Buying an Online Business
Congratulations! So you’re thinking about buying an online business.
Here at Flippa, we understand that business acquisition is no game; there are many things to consider and plenty of due diligence to do before you give a business the tick of approval, hand over your funds, and set sail into your digital future. It’s a new-age journey that requires a lot of research, but one that we know is increasingly valuable.
That’s why we’ve put together a guide for buyers out there covering all you need to know before taking the leap, including the value in purchasing a digital asset, how to get started, doing your due diligence, and more.
There are a number of places where you can search for online businesses, but Flippa is consistently recognised as the best option, especially for first time buyers (June, 2021).
With Flippa you’ll have the best chance of finding the right online business for you.
Flippa provides:
- Advanced search feature
- Huge range of online business types and industries
- Depth of resources and support services
Looking for more guidance on setting up your Flippa account?
Watch our buyer webinar, brought to you by VP of Sales, Ray Preston.
Part 1
Online Businesses
What is an online business?
The future is digital, there’s no denying it. And in a time where there are more online businesses than there are homes, digital real estate is at the heart of the new economy.
But what do we mean when we talk about purchasing an online business? An online business—or digital real estate—can be a:
- Blog
- eCommerce Store
- SaaS Business
- Dropshipping Websites
- Domain
- Online Business App
- Shopify store
- Affiliate Site
- Amazon FBA Store
As you can see, there is quite literally something out there for everyone.
Why buy an online business?
Put simply, it’s one of the greatest ways to own your future. Investing in an online business means investing in yourself. What do we mean by that? When you put money into the stock market or purchase shares in a local startup, your return is entirely dependent on someone else’s work and determination; but when you invest in an online business, the return that you get is entirely determined by your own tenacity. It is your business to manage as you see fit, and then sell whenever you feel the right time has come.
I am forever grateful to Flippa for being the catalyst that helped me transition from being the girl who felt trapped and chained to her cubicle, to the girl I am now living in my dream apartment overlooking the bean and Lake Michigan in Chicago.
Stacy Caprio, four-time Flippa buyer including SideHustleNation.com
BUY AN ONLINE BUSINESS TODAY
Whether you’re an aspiring entrepreneur or a seasoned investor, Flippa offers a world class technology platform and advisory team tailored to your business acquisition needs. Flippa has over 60,000 active business listings ranging from $5K to $50M.
Three reasons digital trumps brick-and-mortar
Lower Risk
You can buy into the online business world with a significantly lower entry cost than other asset classes. While there are always opportunities in the market in the multi- million dollar range, there are also stellar opportunities available for just a couple hundred dollars. We don’t all have the funds to flip houses or start a craft brewery; and even if we do, we don’t necessarily want to risk them all on a single investment.
It’s important to know that these lower cost, lower risk opportunities do exist, and are perfect for those dabbling for the first time.
Established traction
Starting off on the right foot is one of the best upsides of purchasing an online business through Flippa. Essentially, you’re saving time and money in the ‘start up’ phase. Many people start a small business from scratch and are tasked with all of the heavy lifting, start up costs, and personal time needed just to get to day one. It can be incredibly tedious to build an eCommerce shop with hundreds of items or to code out a well performing SaaS platform and you won’t be getting paid during those months of hard work.
Purchasing an already up and running online business—that could be three months old or 10 years old—means purchasing something that is already established and moving forward.
You could acquire an online business that already has:
- an established design
- phenomenal branding
- endless pages of content
- optimised eCommerce operations
- deals with international suppliers
- part-time contractors happy to continue their work with a new owner
- established revenue
Beyond the setup time and costs, it can take several months just to establish enough traction to get revenue flowing. Purchasing an established business gives you a huge head start in your entrepreneurial journey.
Generous Returns
Owning a business is an investment and when it comes to investing, there is only one thing that matters: returns. You don’t acquire a website because it looks pretty, you acquire it because you see the opportunity to own your future and create success. Purchasing something that is already running well sets you up for a great return.
