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Need advice on buying an onnline business

by ninjabluedog
21 replies
Hi Everyone. I'm brand new to the community here and really excited to join in. I'm looking to buy my first online business and want to really to my research. I'm hoping to put together a lists of do's and don'ts from all the experts out there and this looked like a great place to start.

I'm looking to buy something that can replace my current job and figure I'll need to spend somewhere around 300k - 900k. This represents my life savings and I'm scared to death! So I'm hoping to get some good advice from those who have been down this path. If you have purchased a business in this range I'd love it if you shared your thoughts on the following.

1. What are the most important things to make sure I do/don't do?
2. What did you do right?
3. What do you wish you had done differently?
4. What surprised you the most?

Thanks in advance for your help!
#advice #business #buying #onnline
  • Profile picture of the author Gambino
    Yikes. The first don't is don't throw away your life savings and/or retirement for a business opportunity. Any business is a risk. And any advice you receive here is useless without knowing your background and aptitude for running a business.

    What type of income are you looking to replace? You can invest much, much less than $300k and buy a business that is profitable and scaleable - thus minimizing your risk tremendously.
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    • Profile picture of the author ninjabluedog
      Originally Posted by Gambino View Post

      Yikes. The first don't is don't throw away your life savings and/or retirement for a business opportunity. Any business is a risk. And any advice you receive here is useless without knowing your background and aptitude for running a business.

      What type of income are you looking to replace? You can invest much, much less than $300k and buy a business that is profitable and scaleable - thus minimizing your risk tremendously.
      Thanks for the feedback. I can see how some more detail can help you provide better direction.

      Life savings: To add some more detail to this, my life hasn't been that long yet and I still have plenty of earning years ahead of me. I also wasn't planning to invest any of my 401k or other retirement moneys. So what I'm considering doing probably isn't as "all in" as it may have sounded in my original post.

      Background: I have a BS in business management with an emphasis in global marketing. I have 7 years experience in e-commerce. I have worked for 2 major e-commerce retailors, as a business consultant for web analytics and conversion rate optimization, and I currently am a Director at a 5-year-old high-growth SaaS startup in the social marketing space. I haven't ever owned a business before, so this would be a first for me, but I feel very comfortable in the online space and am confident I could make a good go at it.

      Income to replace: I figure I would need to be pulling in about $6k per month to maintain my current lifestyle. Some of the literature I've read suggests that for a business making less than $1M in revenue per year could be expected to provide an SDE (sellers discretionary earnings) of about 10-20% of revenue. From my initial research it seems that online businesses might have a better rate though. Anyway, I would love to spend less then that and still be able to replace my income. The issue with me though is that, with the demands of my current employer, I don't have more than 3-4 hours per week to put into a business, so I feel that I need to get something that can support me out of the gate while I work to grow it. If you have other suggestions I'm all ears!

      Also, PS my current plan is to find something that is seller financed, so if I buy something that costs 300k then then potentially I may only be actually putting down 60k for a down payment and the rest would be paid off via the cash flow of the business. One big advantage of this is that it sort of puts the seller's money where his/her mouth is when it comes to his/her representation of the business's profitability.

      Thank you for your thoughtful response!
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  • Profile picture of the author Eden A
    When you are looking for a business, one of the first thing you must do is research and to the math how much you need to invest, spend and of course how can you earn it back, and what do you need to do to make it work.

    Most important don't jump on the first offer you get check it see if it's worth the time and money.
    good luck!

    P.s
    If you need more help you are welcome to send me a massage.
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    • Profile picture of the author ninjabluedog
      Thanks Eden A! I'll probably hit you up with some questions as I get going here. Do you have direct experience with acquisitions in similar to what I'm looking to do?
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  • Profile picture of the author abhishek singh
    You should make plain for it.think about it deeply before start.
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  • Profile picture of the author bebetsizo
    The thing I have done right when starting an online business is getting myself a mentor. A mentor really helps to exponentially grow your learning curve and achieve faster result.

    when the student is ready, the master will appear.


    all the best good luck.
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  • Profile picture of the author gdrope
    You have to look for the accounting stuff. If you have these numbers, you can calculate a value of a company. How to figure this value out - is a bit complicated, but if you really need help, i can calculate it for you. (it depends in which country the company is - i'm not a international reviewer).

    when you have the accounting-numbers, you see how many profit the business/company has per year. big companies have an extendend report in the end of the year of their financial situation. it's important to know, in what you're investing. how many is the profit per unit, how many per year? etc.

    how much can you take out of the company directly (company-substance) etc. these values are important to know and are the basis of the whole valuation.

    after you calculated everything, you have to look at the market itself. do you have unique products? how much do you have to sell to break-eaven? do you have a direct salary after the investment? etc. many questions (based on the businessplan - you have to study the businessplan for an investment in the upper range like that).

    Another important question - who will buy this product? everyone? just a group of persons? how big is this group? would you buy your future product by yourself?

    if you need more advices let me know.
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  • Profile picture of the author jdjenkins
    Are you sure you want to replace you current job? If, "about $6k per month" is all you need, then you can easily make that part-time,

    cheers,

    Jon.
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  • Profile picture of the author ninjabluedog
    Thank you for your advice all. I bebetsizo is spot on with the mentor. Any suggestions on where to find one?

    @jdjenkins I'm also open to trying to start something part time, but my time is severely limited as I'm a father of 4 and feel that it is imperative that I put family first. If you have any suggestions on the types of businesses that could provide that part time I'd love to hear it.

    Thanks!
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  • Profile picture of the author SnackMemory
    Originally Posted by ninjabluedog View Post

    Hi Everyone. I'm brand new to the community here and really excited to join in. I'm looking to buy my first online business and want to really to my research. I'm hoping to put together a lists of do's and don'ts from all the experts out there and this looked like a great place to start.

