BuyingPart Funding an Online Business Some Tips on What to Look Out For
There a few fundamental things to figure out when purchasing an e-commerce concern, away from the standard mechanisms of buying any business such as P&L, Balance Sheet, Liquid Assets, Capital Assets, Outstanding Liabilities, Goodwill, Legal Threats. While not an exhaustive list, these are some of the ones we have come across.
- Financing :: having the money lined up so you can move forward at the appropriate time to make your acquisition- potentially risky ventures such as e-commerce based businesses can require time for adequate financing to be made available from financial institutions. Especially if the business is still quite young in development or small in scale.
- Web Statistics:: These are the ultimate decider of the business, in bricks & mortar retailers you would estimate things like average foot-fall, this is no different. Questions such as
:: How many unique visitors?
:: What is the average visit duration?
:: What percentage of visitors spend xyz time interval on the website?
:: How many successful payments processed versus ones who have just gone to payment page and then cancelled the order?
:: Customer loyalty i.e. the level of recurring business.
- Brand Awareness:: the Internet is a wilderness of so many websites and services that you need to figure out what road people have to get to the business and how many understand where to go. It is great to have a funky name but if the website is not well known, and the name gives no clue from search engines on what it does, then the more expensive it will be to get both the name out there and the trust of people to transact on it. Check for things like ezine subscriptions, rss subscriptions, independent forum correspondence (do people mention the business/recommend the service) etc.
- SEO- check in search engines, such as Google (as it is the dominant search engine on the Internet), the rankings of the business. The optimum placing is on Page 1. You can also use services such as, http://www.googlerankings.com/. Also check out what is listed in Google by using site:// for example site://www.zyxcorp.ie. If the business is using Search Engine advertising and website targeted advertising to get its name out there, then you need to factor in a lot more marketing expense when purchasing.
- Technology: It may seem obvious- but when buying an e-commerce concern- ensure that all the building blocks of the website are either built in-house or licenced from a reputable source. Factor in potential support, cost and stability factors if there are unregulated blocks of code copied from forums, help websites etc. on the initial development of the website. On the same point, the heart of all e-commerce concerns is the datawarehouse- ensure the database is built correctly. Ask yourself these questions:
:: Is it secure?
:: Is it tracking all the vital statistics that you would need to understand your customer base?
:: Can it be easily upgradeable on the growth of the business?
:: Is the database fit for purpose?
Any issues here will again factor upwards the costs of the business.
- Staff:: when purchasing an e-commerce concern, especially a business built in-house- you will have to either retain the services of the key staff involved or request hand-over duration period contracts. Either way, this will be a significant expense, but one that will prove cheaper in the long run. So on purchasing ensure the use of the key employees services is cast iron and the required expense factored into the initial cost.
- Hidden costs:: If unfamiliar with an e-commerce concern, there are costs that may not be obvious, such as- if independently hosted by a 3rd party- what are the monthly costs involved, and what is the average percentage increase of such service? Costs of processing payments- depending on the rate of transactions on the website these can differ significantly. Costs of contracted banner advertising on various websites. If hosted in-house- cost of server maintenance, support costs, broadband required etc. If selling a product that needs delivery- costs of post margins on the pricing structure.