Unlike the stock market which can be volatile, with an average rate of return around 10% per annum, an investment in online business, while still not guaranteed, can often produce a higher return in a shorter period and is more impacted by your management of the asset. Generally speaking you should aim for a 30-40% annual return on your digital investments. To put this into real terms, let’s say you acquire an online business for $15,000 and as is, it drives $500/month in net profit ($6,000/year). That is around a 40% return, meaning you’ll have made your money back in less than 2.5 years. That is based on simply maintaining current business operations. Imagine the growth possibilities with improved business management by you.
If you purchase an online business where you see an opportunity for growth, you’ll be able to recoup your investment faster and move into making pure profit.
Your Competition
No matter the industry you’re investing in, it’s critical to understand the competition in the room. You wouldn’t want to walk into an auction at Sotheby’s with no knowledge of who’s sitting next to you bidding against you on a piece of art. In the same way, you shouldn’t start bidding on Flippa without understanding who the other potential buyers are.
While there are plenty of first-time buyers, there is an established group of proven investors in the arena, meaning you’ll want to school up to participate.
The Boss Generation
What we refer to as the “boss generation” are those first-time buyers looking to move away from their corporate desk and start working for themselves. They’ve had enough of their manager breathing down their necks and want to invest in themselves, working freely and happily on their own projects.
The Exiter
These are sellers, just like you might be one day down the line. Owning an online business tends to be a cyclical process that can move from buying and operating to exiting and buying something new. There are a number of customers on Flippa who are readying to sell an asset that they feel has grown to the height of their personal potential and are looking for their next investment.
The Investor
These are the sophisticated buyers who are looking to aggregate at scale. There are a number of people within the Flippa community who purchase 10, 20, or even 50 assets every year, adding them to their portfolio where they can leverage each other and optimise at scale. You may not see this in your future, but it’s important to understand that you might be bidding against some seasoned investors.
What you should look for
Safe bets
This is sound advice for any investment: don’t spend more than you feel comfortable spending. Like with any investment, there is never a guarantee, so it’s important to understand just how much money you’re willing to put into a company before you start searching.
It’s also important to realise that while you may be looking for so-called “passive” income, no business
is truly passive. You should go into an acquisition with a few extra dollars up your sleeve to reinvest in the business on things like marketing expenditures, purchasing inventory, or even hiring technical support to overhaul a piece of the backend. With such a broad range of opportunities on Flippa, it shouldn’t be hard to find something that fits comfortably within your budget.
Subject matter expertise
We’re all good at something, so seek out an asset where you can leverage your skills to increase the value. Remember, this is an investment in yourself. Take a look at the potential opportunities and note what the current owner has done well, poorly, or hasn’t even taken advantage of. If you’re an SEO whiz, it’d be worth looking for content or affiliate site opportunities that haven’t yet optimised their organic search practices. If you’re incredible at sales or consumer retargeting, seek out an eCommerce site that hasn’t yet closed the loop between page views and sales.
Using your own skills to maximise opportunities is what every buyer should be looking for, whether purchasing a $250 starter site or a six-figure, well-established listing. Play to your strengths.
Interest
Excitement is everything. If you’re going to own your future, you may as well enjoy it. Be it finance, travel or video games, you should look for something that truly interests you. Moreover, working within an industry that interests you will help you relate to your customers, giving you the upper hand to market, and sell your product effectively.
FIND OUT HOW MUCH YOUR BUSINESS IS WORTH
Flippa’s intelligent valuations engine is the industry’s most accurate tool, taking into consideration thousands of sales and live buyer demand. Find out what your business is worth with our free valuation tool and plan your next move.
Purchase prices
What you can expect
While there is no straight answer to how much someone should pay for an online business, there are some guidelines based on what we found when looking at 50,000+ asset transactions on Flippa. Let’s look at the typical sale value of four common asset types, as well as the high end anomalies that can occur on occasion.
The Annual Profit Multiple is determined by dividing the sale price by the yearly profit to give you the number of years before you make your money back.
