A few years ago, flipping real estate was a huge investment opportunity. If you’re not familiar with the concept of flipping, the idea is to purchase a building, usually a home that is cheap because it has been foreclosed on or needed to be sold quickly. After the home is purchased for a low price, the owner invests money in it to improve it and increase its value, then he or she sells it at a higher price and keeps the difference as profits.
Flipping has now moved beyond the world of real estate to the world of online startups. Many people today are getting into the world of Internet businesses with good ideas but no real understanding of what it takes to make a business succeed. As a result, they struggle to do anything with their great idea and end up in a position where they need to sell or risk losing everything.
If you have a strong foundation in business, flipping startups can be a profitable endeavor. Purchasing a company at a bargain price and then doing what’s needed to turn it around can end up giving you a big return on your investment but only if you’re choosy and select the right online businesses to flip.
Before pursuing any online business, be sure to go through this checklist to analyze just how great the opportunity for flipping it really is.
- The Online Business Is Surviving Somehow.
A flip-able online business is one that somehow continues to function despite being poorly managed or owned by a team that is out of capital and unable to really invest in keeping it afloat. The best opportunities are those that have a product or service that seems to sell itself naturally and that appeal to its target market in such a way that they continue to buy even as the business is struggling to be sustained due to poor management or other factors.
- The Online Business Has Positive Cash Flow.
Flip-able online businesses are those that have a strong cash flow rather than a set of expensive assets. For example, a website that drop ships and has hundreds of thousands of dollars of sales every month that is struggling due to the owner’s personal problems will be a better flip than a t-shirt printing service with only a few thousand dollars’ worth of sales and a $30,000 digital printer system. The value of the assets simply depreciates too quickly and can be difficult to sell off for its estimated value.
- The Online Business Is Something That Anyone Can Do.
Online services like writing, web design or translation can be great investments for someone who is a good writer, a strong designer or a skilled translator; however, it takes a special person to make these businesses a success, so they are less than ideal for flipping. Instead, look for companies that anyone can succeed in and understand. An e-commerce store, for example, may require a person to get familiar with a new type of product but it won’t require additional college training for success.
- The Online Business Is Poorly Marketed.
An unprofessional website, poorly run or missing an Internet marketing campaign and bland print marketing pieces are all great indicators that a business is flip-able. Often, it’s the poor marketing that is holding the company back when you see these types of symptoms, meaning there is an opportunity for you to buy the online business, introduce an effective marketing strategy and quickly increase sales.
- The Online Business Can Be Run By One Great Employee.
Buyers will be more interested in purchasing an online business if you already have a strong person in place who wants to continue working for the company after it’s sold. Search for a business that can be run by one rock star rather than one that is going to require a large qualified and expensive team.
- The Online Business Has Potential to Be More.
An online business that could at least break even for the next 20 years is one that someone can earn a living from potentially, but it’s not one that will bring you a big return for flipping. Look for one that just hasn’t reached its full potential due to the shortcomings of the previous owner. Can you increase its capacity quickly, boost sales or grow its market share in little time? Ultimately, that’s the biggest requirement for a flip-able company.
Interested in finding some online businesses that you could potentially flip? An online business broker can be a great resource. An expert Internet business broker can help you find an online company that is the right fit for you and will assist you throughout the sales process to ensure that everything goes smoothly. Call our firm today to speak to an online business broker and find out what’s currently available.