    I'm looking to buy something that can replace my current job and figure I'll need to spend somewhere around 300k - 900k. This represents my life savings and I'm scared to death! So I'm hoping to get some good advice from those who have been down this path. If you have purchased a business in this range I'd love it if you shared your thoughts on the following.

    1. What are the most important things to make sure I do/don't do?
    2. What did you do right?
    3. What do you wish you had done differently?
    4. What surprised you the most?

    Thanks in advance for your help!
    One thing I can think of, buying a businesses means you better knows from heads to tails how it works. Inside and out with all implications, even subtle ones.

    If you really have that kind of cash, save most of it and go into business with me and my site. Ill cut out you 50% and I wont even need your minimum.
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    • Profile picture of the author gdrope
      If you don't wanna spend time for a business. get an investment banker and let him do his magic. get money from money. you're in a good starter position with that amount of money for an investment banker. but you have to chose carefully. with that amount of money you can reach about 7-8% per year i think. (minimum) everything more, is better, but includes more risk. have fun!
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  • Profile picture of the author brewmeister
    I would start by testing the waters.
    Get into a few JV's - see what you like.

    Once you find your niche find something that is scalable and eventually can be acquired.
    Otherwise I would rather invest in tax havens (life insurence, roth IRA, Municipal) or get something that pays high dividends like REITS.

    The worst thing you can do is blow your life savings. And there are many people out there that will be more than happy to spend your money for you.
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  • Profile picture of the author marketingfreak
    Banned
    to buy an online business you should need to know the business up's and down's. The way market is moving and what is the dire need of market now a days because if you won't keep your business up to date you won't be able to meet the market requirement. Because the market changes day by day. Secondly you should your self know the market from inside and outside only then you can start a health business. In starting you have to face problems and the business will be slow but later as you move on the business will be stronger by your struggle.
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  • Profile picture of the author bettybakebake
    just my two cents here. But if I had your experience I would start a blog about your online retail experience. Start researching suitable things to see on your blog as an affiliate. Start writing ebooks about your experiences. Put an hour a day into getting your blog going. writing about the things you know about for the public for free to start.
    Don't quit your day job until you have about six months poking your toe into the IM field. It does suit you with four kids you probably would like to spend some time with before they grow up and want to only spend time with their friends.


    this way you can find out if you have the right temperament to work from home keeping your own schedule. Six months should see you starting to get some following for your blog, make some money from adsense, maybe sell some of your own ebooks. Take what you know and I know I would buy from you with your background if you had some ebooks.


    I'm doing a brick and mortar store and one or two im sites now. I did have over a hundred sites at one time but was not organized nor smart enough to keep all the balls in the air. I am easily sidetracked and spent more time buying new programs then putting what I should know would work into action.


    I guess I am just lazy, lol.
    anyway these "mentors" are a great way to spend a lot of money. Just do some of your own work online first. see how it goes. only read the free stuff about how to do it. and then assign a block of time and see if you can spend that much time working on your own.


    Just my two cents.
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    • Profile picture of the author ninjabluedog
      Originally Posted by bettybakebake View Post

      just my two cents here.
      Thanks for your two cents bettybakebake! This is something I have considered, but I think I find two problems. 1. I don't think I have the passion for blogging and e-booking to keep me going. 2. I am unsure much money I could actually make doing it and worry that it might take too long to find out...
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  • Profile picture of the author kimanierick
    the first thing you need to understand is that this could be the greatest risk that you can ever get into. Do your maths good and dont put all your eggs in one basket. All the best
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  • Profile picture of the author Kherk Roldan
    Don't buy your first online business, instead of doing it yourself and starting from scratch. you should enjoy failure from the start and learn from it.
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  • Profile picture of the author fernelis2009
    Don´t quit your job just yet, learn as much as you can, and when you feel you are ready for a new life, go ahead and do it. Wish you the best!
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    • Profile picture of the author rjd1265
      Originally Posted by fernelis2009 View Post

      Don´t quit your job just yet, learn as much as you can, and when you feel you are ready for a new life, go ahead and do it. Wish you the best!
      I am doing the exact same thing as you as we speak.

      I bought a online business with 20% down and now have 5 years to pay it off with the profits of the site.

      BUT I did not quite my day job just yet. I will once one of two things happen:

      1. I match my current income on a regular basis
      2. I get to a point where I need to leave to increase my online profits because of time constraints.

      I wish you the best of luck. What you are doing takes balls, many have a hard time taking the leap!

      Ryan
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  • Profile picture of the author NetMan
    As someone mentioned above, and he's right on the money, buying an online business is somewhat freaky as you need to know much about the details and the ins and outs of it to keep it running smoothly and successfully scale it once you acquire it.

    One thing's for sure is that today starting a business on the web MUST be in SaaS area without a doubt. That is automated repeat business at its best. Could also add and run a paid membership related to the SaaS which would bring the passive income side to all of this.

    That being said, seeing where you are at, your background, your questioning and your research and the actual time you have available for your transition out of your full time job, I might be of a good timing for you. And I mean it could be a good timing for me too, both of us win-win. Anyway, if SaaS and related membership site is something of interest for you, PM me I believe I can talk to you of something that will certainly bring water to your mouth lol

    Best regards,
    Andre Foisy
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  • Profile picture of the author getfreetheme
    Whoa! I'm stunned by your guts mate for being such a risk taker. Fearless indeed

    But to advice you only this and please take note of this: You can buy an online business with around 50K-100K Reaklly. Don't throw all that you've got mate. Just an advice. I've seen online businesses that rise and most of them fall. Please be careful.
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