Content sites
We see content sites sell, on average, at a 1.95x annual profit multiple but have also witnessed them sell for up to a 6x multiple. The reason that a content site—or really any online business for that matter—might sell for an extraordinarily high multiple is because the buyer saw a significant opportunity in the company that could be acted upon with their specific skill set, and then optimised it to allow for a speedy ROI.
eCommerce stores
In the wide world of eCommerce, we see sales, on average, of a 1.85x annual profit multiple with the higher end sitting at around 4.5x. It’s important to remember that there is such a wide range of eCommerce sites which include everything from Amazon FBA stores and Shopify sites to dropshipping companies and print on-demand services. All of these factors must go into the valuation of any given eCommerce store.
SaaS businesses
We see these sell, on average, at a 2.7x annual profit multiple and have seen them sell for up to a 4.8x multiple. The reason that a SaaS
platform can sell for a higher multiple than both
content sites or eCommerce stores is because they’re typically based on a recurring revenue model. Subscription is sexy because it guarantees revenue for an extended period of time.
Starter sites
On top of the standard conditions that might be used to value specific online business types, age plays an important role in the valuation of any online business. A business that has been around for several years will earn a higher multiple as they have proven revenue independent of seasonality. They have established operational procedures and often have aged content that is ranking in organic search.
This is why starter sites can be such an exciting investment. The value of these sites is subjective and rests in the eye of the beholder. If you see value in what has been created and the opportunity for it to generate income, then it can be a great way to enter the digital economy for minimal investment. You are purchasing these sites based on potential rather than profit.
BUY AN ONLINE BUSINESS TODAY
Whether you’re an aspiring entrepreneur or a seasoned investor, Flippa offers a world class technology platform and advisory team tailored to your business acquisition needs. Flippa has over 60,000 active business listings ranging from $5K to $50M.
Part 2
Starting Your Search
You’re ready to start your search great!
So you’ve realised the value of digital real estate, you know what you’re looking for and you’re ready to begin your search. Congratulations! As you may have realised, Flippa is a unique marketplace with anywhere from 3,500 to 4,500 online businesses for sale at any given time.
We get it, that can be quite intimidating. So let us help.
Step 1: setting your saved searches and alerts
The very first thing we recommend doing on Flippa—before you start clicking around and jumping in and out of listings—is setting your saved searches and alerts. This will line you up to find your perfect digital match. To do this, fill in the criteria you’re looking for in an online business on the left hand side of the page. This allows you to narrow your search to something that is customisable to exactly what you are looking for.
As an example, in the image above, you can see we’ve searched for Websites that are monetized through AdSense and are generating revenue.
When searching on Flippa there are a number criteria you can use to narrow down the online businesses for sale on Flippa including sale price, monthly profit, monthly users, age of the business, just to name a few!
Once you’ve filtered for the types of businesses you’re looking for, select the green ‘Create Alert’ button and we’ll do the searching for you and send you a daily email with new listings that fit your criteria. All you have to do is check those emails and see if anything piques your interest.
This means you don’t need to worry about missing the perfect listing and you also don’t need to worry about logging in to Flippa every day to run the exact same search. We do it all for you. And you can set as many different Alerts with different criteria as you want.
You can check your Alert preferences within your account by selecting ‘manage your Alerts’.
Setting your preferences is a great way to think about what you’re really looking for— plus it’s super simple. Are you only interested in eCommerce sites? Are you looking for a SaaS platform? Do you want a content based advertising site? Or are you open to anything and everything? Select whatever works for you.
The best way to find listings in your budget is to use the Monthly Profit Min and Max fields. Consider the multiple you want to pay and play with the profit numbers. You will see the listing prices change and can find the right price range for you from here.
Next, pick your preferred industry. Many Flippa buyers are industry agnostic, and are more interested in traffic and revenue than the business’ industry; while others are on the lookout for an industry that they are experts in. We recommend first-time buyers choose an industry they are familiar with as personal insight gives you a great advantage to be successful.
Finally, think about location. One of the great benefits of digital real estate is that location doesn’t typically matter all that much. However, it should be a consideration. If you live in England and are considering a content site that is built around camping in the Australian outback, you might be at a disadvantage. More so, if you’re looking for an eCommerce site, particularly one that holds their own inventory, you’ll need to be wary of fulfillment processes and shipping costs. But remember that the location shown is based on the Seller’s location which may not always be indicative of where the business traffic is coming from. Many of our Sellers are digital nomads are do not necessarily work in the same location as their business. But maybe that’s exactly what you’re looking for!
