions of the agreement have been agreed upon and met by both the seller and the buyer. In this instance, the third party is Escrow.com. Due to the way this type of payment method works, you need to have an extremely clear set of purchasing conditions prior to beginning the process of purchasing the store. You also need a thorough and extensive checklist for everything you will be receiving when you purchase the store including the domain, social media accounts, social media followers, mailing list (email lists) and after-sales support.
The Inspection period
Once your funds have been transferred into escrow, you will receive access to the Shopify store. The next step is an inspection period enabling you to review the store on an in depth basis. This will ensure all the assets, orders and data are as you expected. You can approve your purchase once you are satisfied by notifying Escrow.com. They will then transfer the funds to the individual selling the store. All of the necessary preparations for the full transfer of the site will then be made by Exchange Marketplace. This requires three to five days. Once completed, you will own the business.
The Bottom Line
You will be supported by Shopify in numerous ways during the inspection period. The Exchange Marketplace has a dedicated team to guide you through the entirety of the process and provide answers for the majority of questions you may have. It is important to understand they are unable to tell you if a specific business is a good purchase or not. What they can do is assist you in the purchasing process for an online store while sharing the best practices.
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