When it comes to starting a successful online business, ordinary seems to be the way to go. In a struggling economy, it’s the everyday products and services— health and beauty products, sports and fitness products, IT and online marketing businesses, etc.—that outshine the novel ones.

In general, most online businesses usually sell for about 2.0 to 4.5 times the seller’s total discretionary income. But there is a certain section of the market—namely, businesses that provide common goods and services that command the higher range of these multiples. Why are these companies selling for so much? Here are a few reasons:

Wide customer base: Companies that sell everyday products and services like health and beauty products, sports and fitness products and service businesses such as online marketing companies, have an advantage of being appealing and easily understood by a wide range of potential customers. Most prospective buyers understand the basics of these products and services because they use them on a daily basis, which makes the idea of buying them more attractive.

Built-in revenue: If a company comes with an established revenue base, it will automatically generate a higher price. Companies with strong customer base create security for the business, unlike trend companies where the customers are one time buyers and the market may not be hot for long. Buyers of these companies know they have a customer base to work from everyday, which makes it easier to expand; it’s much more feasible to sell additional products or services to a customer who is already buying from you than to track down new business. However, reaching and establishing new customers is also enabled by having a strong financial foundation (Organic Optimization, Strong Paid Advertising or even a strong Affiliate Network). Exploring new marketing mediums to reach potential buyers is made possible when revenue streams are strong in other areas of the business.

Limited specialized knowledge: Any company that a potential buyer with general business knowledge can purchase and start running right away will command a higher price than a company that requires special knowledge. An office supply business, for example, will not require much experience or specialized knowledge; new buyers can easily take over and manage the product line with ease. With service industry companies, when there is a saturated market of companies offering the same service, it may take some specialized knowledge to stand out; however, it may only require basic knowledge to be competitive such as knowing basic marketing services for an online company or understand various facets of the IT business.

Customer loyalty: By virtue of the nature of some companies, it is easier to let go of an existing customer than to gain a new one. In the case of some service companies, for example, a website hosting company—it is more of a hassle for customers to switch to the competitor than it is for them to stick with their current company so it creates a great recurring revenue model. These types of businesses are very attractive to potential buyers, particularly the buyers with little business ownership or management experience.

Different prospective business owners want different things from a business. An entrepreneur with a degree in electrical engineering may be interested in a company that makes a particular type of computer chip, for example. But in general, companies that offer the above perks and sell products and/or services needed by a large base of customers command a higher price than companies with more of a specialized niche. If you’re currently shopping for a company, keep the above mentioned factors—and your individual experience and knowledge—in mind as you shop.

Acquisitions Direct, formerly known as eBizMLS, is a business broker specializing in online business acquisitions. Contact Us if you are interested in learning more about the businesses listed with Acquisitions Direct, or if there is a specific industry you are looking to purchase in.

At one point or another in your professional career, you have probably dreamed of owning your own online business, but the daunting thought of starting a company may have made you postpone the idea.

It’s true: starting a business is a huge undertaking, intellectually, emotionally, and financially. Not to mention the risk—70 percent of startup companies will have failed after only five years. But there is a way you may be able to have the luxury of being your own boss and living your dream without having to start an online company from scratch; you can buy an existing online business. The advantages of purchasing an existing company are numerous. They include:

Elimination of the cards stacked against you. If you start your own business, you will have to take out a loan, shape your business concept, develop a strong customer base, and fight the bad luck that goes along with owning an early-stage company. If you buy an existing established company, on the other hand, it will already have stood the test of time. Successful businesses have proven track records that usually continue after they are sold. By purchasing an established company you are acquiring a business that has a successful sales model, marketing mediums in place, and search engine history that can not be bought. These things can take years to establish, and some start up businesses go under before they get a chance to see the fruits of their labor.

The opportunity to make the company yours . Many entrepreneurs dream of owning their own business because they envision shaping it to be exactly what they want. Although you may not have as much control over the skeleton of the company if you buy an existing one, you will still be able to apply your own ideas, expertise, and passion once you purchase it. Most successful businesses already have an infrastructure in place that works. In most cases it is much easier to make adjustments to an existing process, than to start one from scratch. Learning from the history of a business will allow you to customize it and make it your own.

Immediate cash flow. Because the company has already been making money for years, you can start earning cash immediately after you purchase an established business. Forget struggling to attract customers—you will already have a customer base you can use as a building block for future growth.

The chance to finance the cost. When you start a company from scratch, you need a sizable lump sum to get the business off the ground; when you buy an existing company, on the other hand, in many cases, you can finance the cost. By making payments instead of having to plunk down a large sum of cash, you will be able to maximize your buying potential.