Do you want a new business or an established business? You can use the Age slider to search based on the age of the business.
Keep in mind that if a business is 20 months old and you select 2 years as the minimum age, that listing will not return in the results.
Use the ‘Includes Only’ section to see listings from our super sellers or brokers, as well as those with third party integrations for verified revenue and traffic such as AdSense, Stripe or Google Analytics.
Change the default sort from Most Relevant (gives you the businesses that best match your search criteria) to Most Recent (newest listings on Flippa) to see newly added listings.
Step 2: searching for the perfect listing
Our favourite searches
The Editor’s Choice search is a function on the homepage that can help first time buyers navigate the marketplace. These are curated searches that our team have created for you to help you get started quickly and efficiently. They are searches that we’ve found to produce meaningful results for many of our users, so we’ve turned them into one-click queries.
One search, for instance, is built for beginners, which features some great listings for anyone looking to get started with their first asset or two. The return will be relatively low-maintenance sites that can
be run without any advanced engineering degrees or understanding of high level finance. Many of them will be content sites that earn income from advertising or affiliate sales.
Looking for more guidance on setting up your Flippa account?
Watch our buyer webinar, brought to you by VP of Sales, Ray Preston.
Typically they will be earning just a bit of money, enough to get you excited, and be quite well priced. These are a great way to get into the game.
Step 3: analysing the listing page
The seller
First thing’s first. Who is selling the business? Checking out the seller profile on the right side of the page can quickly let you know if you should pursue the business or stop in your tracks.
Has the seller completed a verification process? This solidifies their legitimacy as they have confirmed their identity with Flippa. To verify themselves a seller needs to have confirmed their email and phone number and supplied some form of Government ID.
What does their seller profile look like? It’s worthwhile seeing if they have sold on Flippa in the past; however it is common to find sellers who, like you, are new to the platform. However, if they have had previous transactions on Flippa, you’ll be able to see their ratings from previous customers in the feedback section of the seller’s profile.
Make sure the seller has completed a verification process.
At a glance
The at a glance section is at the top of the listing and quickly shows you the site’s age, traffic, and revenue. Age is an important factor as it can let you know what sort of domain authority a site has, shedding light on the sort of traction it might have with organic search. Secondly, age can let you know if there is credible brand equity.
Perhaps the most important piece of this section, however, is the traffic data. This is pulled directly from Google Analytics. It is 100% verifiable as the seller is simply connecting their account with the Google Analytics platform, drawing in the data from their secure software. It shows you what the monthly traffic data looks like, if it’s fluctuating, and if it’s growing or declining. We also include revenue and profit data here, allowing you to see the sort of margins a company has and how their profit is fluctuating in comparison with their traffic data. In general, the more integrations with third parties shown on a listing the better for you as a buyer looking for assurance of the reported numbers and verification.
Seller’s notes
Every business has a story. The seller’s notes section is a chance to get some top level insight into how and why the business was started. Who built the business? What might you need to know
to run the business? What are some strengths and what are future opportunities? Who might the business be ideal for and why might the business be selling? And remember, if you have any questions that aren’t answered in the seller’s notes you can always contact the seller directly on Flippa.
‘Watch’ the listing
We never recommend placing a bid right away. It’s important to do your due diligence first. So after you’ve gone through all the information on the listing page, click the Watch button at the top of the page. By watching the listing, you’ll be notified any time there are comments from the seller or changes to the listing itself. You’ll also be notified when other buyers make comments or ask questions, it’s a great way to gauge the level of interest on a listing and the questions being asked about the business that you may not have thought of.
Want more information? You’re able to contact the seller directly on Flippa from the listing page, giving you the opportunity to ask more questions and dive deeper into the business. The more questions you ask, the better your due diligence.
BUY AN ONLINE BUSINESS TODAY
Whether you’re an aspiring entrepreneur or a seasoned investor, Flippa offers a world class technology platform and advisory team tailored to your business acquisition needs. Flippa has over 60,000 active business listings ranging from $5K to $50M.
