Many investors look for a magic formula that can help them with digital acquisitions. Unfortunately, such a thing does not exist and you need to approach each acquisition individually.
On the bright side, the digital asset’s performance is easy to measure and some general acquisition rules do apply. Simply put, you are looking for a deal that offers value and a business that has a decent track record. Don’t forget to think ahead and consider how the online business would perform a year or more down the road.
The following tips and tricks should help you buy the online business and minimize risk.
Why Do You Want to Buy?
This is the first question that you need to ask before proceeding any further. Investors have different reasons for considering an acquisition.
If you own an existing online business, acquiring a website in the same niche may be a good way to expand the business. At the same time, you are limiting the impact of competition and increasing your market share.
But it is not cheap to acquire a direct digital competition. You need to consider how the competitor may affect your revenue and act accordingly. This is a long-term strategy and it may solidify your position in the niche.
On the other hand, you might want to branch out and get your feet wet in a different market. This type of acquisition requires extra vigilance and analysis since you are venturing beyond familiar territory. Nevertheless, as an online entrepreneur, you probably know that diversification is about not keeping all your eggs in one basket.
Measure Twice, Cut Once
Careful financial and performance analysis is crucial for a successful digital acquisition. First, you need to take a closer look at all the website information. This means checking out the content, targeted audience, marketing campaigns, and other data to determine how well it performs.
The financial aspect refers to all the operational costs and revenue streams. You also need to factor in additional investments that may be required for business growth. It usually translates to acquiring the latest technologies, talent, and additional marketing efforts.
However, the extra expenses quickly build-up, so you may want to have a clear projection for the next 12 months before you proceed with the purchase.
Get a Good Website Broker
Regardless of your expertise or skill level, digital business or website brokers can provide critical help. They do all the hard work for you – an important thing if you are just starting.
Initially, you present the broker with your budget and the type or types of digital acquisition you have in mind. It’s on the broker to give you a list of the websites and online businesses that are worth your attention. In addition, the broker can help you narrow down the list and approach the target businesses.
For your decision, you will get a report about the target with all the important metrics. You’ll want to know all the data about the current financial metrics and future growth before arriving at a purchase price and more.
The seller’s support after the sale needs to be clear beforehand and included in the agreement. The first step is to establish the after-sale support method. Usually, it is conducted via online messaging apps and email.
Next, you need to determine the time frame. The common range is between one and three months, or more depending on the complexity of the site and your comfort level.
Some sellers are willing to extend the support after the designated period for a fee. It can be worth your money especially if it’s an established online business and you have yet to learn every trick from the previous owner.
Find the Right Place to Buy
Website marketplaces are a good place to start. Flippa, for one, offers online businesses that fit the needs of most investors. There is also a Starter Sites menu that offers websites for those who work on a very low budget.
In any event, be wary of bargains. Most of them are cheap for a reason. But these sites may still be viable if they own a domain that you might be interested in.
Those who wish to acquire an e-commerce platform should take a look at what’s on offer at the Exchange. This marketplace was launched by Shopify in 2017 for buyers and sellers of online businesses. It’s a play on stock exchanges where buyers and sellers get to name their won bids and asks.
But unlike a stock exchange, you can skip the exchange and contact the website owner directly. Some sites have great potential but they might lack the requisite management, which makes them perfect for acquisition. There are countless other examples.
Consider Hiring a Project Manager
This advice applies to veteran online entrepreneurs and investors. However, first-time investors in large online businesses can also benefit from an experienced project manager.
The role of a project manager is to cover all the loose ends and make sure the acquisition happens as smoothly as possible. The specialist can also open communication channels and monitor the progress of your investment.
In the digital acquisition industry, the project manager doesn’t even have to be on site. You can easily scour LinkedIn and other social networks for experienced professionals.
The best tip that anyone can give you about digital acquisitions is to do your homework. This means spending enough time on research and analysis. And don’t forget to consider your reasons for wanting to make an acquisition.
In addition, you should set clear performance benchmarks to avoid buying websites that don’t have a promising future or overspending on something that could’ve been viable otherwise. Overall, venturing into an acquisition without a clear strategy is just asking for it.
We hope that the tips and tricks presented in this article provided you with enough guidance to find the right tactics for a successful purchase.