This is not to discount the challenges associated with buying a business; there are many. To successfully manage the process, you should first do as much research as possible on how to go about buying a company. Next, you should realistically assess the cost of the type of business you are shopping for and what you can afford. You will then have to negotiate the price, arrange financing, and actually transfer ownership of the company. All these tasks can be made easier with the help of an intermediary, who will be able to guide you every step of the way.

In general, you will be much more likely to succeed if you purchase an existing company than if you try to build one from the ground up; many more purchased companies are profitable than start-up companies. And it makes total sense: An existing profitable business has already proven that it can work; it has already defied the odds. So as long as you continue to run the company wisely, you should be as successful as the previous owner.

When you start the actual process of shopping for an online company, you should strongly consider using a business broker. Buying a company is a complex activity that requires a third party to coordinate the activities of the buyer and seller; business brokers have the knowledge and expertise to assume that role. A business broker is not a sales person, but a business professional that facilitates the transaction to the benefit of his or her client. Many transactions fail when the buyer tries to exclude a business broker from the sale process.

Also keep in mind that buying an online business is very different from buying a brick and mortar business. The internet channel utilizes very different skill sets for customer lead generation, order fulfillment, and customer service. The business broker you choose must have a detailed understanding of these unique skill sets in order to effectively facilitate the transaction.

Acquisitions Direct, formerly known as eBizMLS, is a business broker specializing in online business acquisitions. Contact Us if you are interested in learning more about the businesses listed with Acquisitions Direct, or if there is a specific industry you are looking to purchase in.

So, you are interested in buying an online business. Congratulations—making the decision is the first step. However, since 90 percent of people who begin the search to buy a business never actually purchase one, realize that you are up against some obstacles. Learning as much as you can about what it takes to successfully buy a business can help put you in the successful 10 percent.

One of the most important parts of successfully buying an online business is finding your appropriate price level, but most importantly finding a company that is the right fit for you, your interests, and your experience. If you are a sales and marketing expert, for example, look for an online company that does lead generation. If you are great at customer service, look for an online company that will enable you to interact with and assist consumers within the service industry. And if you have always excelled at retail management, keep your eye out for an ecommerce opportunity that will allow you to apply your skill to marketing products on the internet. Overall, whatever you do best should be the most important driving factor of the revenue and profits of a company you consider buying.

Secondly, the company must have a strong online demand. A company that is a strong acquisition opportunity will exhibit characteristics that indicate strong future sales, not just a hot trend of the moment. Many consumers are looking to do more shopping online as personal schedules now are busier than ever. All consumers are not always looking for the lowest price. Healthy competition is a welcomed sign even in completely saturated markets. High demand allows businesses to showcase more to consumers than just a low price, it allows the consumer choices.

Keeping the above advice in mind, don’t get too focused on the “coolness” factor of the product or service offered, however. If the business is growing and you are enjoying the work, the uniqueness of the company becomes much less of an issue.

In addition, it is a good idea to look for an Internet company that has an established client base. The less work you have to do to pull in more business, the more time you can spend sharpening the product or service you offer. With many ecommerce sites, an established customer base will help sustain the business while additional product lines, marketing mediums and processes are explored.

Another key factor is to never lose sight of the bottom line: profits. Sure, it’s great if you love the product or service your online business provides, but that love isn’t going to put food on the table. So the money the business will yield should be the most important consideration.

Overall, realize that the search for a company for purchase can be a daunting task. There are a lot of companies for sale out there, and more than one of them may seem like the “right” one for you. When you are ready to make your final decision, in addition to all the information you’ve gathered on the company and whether or not it is a good fit for your skills, listen to your gut. When you picture yourself running the company five years down the road, are you happy? Do you feel like a successful business owner? If not, you may want to reconsider your offer.

To help you with all the analysis and decisions mentioned above, consider utilizing the services of a business broker. Buying a company is a complex activity that requires a third party to coordinate all the activities of the seller and the buyer. A business broker has the experience and training to assume that role and to make sure you get the most for your money during an Internet business transaction. Keep in mind that buying an Internet related business is very different from buying a brick and mortar business; the Internet channel utilizes very different skill sets for customer lead generation, order fulfillment, and customer service. The business broker must have a detailed understanding of these skill sets in order to effectively facilitate the transactions.

Acquisitions Direct, formerly known as eBizMLS, is a business broker specializing in online business acquisitions. Contact Us if you are interested in learning more about the businesses listed with Acquisitions Direct, or if there is a specific industry you are looking to purchase in.

When an online company goes up for sale, the company owners and officers usually place value on different aspects of the business than does a potential buyer. But it is important that sellers consider the factors that will be important to buyers, because these things can ultimately make or break a sale.

Overall, keep in mind that buying or selling an Internet related business is very different from buying or selling a brick and mortar business; the internet channel utilizes very different skill sets for customer lead generation, order fulfillment, and customer service.