Part 3
Doing Your Due Diligence
You’ve successfully found a listing that more than piques your interest
That’s great! But, what’s next?
It’s helpful to imagine Flippa as a real world marketplace. Picture yourself walking through an art gallery filled with incredibly diverse works. Standing directly beside every painting and every sculpture is the artist who created the work. Would you walk up to the artwork, take a look, note the asking price, and walk up to the clerk to pay for the artwork without ever speaking to the artist who was standing right there? If you love the artwork so much, wouldn’t you want to pay the artist a compliment? Ask them what inspired the painting? Get some insight into how they learned to make something so ornate and exquisite? This is exactly how you should approach Flippa listings.
Even if the listing that you’re evaluating is being sold for a relatively low dollar figure, you’re making a choice to purchase something that you plan on spending your time and energy on improving. It’s important to get to know a bit more about the business that you’re considering owning so you can make a well thought out decision on whether it is right for you.
Some listings have integrations like Google and Stripe. These features allow the seller to boost the visibility of a listing and increase the chances of a sale. Don’t hesitate to dig around and find out more about an asset’s traffic and revenue history.
Google Analytics will give you an unbiased view of the traffic a site receives, where that traffic is coming from and how consistent it is.
The Google AdMob integration will give you insight into the revenue a business receives from paid advertising and what you may need to invest in advertising to achieve the same level of revenue.
The Stripe integration lets sellers connect their account and display verified revenue directly on their listing.
Sellers cannot edit this data as it comes directly from Stripe and can be fully trusted.
One of your options as a buyer is to purchase a SEMRush report which will provide you with an in- depth analysis of the content, traffic and competitive landscape. Where possible it’s always a good idea to gather objective data and facts about a business and Flippa makes it easy for you to access.
Every Flippa listing that measures website traffic has the option to purchase a SEMRush report.
Where possible, always go directly to the source. You can click the contact the seller button and talk to the creator that is standing right beside their work of art. There is nothing binding about contacting the seller, it simply puts you in an environment where you can ask questions. When doing this, it’s important to put yourself in the seller’s shoes. They may be dealing with tens, if not hundreds, of buyers on the cusp of making a purchase so be professional, be polite, and tell them a bit about your own story. Approach them with a sense of etiquette, show them a bit of passion for their project and let them know what interests you about it before diving into any hard-hitting questions.
BUY AN ONLINE BUSINESS TODAY
Whether you’re an aspiring entrepreneur or a seasoned investor, Flippa offers a world class technology platform and advisory team tailored to your business acquisition needs. Flippa has over 60,000 active business listings ranging from $5K to $50M.
Ten questions to ask sellers
1. Can you provide read-only access to Google Analytics?
Yes, it’s possible. Sellers can give read-only access to their Google Analytics page. This allows you to get into the real nitty gritty of what’s happening with traffic on their website. You can take a look at historical trends and get a verified look at what’s going on in the backend.
But which metrics should you focus on when it comes to Google Analytics? Many buyers don’t feel very tech savvy when it comes to analysing Google Analytics. That’s OK, we can help!
A good metric to start looking at is organic traffic. This is free traffic coming through search engines. It can’t be faked or cheated and means that there is valuable content built into the site that attracts customers when they are searching for relevant keywords. Direct traffic is also intriguing as it can mean that you’ve built a strong brand that people are driven to without the need for search. This can also imply customer loyalty. Social and referral traffic can be a bit confusing as you don’t know if it is paid for or really how the traffic is flowing between social and the website. This is a question worth asking the seller.
Most importantly, don’t be afraid to ask the seller for a bit of training during the hand-off period. Most sellers are happy to help you out, show you what they’ve been doing to drive traffic, and be sure that their company is in safe hands as it transfers ownership.
Read more about transferring website ownership here >
2. Can you provide proof for each revenue source?
This is critical. While Flippa does verify certain revenue streams, it’s crucial to know what the revenue looks like in the asset that you’re looking to acquire. Like with Google Analytics, ask for read-only access if the site is built on a platform that allows for this; such as Amazon Seller Central or Shopify. If not, ask for a file download, video, or screenshots of them sifting through the revenue pages themselves. We also recommend asking for revenue information for previous periods that aren’t listed on Flippa. It’s great to see if business has grown, decreased, or remained neutral over the years.
