Buying an Online Business: What to Check Before You Do
Buying an online business looks simpler than buying a physical one. There is no lease, no equipment, often no staff. The business is a website, some accounts and a revenue figure.
That apparent simplicity is the problem. Fewer moving parts means fewer things to inspect, so people inspect less, and the things that matter are not the obvious ones.
Verify the revenue three ways, not one
A seller will show you a dashboard. Dashboards are the least reliable evidence in the room, because they are the easiest thing to select a date range on.
Ask for the same period from three independent places: the platform analytics, the payment processor, and the bank account the money landed in. They should reconcile. When they do not, the gap is the conversation, and it is often the difference between the asking price and the real one.
Screen-shares are not evidence. Ask to see the accounts live, logged in, in front of you.
Find out who actually controls the traffic
This is the risk with no equivalent in a bricks-and-mortar deal. An online business can be entirely dependent on a channel it does not own.
Ask where the last twelve months of traffic and revenue came from, broken down. If a single source is most of it, you are not buying a business, you are buying a position in somebody else's system. One algorithm update, one ad account suspension, one marketplace policy change, and the asset you bought behaves differently.
Concentration is not automatically disqualifying. It is a price and a structure question: if most of the value depends on something outside the seller's control, that belongs in the terms rather than in your assumptions.
Establish what transfers, in writing
Some things do not move with the sale, and finding out afterwards is expensive.
Marketplace seller accounts frequently cannot be transferred, only operated under an arrangement that the marketplace may not permit. Ad accounts and their history, which is worth real money, may or may not come across. Supplier terms are often personal to the seller. So is the domain registrar login, the email list and its consent basis, and any software licensed to them rather than to the business.
Make a list. Confirm each one with the party that controls it, not with the seller.
Understand the earnings you are paying a multiple of
Online businesses are usually priced on seller's discretionary earnings, which is profit with the owner's own costs added back.
Add-backs are legitimate in principle and abused in practice. Each one is a claim that the expense will not exist under your ownership. Some are obviously true. Others are the owner's salary for work that still has to be done by someone, which means it is a real cost you have just agreed to call profit.
Go through them individually and ask what happens if you do not do that job yourself.
Know how much of the business is the owner
If the founder writes the content, holds the supplier relationships, or is the face of the brand, some part of what you are buying leaves on closing day.
This is the same question that decides whether an acquisition of any kind survives the handover, and it is worth settling before you sign rather than discovering during integration.
Then plan the first ninety days
The work starts at close. Decide before then what you are changing and what you are deliberately leaving alone, who is doing it, and what you will measure.
If the purchase is funded with debt, the structure of an acquisition loan determines how much room you have if the first quarter runs below plan. That is worth settling alongside the price, not after it.
Where FM Enterprises fits
FM Enterprises works with owners on acquisitions, advisory and capital from Atlanta. Most of the value in a deal is decided before it closes, in what gets verified and how the terms are structured.
If you are looking at a business and want a straight read on whether it holds up, book a call.