It crossed my mind many times over the years – Can I just buy a business that’s for sale and grow it? WhatsApp was sold for $19 billion but is now estimated to be worth over $100 billion. That’s a good business purchase.
Now, most of the people don’t have $19 billion lying around. But most businesses are not WhatsApp. Yes, there are businesses to buy that could revert with a very good ROI. But there are risks to consider.
The stock and crypto market are fluctuating, so there are always high risks there. But stocks of companies like Amazon are at least related to a business that is making profit.
Buying a business from someone else, has a higher risk than that. You have no idea whether the business will grow with you or not. Most importantly, you will have to do the most critical aspect of any business purchase – due diligence.
Where to look for a business
I’ve personally had quite a good experience on Flippa. It’s extremely fun to just explore the businesses on the platform. But I’d put some filtering if I were you. Most importantly, I’d look out for:
- Revenue generating.
- Traffic and site authority.
Then you should dig deep into why the seller is actually selling this business. Many simply grow a website out of a trend and try to abandon ship. You need to be able to see that.
Some sell startups because it doesn’t really matter to them or they’re bored of working on it – that’s your perfect seller.
Additionally, there are Empire Flippers, that are pretty much the same but with a slightly less appealing user interface.
Then there’s Acquire (formerly known as Micro Acquire) that has over $11 million in funding.
The choice of which platform should depend on the budget and the level of attention you’ll give your new business.
- For low-attention, I recommend Flippa.
- For creating a big startup, where you’ll provide alot of input, I recommend Acquire.
The Process
Most of these platforms have supporting departments that could help you with your process like signing NDAs, Agreements, and performing due diligence. But they’ll surely tell you that it’s your responsibility at the end of the day.
- Hint 1: If a business is too good of a sale to be true, it probably isn’t true.
A red flag would be a company owner hiding figures or details until the purchase is completed. If you’re a serious buyer, then you’re entitled to see everything. They could make you sign an NDA, which is not a problem. But they shouldn’t tell you that “You’ll know after the acquisition is complete.”
Stage 1: Filter and find
Search, search, and search. Finding a good business to buy should not be as easy as searching for an answer on google. Contact many of those sellers and get to know them. Calling them face-to-face should not be an optional element, but a mandatory one.
Understand what you’ll give this business and what the previous founder will do once the acquisition is complete.
A few years ago, I had a problem selling an agency of mine because it highly depended on me as a consultant. This would’ve not been an easy purchase for any business buyer out there who is not a consultant like me.
Stage 2: Research
Websites like Semrush would give you enormous amount of information about the domain. You’ll see whether the traffic is decreasing and understand the reason of selling.
Study the market of the business you’re purchasing. If you’re buying a blockchain blog, read and assess whether blockchain is up and coming.
This stage is what really matters in the long term. You could buy a perfectly healthy business and fail. This stage should show you what you need to prevent that.
Stage 3: Due Diligence
Finally, and most importantly, question everything the business owner is saying. Triple check every variable and look for red flags.
If JP Morgan bank buys fraudulent startups like Frank, then you might fall prey to this as well. You don’t have the resources of JP Morgan, but you should have that sense of ownership that’ll drive you in the right direction.
The Journey
A business could be for sale, but that’s just the start. Remember, a startup is a journey. I look into the past twelve years of my work, and I’d do it again just for those moments of waking up in the middle of the night to write down an idea that could help my business.