Stripe is an API integration that allows the seller to show proof of streamlined revenue from the past 12 months and the asset’s monthly recurring revenue (MRR).
3. Can you provide a breakdown of all of your costs?
Understanding where their money is spent is important. Revenue only tells one half of the story; you want to understand is profit, so you need to know what the built-in costs have been to run the company. Are they paying content writers? Are their web designers on retainer? Do they have a team of developers who are creating updates to a SaaS platform? Do they use virtual assistants to manage inventory, returns, or customer support? What do wholesale prices look like for a company that holds inventory and what are the shipping rates and storage rates?
Sellers may own a portfolio of assets, so be sure to get the costs directly associated with the asset at hand, as certain expenditures might be spread out across their multiple businesses.
4. How do you acquire customers? What marketing initiatives have you used?
It’s great to understand how or why customers began using this service. Is the traffic organic? Where are the customers located? Are they paying for influencers or PR? Are they finding business using targeted ads on Facebook or Google? You should also feel comfortable asking them what they have tried that hasn’t worked well. Does instagram move the needle? Does adsense provide a greater ROI? Understanding this means understanding where future marketing opportunities lie. This can often be a space for opportunity if you happen to be highly knowledgeable in a certain marketing stream that hasn’t yet been optimised or even attempted by the seller.
5. What tasks are required of the owner? How much time are you spending on this project each week?
This is a two part question:
1. What’s the minimum amount of time needed to just keep things moving along as is?
2. How much time would be needed to grow the business?
One mistake we often see from first time buyers is overconfidence in their own skills and forgetting about the learning curve. Remember, the current owner is likely an expert at every process involved so if they claim to spend 10 hours a week running the ship, it’ll take you longer; even double the amount of time. This will likely be the case for the first few months as you ramp up your understanding of the business.
6. What level of technical knowledge is needed to run this business?
These days, managing large, cloud based platforms such as Shopify or WordPress is fairly seamless, but there can still be a number of technical skills needed to run a digital business. You’ll want to be sure that you can handle as much as possible, as paying a developer can begin to get expensive.
7. Operationally, what is working well? What needs improvement?
As with marketing, it’s key to understand which operations are running efficiently and what could use some help. While sellers won’t often post the weaknesses of their business directly in their listing, they are often willing to share their shortcomings in personal discussion. Often you’ll find that sellers are transparent when discussing a piece of the business that grew beyond their skillset. It’s extremely common for an entrepreneur to be selling their business because it has grown too large for them to run effectively. These knowledge gaps can be your opportunity to invest and grow.
8. What are the stability / legal risks?
Sellers can touch on the risks in the listing notes, but often these notes aren’t too detailed, so it’s important to find out if there are any legal or stability risks. Is Google making an algorithm change that will mess with the SEO? Are they highly dependent on a specific supplier who they have no control over? Would a change in shipping costs or Instagram functionality instantly change the way that they need to run their business?
9. Why are you selling?
You’d be surprised at how often the answer to this question falls into one of two categories: time and the need to raise capital quickly.
Many sellers are running multiple projects at once, have a full time job, or have had a personal life change like having children, which has cost them the time to devote to this particular business.
The other most common response is that they are looking to invest in something bigger and they need an influx of capital to use as an investment. This can either be an investment towards another online business or their lifestyle, and while it might seem odd to give up on monthly revenue, it’s quite common for a person to require a larger sum of money up front.
As mentioned earlier, this is also a good moment to understand if the current owner has hit a wall when it comes to a certain aspect of their own knowledge base or skill set that you can capitalize on, be it marketing know-how or supply chain management.
everything about every bit of technology and business, what would you do tomorrow to get this project moving forward?”
10. What are the best growth opportunities?
You might not be paying for future opportunities, but you want to know what potential there is. One way to ask this question is: “If you were me, and let’s assume you knew everything about every bit of technology and business, what would you do tomorrow to get this project moving forward?”
