On the surface, shelling out a pile of dollars to purchase an ecommerce entity that has an established online presence seems like a no-brainer. But before you sign on the dotted line, take a few minutes to investigate both sides of the coin.
After all, the success or failure of this endeavor could have a profound effect on your life for years to come.
The pros.
Established customers.
First and foremost, buying an established online business enables you to get a running start on your success. If you are lucky, the company you have purchased will come with a ready-made set of loyal customers.
In the best possible world, these people will already be favorable toward your brand and products, and will already be primed to continue making regular purchases of familiar items.
Gathering the financial resources necessary to buy a business is often easier if you choose to go with a pre-existing company. This is because the reputation and established customer base of a known entity can allay the fears of lenders.
As a result, they may offer you options with more favorable terms.
Existing infrastructure.
The business may already have a solid infrastructure in place. This could include a high-quality ecommerce payment gateway designed to facilitate secure and easy payments, as well as a website that has already been curated to meet the expressed needs of a particular niche of buyers.
You might even be able to build on social media presences that the previous owner has crafted, making it possible to get a sense of the voice of your brand and the campaigns and initiatives that piqued buyer interest in the past.
Revenue track record.
Your new company will hopefully come with a positive track record of revenue and profits. Although you may have your own ideas about how to increase and enhance what it offers, these numbers will give you a baseline from which to start.
You will also be able to use previous data analytics to arrive at intelligent inventory and customer relationships initiatives.
Building on past successes and recognizing the nature of the failures and obstacles your predecessor encountered will help you lay the foundations for a stronger business going forward.
Supply chains.
Another key component of strength in a business can be found in the supply chain that provides them with the products or components they sell.
Whereas founders of startups must forge new relationships and often go through a trial-and-error process to find the vendors that are the best fit, these steps will have already been accomplished by a pre-existing business.
This takes much of the burden away from you as the new owner.
Brand identity.
Finally, you can never over-estimate the power of brand identity. When you buy into a business that is already known to accept online payments and has been around for a while, you can benefit from the company image that those who came before you worked so hard to build.
Instead of needing to start at square one to create a whole new persona and niche that separates you from the rest, these elements are already there.
Your job is to make the most of the success this brand has earned in the past, build on its accomplishments, and move beyond any negatives.
The cons.
What is motivating the sale?
Of course, there are also disadvantages to be found in hitching your wagon to an established online business. The elephant in the room that you must confront right away is why the business went on the market in the first place.
The answer may quickly develop into a challenge that you need to deal with before you do anything else.
This challenge could come in the form of legal disputes that have yet to be resolved. Alternatively, the company’s profits might have taken a nose dive in recent months or years.
Perhaps the website was a complete mess that made an optimized checkout experience impossible, thus alienating customers.
Higher upfront costs.
Another downside is that you will probably pay higher upfront costs when you buy into an already-existing brand and infrastructure. After all, you are, in effect, buying into someone else’s diligent work and the hard-won customer base that resulted from it.
You may also benefit from financial assets that have been gained over time, and that will come at a price.
Adapting to the existing culture.
What’s more, you may not find yourself seamlessly fitting into the brand and culture that you have bought into. Any staff that have carried over as well as long-standing clients will be accustomed to certain protocols as well as a less tangible but still very real company voice.
If you don’t come in speaking the same language, you and the people around you might have some difficulty adapting to each other. This could either be a temporary setback or a fatal flaw, depending on how well you recognize the situation and address it proactively.
Outdated equipment.
The very infrastructure that may seem advantageous can also work against you. This is especially true if the equipment or processes that are in place are inefficient or outdated.
Before you even complete the initial purchase, you should thoroughly examine the entire infrastructure to get a sense of what is working, what needs improvement, and any issues that seem to be so entrenched that they may be insoluble.
Customer expectations.
Finally, your new company comes with an existing set of customers. While this is great news in many ways, you may also find that these people are not happy about the transition.
You may even discover that some of them have complaints or resentments that have carried over from the former owner. In that case, it is vital that you work to resolve these issues as quickly and effectively as possible before they become toxic and seep into every aspect of your business.
Conclusion.
As this discussion illustrates, investing in an established online company is a mixed bag. While contemplating making this purchase, be sure to thoroughly investigate every nook and cranny of the business.
Should you decide to align yourself with the company by purchasing it, you will go into the arrangement with your eyes open, possessing an accurate awareness of both the advantages and the challenges that lie ahead.
