You want to start your own ecommerce business, but you don’t want to waste time on products that might not sell. You know a few reliable suppliers, but you don’t yet have enough information to start dropshipping locally. You have lots of great marketing ideas, but when it comes to building a website, HTML might as well be Greek.
If these limitations are stopping you from creating an online store from scratch, you might consider buying a turnkey website instead. Purchasing a pre-made, dropshipping-enabled website with an existing product line, a well-established online presence, and a proven record of profits can give your own business career a jumpstart.
While turnkey websites are available for sale on a variety of online platforms, one of the most reliable marketplaces is Exchange. Each listing on Exchange includes a description of the business, its traffic and revenue during the past year, and the asking price, along with a list of what is included. Sellers will often list their current business expenses and time commitment and their reasons for selling. Buyers can contact the seller directly through an anonymous email to negotiate the details.
For example, one listing is Siesta Fit, a women’s fitness clothing line with a lifetime revenue of $186,932 and lifetime traffic of 132,125 sessions. The price, $35,000, includes the domain, social media accounts, logo and branding assets, product photos, and personal support after the sale.
Buying a second-hand online store always involves a certain degree of risk. Medium recommends looking for businesses that have been in operation for at least two years. When considering the price, take into account the Price to Earnings (P/E) ratio. A business whose earnings, assuming they remain the same, would pay for its purchase price in a year has a P/E of 1x; aim for businesses with a projected P/E between 0.8x and 3x.
When calculating the annual earnings, make sure to look at the revenue for the entire previous year rather than multiplying the last quarter by four. Sellers sometimes try to optimize their recent earnings to make their businesses look more profitable, but their profits might also go down if they stop actively promoting their stores once they’ve made the decision to sell. In the case of Siesta Fit, the business has only existed since March 2018, so its long-term profit margin is more difficult to predict.
Business warns buyers to vet every aspect of a prospective business, beginning with the domain itself. Use Archive.org or a paid service like Domain Tools to research the store’s domain name and find out if the domain has ever been penalized by Google. Researching other domain names sellers own can give you insight into their credibility.
SEOmark explains the many reasons Google will demote a website in its search results or even remove it from the search index entirely. The site may have featured excessive ad content, overused keywords, or included misleading or manipulative links. It might also be getting traffic from links on unreliable or irrelevant sites or be infected with malware. While such a domain can recover, it’s typically a poor investment.
Shopify advises buyers to look for businesses that include social media accounts as part of the sale. Review these accounts carefully and look at the engagement rates to confirm their following is as large as the sellers claim. The sale price for Siesta Fit, for example, includes access to the business’s 10,000 social media followers and 4,500 mailing list subscribers, which would be crucial for future marketing endeavors. However, a cursory look at the business’s Facebook and Instagram accounts reveals no activity in the last three months, so the new owner would need to re-engage existing followers.
Although many sources recommend the turnkey model, Till Boadella draws attention to the pitfalls. While you can afford not to be me an expert in web design, a strong marketing background is a must. “You need the marketing skills to maintain and grow the store you’re acquiring,” says Boadella. “If you don’t know how to drive traffic and sales, you’ll run your store into the ground in a heartbeat.”
Buyers often underestimate the effort and resources required to keep an established business going. The seller of Siesta Fit, for instance, indicates the business only requires ten hours of work per week, but monthly advertising and subscription costs amount to at least $3,000. Failure to continue investing in those services will result in reduced revenue.
Remember that the business you purchase will only continue to profit if you put the same time, money, and effort into it as the previous owner, if not more. Your hard work will pay off when you have a successful website you can flip and sell to someone else for an even greater profit.
What dropshipping businesses have you purchased and how did you make a second-hand website your own? Share your experiences in the comments.