Flippa Due Diligence
Once you’ve exhausted all the questions you have about a particular asset you may feel comfortable placing a bid or making an offer to the seller. Or you may feel the need to find out more about the business. This is when Flippa Due Diligence service comes in.
Our service not only helps buyers ensure a site is legit before they purchase, it’s a deep-dive into operations, which reveals interesting insights, performance against benchmarks, and potential growth strategies for the new buyer. There are three distinct packages to choose from depending on the size and complexity of the business you’re looking to acquire.
Finalising Your Purchase
Flippa is not a broker, it is a marketplace
It works as a peer-to-peer environment where you can look for listings, decide what you want, negotiate and safely transact. This safe transaction space is extremely important to us and something that we’re continually improving so that our buyers and sellers can have the safest and smoothest experience possible.
The sale completion area
You’ve won an auction or have had your offer accepted by a seller. Now, you’ll find yourself in the sale completion area. So what exactly can you do here?
Legal documents
On the bottom right of the page you’ll find the contract module. This will lead you to Flippa Legal,
a partnership with Contracts Counsel to give buyers and sellers access to legal services and asset- specific template documents directly through the Flippa platform. Whether you feel you need to connect with one of the verified lawyers or just purchase a template purchase agreement, it can be a great way to feel comfortable and confident with the sales process.
Flippa Legal
While this might be unnecessary for smaller purchases, as you begin to look at larger and larger deals, you may want to have very particular terms that need to be stated and agreed upon. Things like a letter of offer or a purchase agreement are methods of communicating and contracting so that each party fully understands what they are responsible for going into the transaction.
When creating an agreement, one of the most important aspects is to list out everything that is expected to be included with the sale. This can be source code, domains, inventory, supplier agreements, virtual assistants and trademarks.
Seller Communication
Communication doesn’t end when the bid is accepted. In fact, maintaining a steady line of communication throughout the sales process is crucial in ensuring a smooth transaction. The discussion with seller section of the page will allow you to do just that.
You might want to discuss when they can expect payment, how assets will be delivered, or whether they would be interested in assisting you during the transition phase.
Payment
Escrow.com is our payment portal and is the safest and most secure way to transfer assets purchased via Flippa. While there are options to use PayPal for lower valued assets, our integration with Escrow.com has been integral in creating an environment of secure, safe transactions for both buyers and sellers.
Although the process may be little lengthier than Paypal, the Escrow.com platform is designed specifically for these sorts of transactions, guaranteeing that funds are available to the seller and that the assets have been received by the buyer before the transaction completes. Not to mention, you’ll receive multiple updates as the process moves along.
Payment FAQs
1. Should I be paying based on a profit multiple or revenue multiple?
While there may not be a one-size-fits-all answer to this, we typically suggest going off net profit as revenue can often be inflated in comparison. It’s quite common for businesses to spend a large sum of their revenue on marketing, while in an eCommerce business, much of that revenue might actually be going towards the cost of goods sold (COGS).
To understand this: a company that sells 100 items at $10 each is creating $1,000 in revenue, but if each of those items costs $9 for them to purchase at wholesale, they are only profiting $100. You don’t want to be paying on a revenue multiple in this case as it would take a long time to recoup your investment.
2. How do I notice small instances of fraud in the numbers?
When trying to see whether someone is faking numbers or buying traffic, the easiest thing to look for is anomalies. If there are spikes that make no sense, this might be purchased traffic that isn’t sustainable. And while this certainly isn’t “fraud”, it is something to look out for as it might not make sense for the new owner to continue running ad spend at that level for continued growth.
3. Can I get my money back if the agreement doesn’t go through for whatever reason?
Yes. The great part of Escrow.com is that your money is held in a digital “wallet”, protected by Escrow.com, while the transfer is taking place. If at any point something doesn’t feel right to you, you can notify Escrow.com, cancel the transaction and have your money returned.
4. Should I be negotiating a lower price?
Everything on Flippa is open to negotiation. Do your due diligence, comb through the financials and the traffic, and approach the seller in a friendly manner with notes on why you believe that your valuation makes sense. Sometimes you can leverage other similar listings as examples of an over-valuation.
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