There are two things an e-commerce business needs to be successful. One is product market fit, and the other is scalability. Almost everyone underestimates how hard it is to achieve these with an e-commerce business. Aren’t we tired of ads telling us how simple and easy it is to start an online business? The facts say it’s not easy. In 2024, the Small Business Administration completed a study showing that ninety percent of all startups fail.
Let’s be smart about this. Let’s buy an e-commerce business that has found product market fit and is scalable. These businesses already have a proven track record of making money every month. There are many such businesses for sale, making passive income already.
What is E-commerce and How It Makes Money?
An e-commerce business alows customers to buy products or services online. This can be a virtual store front can range from small, bespoke operations selling handmade goods to large-scale online retailers that distribute products globally.
- Revenue Generation – E-commerce busineses make money primarily through direct sales. Customers visit the website, browse products, and make purchases directly from the comfort of their homes. The ease of access and convenience typically leads to a broad customer base and diverse revenue streams.
- Subscription Services – Some e-commerce sites offer premium features such as membership clubs or subscription boxes, which provide recurring revenue.
- Advertising – Hosting advertisements or affiliate marketing also contributes to profits. Websites might display ads or promote third-party products for a fee.
- Dropshipping – This model allows e-commerce businesses to sell products without holding inventory, reducing overhead costs and enhancing profit margins.
- Cost Structure and Profit Margins – Profits depend on effectively managing costs such as web hosting, payment processing, and marketing. Strategic pricing, efficient supply chain management, and customer retention are crucial for maximizing profitability.
Where To Find E-Commerce Businesses For Sale
- Empire Flippers – Great reputation, reliable
- FE International -Trusted by many buyers
- FBA Broker – Specializes in FBA businesses
- Quiet Light – Known for quality listings
- Exchange Marketplace – Shopify site owners sell directly
Website brokers are the best place to buy online businesses, especially e-commerce ones. Brokers have their reputation at stake, so they ensure they only list quality businesses for sale. They won’t risk selling a bad business and getting bad press.
How Much Do They Cost?
Buying an e-commerce business involves knowing the costs:
- Initial Purchase Price – Depends on the business’s monthly revenue
- Monthly Revenue – Ranges from a few thousand to hundreds of thousands of dollars
- Operational Hours – Varies, some businesses need only a few hours a week, others more
How to Verify an E-Commerce Business Model Before Buying?
We always ensure the e-commerce business we plan to buy is solid. It’s like checking the health of a plant before bringing it home.
Assessing Financial Situation
Before we commit to purchasing an e-commerce business, we dive into its financials. We look for consistent revenue growth and profitability over several years. It’s crucial to understand not just the numbers but the story they tell about the business’s viability.
- Revenue Streams – Are the sales figures consistently growing?
- Profit Margins – What are the net margins, and are they improving?
- Expenses – Breakdown of operational costs, marketing expenses, and overhead.
- Debt Levels – Is the business heavily in debt?
Market Position and Competitiveness
We examine the market position of the business to gage its competitiveness and potential for growth. Knowing where it stands among competitors helps us see the big picture.
- Market Share – How much of the market does the business actually control?
- Customer Base – Is the customer base loyal and growing?
- Brand Recognition – How well-known is the brand?
- Competitor Analysis – Who are the main competitors and what advantages do they have?
Customer and Supplier Relationships
Understanding the relationships that the business maintains with its customers and suppliers reveals a lot about its stability and future prospects.
- Customer Satisfaction – Are customers happy with their purchases? High return rates?
- Supplier Dependability – How reliable are the suppliers? Are there exclusive agreements?
- Customer Support – Is the support team responsive and effective?
| Factor | Description | Why It Matters |
|---|---|---|
| Revenue Growth | Year-over-year increase in sales | Indicates business scalability |
| Profit Margins | Net profit as a percentage of revenue | Shows financial health and efficiency |
| Market Share | Percentage of market controlled | Reflects competitive strength |
| Customer Base | Size and growth rate of customer base | Measures potential for future sales |
| Brand Recognition | Level of consumer awareness of the brand | Impacts customer trust and loyalty |
| Competitor Analysis | Comparison with main competitors | Identifies business’s standing in market |
| Customer Satisfaction | Feedback and return rates | Affects repeat business and reputation |
| Supplier Dependability | Reliability and terms of agreements with suppliers | Ensures consistency in product supply |
| Legal Compliance | Adherence to relevant laws and regulations | Prevents legal issues and fines |
| Intellectual Property | Ownership and disputes related to intellectual property | Protects unique products and branding |
Legal and Compliance Check
We thoroughly check for any legal issues that could affect the business. This includes verifying compliance with online business regulations.