In general, buyers seeing Internet businesses are concerned with the following factors. These characteristics can affect both the future earnings potential and risks involved with owning an online business.

Growth prospects: If the company for sale is in a growth industry, it will immediately be more attractive to buyers. If the potential buyer is from the same industry as the company he is interested in buying, the potential buyer will probably have a better idea of the growth prospects. If he or she is from a different industry, on the other hand, the potential buyer will have to closely examine the growth prospects before he or she makes a decision of whether or not to buy.

Although the Internet makes it easier for potential buyers to assess the growth prospects of businesses than ever before, unless the buyer has a crystal ball, he will not be able to exactly predict the growth prospects for the business and the industry as a whole. But if the buyer’s research points to the company being in a growth industry, he will immediately place the company at a higher value.

History of earnings: They say the best predictor of future behavior is past behavior, so an online company’s historical earnings are one of the most important elements to a potential buyer. A buyer looks for a long history of increasing and stable earnings when shopping for a company, and he will probably steer clear of a company that has a short history and/or inconsistent earnings. Even when a start-up company has done well, its short track record will be seen as a negative to a potential buyer. A positive to start up companies is that there may be huge hidden growth potential that a new buyer may be able to quickly capitalize on.

Overall, the longer an online company has been in business and the more the company has earned, the higher its value. The Internet companies with the strongest track records will have been in business for at least five years, the companies with moderate track records will have been in business for at least three years, and the businesses with the shakiest track records will have been established for less than two years.

The type of business: Businesses have varying degrees of risk depending on the type of industry. An online company that was easily started required fewer skilled workers, and therefore reduces the overhead costs associated with wages and benefits. Most online companies do not required specialized knowledge about that specific industry, but those who do not become quickly adaptable will be less valuable when it is resold. In addition, some industries are more popular than others.

Management team: When it comes to an online company’s management team, both the number of the company leaders and the degree of their training and skills will help determine the value of the business, but it is not the only factor. In general, the smaller an Internet business, the less its depth of management, and vice versa. The more a company relies on a single owner or manager to run smoothly, the less revenue it takes to achieve a higher margin. An online company that has a strong management team in place, will positively impact the business to be valued higher. And some potential buyers prefer a company that has more than one layer of management in place when they make their purchase. For a single buyer who intends to purchase the business to run themselves, there are many suitable options for turning a company who was run by one level of management into several, and vice versa.

Employees: If a company comes equipped with well-trained and highly skilled employees who are happy in their jobs, it will be more valuable. Prospective buyers know that if a company does not come with stable employees, they will have to spend money hiring and training new employees. Therefore, a company that is staffed with an established, reliable workforce will go for a premium price. That being said, most online businesses come with a scalable infrastructure that allows for new employees and management to be easily trained and transitioned, making this premium not always applicable to every online business.

Flexibility: If a company is limited, either in its geographic location or its products and services, it will be less valuable than a company whose products are relevant on a national level and can be readily changed or expanded.

Competition: The Internet has redefined competition. It is no longer about having the lowest price, it is about the entire customer experience. Factors such as website design, customer reviews, brand credibility, price, shipping timeline and fees are not all factors of consideration for consumers, opening up the competition to offer an advantage in any or all of these areas. Markets and Industries that are “hot” will have the most competition, but that will not necessarily devalue the company. Because of the number of factors that influence a consumer online, “hot” or saturated markets are worth more online since they are in high demand with consumers.

Location: Companies located in a desirable geographic areas command a better price, as do businesses that have well-maintained facilities. This is true for online and offline businesses. Online the “well maintained facilities” translate to the website, inventory processing systems, infrastructure and customer database.

Terms of the sale: The terms of the company sale can also add or detract from its value. For example, if a company is stable enough to support debt financing rather than equity capital, or if it is a privately owned company that is willing to help finance the acquisition, it will be more valuable. In the online industry business headquarters are easily moved, which also makes the company more valuable since relocation, in most instances, is not required to purchase the business.

When it comes to the sale of a company, both buyers and sellers should be aware of the above factors that can affect the value of a business. The better both parties understand these characteristics, the more smoothly the acquisition will go.

Buying or selling an online company is a complex activity that requires a third party to coordinate the activities of the seller and buyer. Many transactions fail when the buyer and/or seller try to exclude the business broker from the tail end of the transaction. A business broker has the expertise and training to assume that role. A business broker is not a sales person, but a business professional that facilitates the transaction to the benefit of his or her client, be it the buyer or the seller.

When you look for a business broker, search for someone who has a detailed understanding of the buying and selling of online companies so he or she can effectively facilitate the transaction.

Acquisitions Direct, formerly known as eBizMLS, is a business broker specializing in online business acquisitions. Contact Us if you are interested in learning more about the businesses listed with Acquisitions Direct, or if there is a specific industry you are looking to purchase in.