How To Successfully Buy A Passive Income E-Commerce Business (Written By A Current E-Commerce Business Owner)
There’s a booming market for buying and selling passive online businesses.
Everyone Wants Passive Money Without Doing Anything Or Needing To Be Anywhere.
Anyone can buy these businesses on Flippa, Empire Flippers or other Internet business marketplaces. Amazon FBA, Affiliate sites, Adwords revenue sites, etc., etc. are easy to purchase. Now that SBA loans (Small Business Administrations Loans) are available, it’s easier than ever.
If you’ve never run an Internet business, I caution you that buying a passive income business isn’t a risk-free guaranteed-income retirement plan. Many Internet business buyers don’t do well.
Don’t Buy A Business If You Plan To Do Nothing And Collect Checks
Imagine a car’s engine. Like a business, it’s a complicated passive energy generator for the driver. But, what if one day it doesn’t start. Maybe the problem is a little 50-cent spark plug, but if you don’t know then the entire engine loses its value in an instant.
For an Internet business this broken ’50-cent spark plug’ may be…
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Re-entering a credit card number somewhere
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Re-authorizing someone’s permissions
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Re-listing a product that Amazon ‘blocked’ for some silly reason
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Clicking ‘confirm new terms’ in some email that went to your spam folder
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Increasing a PPC bid when a competitor out-bids you and you stop showing up
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Updating some software
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Canceling a faulty bank payment before it goes through
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Double-checking the shipping labels for a $10,000 order of product
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And so on….
All of these 50-cent tasks take just a minute and the business remains 99% passive, but do you know what the problem is when your newly-purchased Amazon Affiliate Site traffic decreases? Do you know what a correct shipping label looks like so that you can correct them if an error has been made?
If you’re planning on buying a business, doing nothing and collecting checks, it’s like driving an expensive car without knowing how to change the oil or fix a spare tire.
Who Is The Best Buyer For An Internet Business?
Personally, I believe that people who know how to turn around a poorly performing company or those who know how to scale to the next level are the best business buyers. This is because they understand how to run the business and will actually work, whether it’s them or their team, to increase the value of the asset rather than just doing nothing while living off the cash flow.
The worst people to buy an Internet business are those who don’t know how the business works, don’t care to know and hope that it will just keep pumping out profits for years to come. It’s just not smart and not likely.
SO… If You’re Going To Buy An Online Business (Without Having Owned A Similar Business Prior) Here Is My Advice…
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Understand – This is NOT 100% Passive.
It will be largely passive, the work of building is done, but you need to learn where the 50-cent spark plugs are. You need to read and understand the businesses SOPs, even if freelancers or employees are supposed to handle them. This way, when you see your traffic drop or you see a scary ‘red flag’ in your Amazon FBA account, you know what to do.
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Talk To The Ex-Owner As Much As He/She Will Let You
The old owner wanted to sell and move on, but you really should push to have educational phone calls before purchase and 1 month, 3 months, and 6 months after purchase. When I sell a business, I will do this even though it takes some time. I want the new owner to be successful, and maybe buy another business from me in the future. I don’t want a 50-cent spark plug make their decision to buy my business a bad one.
Yes, the ex-owner wants to be done with this old business. Unfortunately for them, you should push a little to open a line of communication. Don’t expect them to be ‘on call’ but I would hope they get back to you on Skype chat if you ask infrequent and relevant questions. It’s important!
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Learn Learn Learn About The Business Model
Search for podcasts and blogs that talk about the business you’re in. Don’t be blindsided because you didn’t know a basic piece of information that every other business owner does.
Listening to podcasts is fun, easy, and gets you up-to-speed very quickly on the mindset of an owner of this kind of business. Do it daily for a little while. Sit with a coffee and listen and think and take notes. What’s important? What’s critical? What’s not? What numbers matter? Which don’t? This clarifies so much.
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Click On Everything!
What is the main ‘dashboard’ for your business?
For Amazon-based businesses, this is your Seller Central Dashboard.
For an E-commerce store it may be your Shopify Dashboard.
For an Amazon Affiliate site it may be your Google Analytics Dashboard.
Each of these platforms has menus, lots of pages, and many sections that you may never need to look at.
Systematically click everywhere. Drop-down menu 1, section 1. Drop-down menu 1, section 2. Drop-down menu 1, section 3. Drop down menu 2, section 1. And so on… You need to at least have seen every section of the business. It’s like the factory tour.
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Contact Support
Is there a support team you can call/chat with? Ask them questions. They will know a LOT of answers. Be trigger happy about contacting support. It’s OK to waste their time with stupid questions; it’s their job.
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Join Facebook Groups Or An Online Mastermind Group
Join groups where other business owners are talking. Again, this is about getting into the mindset of other entrepreneurs in this space. If everyone’s talking about something, you want to hear about it. Most of these business owners will have started their businesses themselves and they’ll all know a lot more than you. Just don’t share too much information too soon… these guys might just be your competition! Many online business owners never share which business is theirs.
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Ask, “How Can I Grow This Business?”
There is no such thing as non-changing business. You’re either growing or shrinking. Everything is in motion.
Ask the ex-business owner how you can grow the business, even if it’s just a small increase.
How could you reinvest some of the profits? Could you pay $50/mo for more SEO content that ensures you rank well in search engines for years to come? Could you buy 500 units of a variation of your top-selling product to grow your revenue by 25%? Could you test out some new keywords in the PPC campaign to capture new leads?
What growth initiatives could you can take to ensure that the business thrives and grows while remaining 95% passive… rather than slowly dwindling while remaining 100% passive?
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Due Diligence
Most business sellers are honest people. They have honest Profit-Loss statements and they’re not hiding anything, like an imminent business collapse or major issues with their suppliers.
But, this is the Internet; the Wild West of business opportunities. There are Outlaws and Fool’s Gold and Snake Oil Salesman and sometimes the sheriff isn’t in town. Don’t buy a business without asking some difficult questions to the seller, running an external audit, and perhaps sticking to a trusted ‘marketplace’ that will do due diligence for you. Pay a 10% ‘success fee’ to ensure that you’re getting what you think you’re getting.
You Are The New Steward Of The Internet Business
You’ve paid for a business. It’s yours. Nobody will care about it as much as you do, not even your new employees.
Stewardship doesn’t mean actively ‘hustling’ in the business every day but it does mean learning about the business, putting in some non-passive work up front and building on the ex-owner’s long-term plan.
If you have any questions about buying online businesses, especially buying an Amazon FBA business, I’m reachable from the contact page on this website.