- Licenses and Permits – Are all necessary legal documents in place?
- Privacy Policies – Does the business adhere to data protection laws?
- Intellectual Property – Are there any ongoing IP disputes?
Steps To Avoid Scams
When using platforms like Exchange Marketplace, where individuals can sell their Shopify sites without brokers, we need to be careful:
- Research Thoroughly – Check the seller’s history
- Watch Out for Red Flags – Unrealistic revenue claims, lack of documentation
- Get Expert Help – If unsure, consult someone experienced
In conclusion, buying an e-commerce business is about finding the right fit, ensuring it can scale, and verifying its track record. Using trusted brokers can help us avoid scams and find reliable businesses.
Exploring E-Commerce Business Marketplaces
Let’s check out Exchange Marketplace if you’re interested. Do you know any other places to buy website businesses? Comment below if you know other brokers or sources for e-commerce businesses.
Ecommerce Through Empire Flippers
First up, let’s look at EmpireFlippers.com. Click on the marketplace to browse their website businesses for sale. Many are e-commerce, but they have different business models too. We want to see how much these businesses cost, their average monthly net profit, and the multiple used to calculate the price.
Key Details to Check:
- Selling Price – Based on average monthly net profit times a multiple.
- Average Monthly Net Profit – How much the business makes monthly after expenses.
- Price Range – Most beginners start between $10,000 to $100,000.
For example, we find a supplements business for $801,000 with an average monthly revenue of $13,168 and a net profit of $2,141. The seller asks for a multiple of 34 times the monthly net profit.
Operational Hours:
- Let’s say business requires about 2 hours per week.
- Tasks include monitoring sales, restosking inventory, and financial forecasting.
Hourly Rate Calculation:
- $2,141 net profit per month / 8 hours per month = good hourly rate.
Exploring FE International
Next, let’s look at FE International. They have a subscription box e-commerce business for children’s craft kits listed for $200,000.
Key Metrics:
- Asking Price– $200,000
- Yearly Net Profit – Amount not fully detailed but critical to know.
Important To Consider
When browsing these platforms, keep an eye on:
- Business Age – Older businesses might be more stable.
- Profit Margins -Higher margins mean better returns.
- Operational Complexity – Simpler operations save time and hassle.
These insights help us find the best deals and ensure we invest wisely in e-commerce businesses.
Return on Investment and Operational Hours
You could earn more than a 50% return on investment per year with a business like this. In two years, you’d have made back more than the cost of the business, which is quite impressive. While there isn’t much information on how long it takes to run the business, it’s likely around 5 to 10 hours per month.
It’s advisable to spend more time initially to ensure you can scale it effectively. The business has a proven concept with a subscription box that generates $300,000 in revenue annually and $128,000 in net profit.
Checking Out Another Broker – Quiet Light Brokerage
Next, let’s look at Quiet Light Brokerage. They offer businesses ranging from $100,000 to $20 million. One example is an FBA business listed for $120,000. The yearly revenue is $137,000, with a net income of $40,000.
This translates to a 2.92 multiple, meaning it would take roughly three years to get a 100% return on investment. You’re looking at a 33-35% return on investment per year. This business has only three stock units, which simplifies operations.
Key Points to Note:
- Revenue– $137,000 per year
- Net Income – $40,000 per year
- Multiple – 2.92 (approximately three years for full ROI)
Other Platforms
- FBA Broker – Specializes in FBA businesses.
- Exchange Marketplace – Direct sales from Shopify site owners, but requires careful vetting.
It’s crucial to explore various brokers and platforms to find the right business that fits your investment range and operational capabilities.
Importance of Due Diligence
Before purchasing, conducting thorough due diligence is essential. Without it, you risk making a poor investment. To assist with this, there’s a free due diligence framework available.
Steps to Effective Due Diligence:
- Evaluate Financials – Verify revenue, net profit, and expenses.
- Assess Business Model – Understand the operational requirements.
- Check Seller’s Background – Ensure credibility and transparency.
Additional Resources and Community Engagement
For more insights, check out videos and playlists that delve into the best types of websites for beginners and detailed due diligence processes. Engaging with the community by subscribing, commenting, and sharing questions helps everyone make better investment decisions.
By exploring these resources, we can empower ourselves to make smart choices and successfully invest in e-commerce businesses.
