Risks Associated with Buying E-commerce and Web Based Businesses

E-commerce and web based businesses are in great demand. In fact, a report that was published by Forrester in 2013 revealed that E-commerce will outperform the U.S brick and mortar over the next five years. According to this report, this industry will reach a total of $370 billion in annual sales by the year 2017. The rise of E-commerce and web e businesses has grabbed the attention from many small business buyers.

The main reason behind this is model that offers greater flexibility for owners and has lower overheads. If you are also interested in buying an E-commerce website or a web based company, there are some risks associated with it and you should be aware of these risks. Let’s have a look at these risks.

Web Based Businesses

1: Unsustainable Traffic
Success of any kind of web based company depends on the amount of traffic that it gets. Most companies use paid traffic sources, such as Google Adwords, Bing Adcenter and other advertising platforms to drive traffic toward their E-commerce website. But still, these companies rely heavily on organic search engine traffic. Organic traffic is impossible to obtain without proper Search Engine Optimization.

For example, if a website has a good SEO score, it is more likely to receive more organic traffic from search engines than a poorly search engine optimized site. Paid traffic is a surefire way to get consistent traffic, but it may not work for everyone for some reason. That’s why, it is important to carefully check all traffic sources during due diligence process for issues that could threaten search engine rankings of the site you want to buy.

2: Role of Current Owner In Maintenance of Site
Just like a brick and mortar business, an Ecommerce and web based company also requires high maintenance. E-commerce entrepreneurs often play a key role in normal website maintenance routines. You should talk with the current owner to determine how much they give to site maintenance on daily, weekly and monthly basis.

Also, you should determine if you need to have a grasp of technical stuff to maintain the website. If you require additional help, in this case, you will need to add the cost of hiring an additional team member to your budget forecast.

3: Post-Sale Competition with The Seller
When buying an E-commerce and web based company you should make sure that the current owner will not compete against you during the post-sale period. To make sure this will not happen after acquisition, you should be able to enforce non-compete clauses. You are also advised to research the background of the current owner before you commit to a sale deal.

4: Verification of Financial Disclosures
Most web based companies don’t audit their financial records due to which there is a great chance of fraudulent finances. It is important to verify financial disclosures before signing a deal. This is to make sure that the financial information that seller has provided is not fraudulent or flawed.

These are some risks that you may face when buying E-commerce and web based businesses. Once you have overcome these risks, you can safely acquire a profitable web based company.

Author bio: Author is a financial expert and a writer who particularly writes about financial risks in this modern world. He recommends using SuperNET which is an awesome way to protect your wealth and privacy by using anonymous currency. It is an association of the most reliable blockchain technologies which allows you to trade, pay or invest your money anonymously without any intervening third party.