Building a start-up from scratch is an amazing feeling. Not just the sense of accomplishment, but the fact that you are able to tailor the company’s image and culture to what you want it to be.
Of course there is the main drawback; the fact that in their first year, a quarter of all start-ups will fail, and by year five the rate of failure jumps up to 55 percent.
For people who are in business with one goal in mind, to make money, buying an established business is often the route they prefer to take; after all, if you do your research you will only be buying a business that is proven to be successful. But beating the odds of failure isn’t the only advantage.
Consider this, “If you’re buying an established venture, then not only do you have the readymade brand and off-the-shelf-systems, but the whole business is up and running, ready to go. You don’t have to wait around,” says Adam Bannister, of BusinessesForSale.com.
If you don’t see the value in that, then maybe you need to reconsider going into business for yourself because time is money and one of the biggest hurdles any start-up venture faces is the problem of bringing in money when getting things started.
Likewise, buying an established website can be a smart move for someone who isn’t afraid of doing some research. Similar to their brick and mortar counterparts, an established web based business can provide you with instant customers, traffic and revenues.
Buying a website
Websites are like any other business; you have to enjoy the niche your business is in, or it won’t stand a chance at being successful. This is something you need to consider when looking for a website to buy.
Finding a seller is easier than ever. With sites like Flippa.com and WebsiteBroker.com, you can find websites for sale that match the exact criteria that you want. Even if you don’t find anything you like in one of the marketplaces that deal in websites, you might have a chance at finding something that interests you using Google to find abandoned sites.
Using search terms like Copyright 2009 + a keyword could turn up some sites that are established but have been abandoned. You might get lucky and find someone willing to sell.
Once you have a few websites in mind, it’s time to start comparing them. You should expect to pay between 12 to 24 months’ worth of current revenue for an established website. Using a marketplace makes it easier to verify claims like revenue and traffic as these sites offer tools to help with this. Buying sites on your own requires you to verify this information in person. Arrange a time where you and the seller can get together to share their screen. This way you can view things like their Google Analytics data, sales numbers and other numbers that might be important to know. In fact, this is a good practice for people buying high valued sites from a marketplace as well.
Just like anyone who would be buying a brick and mortar business, those buying websites need to protect themselves legally. Not only through a contract or sales agreement, but you should include some language about support and/or consulting for a period of time after the sale is final.
Additionally, you should consider adding a non-compete clause in the sales agreement. The last thing you want is for that person to turn around and use all the knowledge they gained building that business and using it against you.
Finally, see if you can’t get the owner to finance the sale. If the seller is willing to accept payments over a period of time you know that he or she is confident that the website they are selling has the potential to pay the bills and support you. This is a common practice in traditional business transfers so see if you can work this into your negotiations as well.