With a myriad of businesses for sale across a variety of channels, being focused from the outset will not only make the search easier but will also speed up the acquisition process.
Before acquiring a website however, a suitable investment target has to be found. With numerous marketplaces and brokers in operation, the pathway is not always clear. This post sets out the various options available to buyers when looking for online businesses for sale in the lead up to making an offer.
Where to Find an Online Business for Sale?
It goes without saying that the best place to start the search for an online business for sale is the internet. The rapid growth in internet businesses and the online business brokerage industry has resulted in:
The extension of traditional business marketplaces to cater for online businesses
The emergence of online business auction sites, where buyers can liaise with and acquire directly from website owners
The growth of online business brokerage companies, all with different levels of expertise and varying track records in the space.
With excitement and curiosity, buyers often attempt to explore all avenues at once. However, just like seeking out a suitable real estate investment, it is important to select the right agent, platform and approach to avoid wasting time and money. The three most popular routes are marketplaces, auction sites and brokers, which are explored in greater detail below.
Online Business for Sale Through a Marketplace
To many, online business marketplaces would seem the obvious place to start when searching for an online business for sale. BizBuySell for example, states that it is “the internet’s largest business for sale marketplace” and has seen rapid growth in recent years. Online business marketplaces are attractive as they enable buyers to look across the industry at a range of available listings, helping them to identify potential investment opportunities. Buyers are able to request additional information on listings, which automatically alerts the seller or designated broker (if represented). Most established online business brokers have a presence on such platforms, using them as an additional outreach channel.
Whilst marketplaces are useful, sites such as BizBuySell.com and BizQuest.com allow sellers to post ads in a relatively short time and are typically only as credible as the brokers and sellers that market through them. With a limited registration process, it is straightforward to setup an account and begin to solicit buyers. Therefore, buyers should approach with a healthy degree of caution but take not that there is certainly scope to find high-quality business listings on marketplaces at reasonable prices, depending on the specific requirements of the seller.
One other important consideration with marketplace transactions is that their success is contingent on the transparency and motivation of the seller. It can take longer to get the information needed to make an offer and conduct due diligence. There is typically a less structured sale process too.
Online Business for Sale Through an Auction Site
Similar to online business marketplaces with a slight difference, auction sites act as the eBay of the online business-for-sale world. Flippa is the primary website auction platform, with over 600,000 users. The site claims that nearly 23,000 businesses have been sold via their online auctions. Auction sites such as these attract individuals wishing to sell their online businesses to other individuals (effectively peer to peer).
Whilst online business auction sites offer sellers a quick option to tap into a large potential buying base, there are some drawbacks associated with them. With limited upfront seller and business vetting and less focus placed on operational and income verifications, buyers have been known to fall victim to fraudulent misrepresentations by sellers. With reduced vetting, the onus of performing extensive due diligence lies with the buyer. Therefore, buyers who are unfamiliar or unspecialized in internet business due diligence should be cautious about this purchasing channel.
Naturally, auction sites have a reputation of housing a wide variety of businesses so there is a wide selection, but it’s important that buyers are cognizant of the quality of listings where sustainability is questionable. The other cautionary factor of note with auction sites is the prevalence of ‘shill bidding’. Shill bidding is a technique used by sellers on business auction platforms to try and secure the highest possible price for their business. They will often set up a buyer account under another name and bid against genuine buyers, to push the price up. There are ways of spotting shill bidding in practice, to protect against it.
While using auction sites carries some risk, those who are experienced in due diligence and buying online businesses can find favorable deals. Any buyer transacting through an auction site should insist on using an escrow service to complete the sale.
Online Business for Sale Through a Website Broker
Online business brokers specialize in the sale of online businesses. Business owners typically engage brokers to benefit from their knowledge, tools, investor network and prior experience when it comes to executing deals. Many brokers offer a range of listings, which have been pre-vetted from a due diligence perspective prior to listing. Unlike popular auction channels, brokers veer towards the more established end of the web-based business market where verifiable site history, stable income and seller legitimacy are commonplace.
Buyers often take comfort in the fact that a third-party intermediary is at hand to resolve any issues as well as benefiting from a structured sale process when buying an online business. Brokers are usually always at hand to discuss business listings with buyers – offering advice, providing figures as well as hands-on guidance across the duration of the sale process. Brokers are economically invested in the sale and are only paid once the deal has completed, therefore, they will only list high-quality online businesses that they are comfortable will sell.
As the online business brokerage industry is still in its relative infancy, lesser known/trusted brokers emerge every so often, seeking to benefit from limited market regulation and unsuspecting buyers. Therefore, it is important to select a website broker that has a legitimate track record, infrastructure (contract drafting capabilities, secure deal room areas, use of escrow etc.) to ensure the best quality service.
In general, fostering relationships with brokers is perhaps the most effective way of finding quality online businesses for sale and is something that every buyer should look to put front and centre of their acquisition strategy.
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Buying an Online Business Directly
Buyers that know exactly what they are looking for may find it quicker to approach the specific businesses in question instead of waiting for one to come up for sale. There are different ways to approach a business owner and it is important to ensure the approach is right, to signal seriousness and intent to the seller.
Buyers following this route should look to make use of industry due diligence tools and analyze candidates’ traffic and backlink profile before approaching. If the website still looks attractive after some initial analysis, the seller’s name and contact details can sometimes be found by conducting a who.is domain search or a straightforward Google search.
Conclusion
Buyers have plenty of options available when it comes to finding the right channel to begin the search for an online business. It is important to stay focused on one or two from the outset, keeping up to date with deal flow as and when new sites come available. Being organized from the outset will speed up the search process, helping you to find the right online business.
Author information
James Morrish
James is a Junior Broker at FE. Starting out in management consulting in 2011, James worked with a range of technology majors before making the move into website brokerage in 2014. At FE, James is responsible for small cap deals, liaising and building relationships with buyers as well on-boarding new clients.
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