3 Ways to Get Great Returns on Online Business Acquisitions
Online businesses are created for all kinds of reasons. An experience, a weekend project or a real curiosity to see what is possible. Many do not take off, but some stimulate the imagination and develop a following. Once the initial traction is found, further growth requires more energy. Some online business owners get started and grow, others lose interest in the sustainability of the business and seek to retire.
Dominic Wells is the founder of Onfolio, which buys, improves and develops online businesses in content, e-commerce and services. Wells has acquired more than fifty online businesses over the past two years, and his company helps entrepreneurs and passive investors achieve returns that are not normally available in other industries. Onfolio raises investments to finance and accelerate acquisitions and has enough confidence in its performance to pay fixed annual dividends.
Many online businesses are available for purchase online, using popular marketplaces such as Empire Flippers, Flippa, and Swift Exits. Here are three approaches to consider.
Buy and maintain
Get great returns by simply buying an existing online business and running it yourself, with the goal of keeping it profitable. According to Wells, the numbers are piling up. “Online businesses typically sell for around three to four times annual profits. This means that, from a pure investing perspective, “if you bought one and maintained its profits by managing it yourself, you would experience a 25-40% cash return on investment, every year. “. Compare that to ownership, for example, and it’s an interesting prospect.
If you have aces to bring to the table, this plan could be hugely profitable. A mailing list, a reputation, a gift for growing businesses. Attention to detail may mean that you make a few changes that improve the site’s conversion rates. Capitalize on a bored owner by spotting the things they missed, re-energizing online business, and reaping the rewards for that action. Even just maintaining the profits, you will get your investment back.
However, this strategy is not for beginners. “The problem most people face is skills risk. They don’t know how to run an online business, which makes the ‘keeping the profits’ part easier said than done, ”Wells said. There may be nuances that the previous owner did not disclose, or the market may change quickly. Google Adsense, Affiliate Links, and Ecommerce are rapidly evolving entities that require effort for their maintenance. Staying the same could be a full time job.
“It’s a very active investment,” Wells added, “when most people prefer something passive.” The active nature of buying and maintaining an online business reveals why they “tend to only sell for three to four times the profit rather than much more.” If an online business can be integrated with an investor’s existing business, the payoffs could multiply. But making a successful online store, platform, or content site is a dark art role that enthusiasts don’t need to apply for.
Buy and outsource
A less active option is to buy a business online and then take it to a professional. Wells explained that “hiring a trader to run the business for you means returns should always be around 20% and much more passive.” A good operator will make sure that your business stays alive and even grows. They need to know how to avoid the common pitfalls of online business. The operator is likely to manage a portfolio of sites, with benefits for members including specialist knowledge, shared networks, similar audience profiles and economies of scale. “You could get your money back in less than five years, and after that you earn indefinitely. “
Running the businesses of business owners online is now a business in itself, Wells advised. “There are more and more operators who will turn an active investment into something passive.” Although this reduces returns, “since they don’t work for free” they should expand the business to easily cover their costs. “Even if they only maintain it, the margins remain attractive.” But what if they don’t? What if Google changes its algorithm, the previous owner worked more than he hinted at, and the hired operator drives it into the ground? This option, although passive, is important to be correct. Delegate, but don’t abdicate.
Invest in a fund
A third way to profit from online business acquisitions is to invest in a fund that buys businesses online. “This offers diversification and could bring in between 20% and 30% return in a good year, but with less control,” according to Wells, who explained that “this market is still in its infancy, but opportunities are enormous, ”and the company pays a fixed annual dividend of twelve percent.
Most funds disclose their financial records as well as a list of companies on their books. This could mean that investors can leverage their other assets to further develop the business, for example that mailing list, wide area network or reputation that we mentioned earlier. This reduces the headaches for admins and businesses to zero because someone else owns it, but limits the rewards accordingly. For someone who wants to get rid of the itch of running an online business, this won’t be enough. For someone who is only looking to make a comeback this might work
Wells has presented investing in an online business fund as an investment option that piles up alongside property, stocks, and stocks, especially when the market is relatively new. “Funding options and leverage are only in their infancy, giving power and opportunities to people who have the cash to invest.” In addition, the cost of entering the market is minimal, as the fund takes care of the administration and due diligence required for finding and buying businesses online.
But while you don’t need to do your due diligence on additions to their portfolio, you will need to do some verification. Investing in a fund means having confidence in its managers. You are sure that they are taking the pulse of market changes in order to protect your investment. Their background is important, so research on them is paramount,
With all investment decisions, risks should be carefully considered and anyone considering investing should seek proper advice and be prepared to lose it all. But for business owners looking to generate a return on available money, buying or investing in online-only businesses is an option worth exploring.