I have been mulling the idea of purchasing an e-commerce business and am looking for best resources for learning about the purchasing process and the required skill set for different types - at the moment I am considering e-commerce, FBA or affiliate marketing in the $100k-$200k range. Hoping to replace $3k+/mo. Income. Completely green though, don’t have experience in either and am just starting to research. I have built a couple simple Wordpress sites, but nothing for income.
So far I have been looking at sites like Empire Flippers. Is there a better place you all would recommend for brokers? Would you even recommend trying to purchase vs. establishing something new? Most of the stuff they have listed is in the 40x net income range, is that reasonable?
I just purchased an ecommerce business last week:
https://forum.mrmoneymustache.com/entrepreneurship/buying-an-ecommerce-business-our-journey/ The best way to learn is by doing. However, that's not always feasible to start something or buy something on a small scale to get started. The effort to run an ecommerce business that generates $5k in profit is not going to be much less than one making $50k. Better to spend your time on something with a decent return.
I've gained a lot of my knowledge through podcasts and to a lesser extent blogs. I know there's a lot of YouTube content, but a lot of that is probably outdated.
The best ecommerce podcasts I've found are:
EcomCrew - They just hit 400 episodes and are very open and transparent about their brands, products, numbers, struggles, etc. It's not all sunshine and roses. Amazon FBA but also running a D2C website on Shopify and using content sites.
ECommerce Fuel - Another long running podcast. The host runs a private forum for 7-figure plus ecommerce store owners and built and sold some businesses of his own.
The Quiet Light Podcast - Quiet Light has an excellent reputation in the industry for selling online businesses. The business I just bought was listed by a broker with Quiet Light, and the seller purchased it there almost a decade ago. They do a lot of ecommerce but also content sites, SaaS, and others. Their average deal size is now over a million, but still plenty of businesses in the low to mid- 6 figure range. Their podcast has a lot of former clients on it talking about their sale or purchase but lots of general information as well.
Empire Flippers is probably the largest online business broker by volume, they're also one of the few to use monthly multiples instead of annual. 40x = 3.33x annual which is reasonable. Multiples for ecommerce businesses have definitely been increasing in the last year or two as Covid drove a lot more people online to shop and many will not go back to local retailers. There's also a lot more money coming into the space from Amazon FBA aggregators. More demand = higher prices = higher multiples.
This website aggregates listings from Empire Flippers, Quiet Light, and several others:
https://app.centurica.com/marketwatch Note that some brokers will include the inventory in the purchase price which can make a 3x multiple look like a 4x. The inventory is an asset and is essentially equivalent to cash. So if you bought a business for $300k with $100k in their checking account, saying you paid $400k is a bit of a misnomer. That being said, virtually all online business purchases are asset sales as opposed to stock sales so you just buy the assets of the business, not the whole existing company (typically an LLC) and whatever their bank account balances are.