Buying a website is like investing in online real estate.
Between budding entrepreneurs and veterans, successful ecommerce brands and early businesses, there are hundreds of thousands of ecommerce stores online.
And now, with Exchange, there’s a marketplace for these merchants to buy and sell their Shopify stores.
With more than 10,000 ecommerce stores for sale—more than any other online marketplace—Exchange lets you bypass the building stage and get right into running a business.
Benefits of buying a business
1. Avoiding procrastination
When you buy an online business instead of creating one, you’re less likely to procrastinate. The hard part of store setup is all done for you—there’s no need to worry about the logo not being right, get stuck on a color scheme, or feel discouraged by all the little tasks starting a new store requires.
Plus, whether you’ve invested $50 or $1 million in buying an online business on Shopify’s Exchange, you’ve proven to yourself that you’re committed to making this business a success. The additional financial payment is more than enough to motivate you to go after your first sale early on.
2. The ability to start selling from Day 1
The best thing about buying a business is it lets you completely skip the store setup phase and dive right into marketing. If your store has added products to your website, you can start selling the day you get account access.
And by diving right into marketing, you’ll inch closer to getting your first sale. If you were to create a website yourself, you’d be spending time during the first couple of weeks designing the site. But by buying a business, you gain a head start over new competitors stuck in the setup phase.
3. Gaining a professional website
While some of Shopify Exchange’s stores are built by entrepreneurs like you, there are hundreds of stores designed by Shopify Experts who specialize in creating professional websites. If you find your website design skills lacking, you might choose to buy an online business built by an expert who specializes in creating Shopify stores. You can find stores built by these experts for as little as $50.
How to buy an existing business
1. Decide what stage of business to buy
Buying a business is a big investment, and it can be a daunting decision. Here are some questions that can help you narrow down what stage and size of business you should purchase:
- What sort of lifestyle do you want and need? Depending on the size of the business you’re purchasing, your lifestyle can change drastically.
- A startup means long hours with not a lot of pay, as you try to establish the business and find some security. But if you enjoy building from the ground up, this might be the right kind of business for you.
- If you’re looking to grow an organization that’s already established and be able to live comfortably off your acquisition’s profits, maybe look for a small business with an already solid customer base.
- If you want to simply maintain a company that’s doing well and diversify your investment portfolio, you may want to look into businesses that have already gone through incorporation.
- What are your skills and strengths? When deciding on a new business venture, first figure out what it is you bring to the table and what it is you’ll need to learn or improve upon. For example, if payroll is not your strength, then perhaps stay away from acquiring a new business with a lot of employees.
- What are you interested in? Already having know-how in a certain area narrows down the industry you want to focus on. Being a business owner is already tough and can take up a lot of time, so you might as well buy a business that aligns with your interests.
2. Browse businesses on sale
After you’ve decided what type of business to buy, it’s time to find it. There are a lot of places where you can find a business for sale, and the type of business you want to find determines where you’ll find it.
For example, if you’re looking for something established, a business broker might be your best bet. You can also find businesses listed on Craigslist, in the newspapers, and within your own network of small business owners.
Exchange is Shopify’s marketplace for buying and selling ecommerce businesses built by Shopify merchants. Through the Exchange app, which pulls information like traffic and revenue data directly from Shopify, merchants can list their online stores for sale. Sellers can’t edit their store data, which means interested buyers can feel secure knowing that what they see is what they get.
Stores on Exchange range from ready-to-go starter stores to successful ecommerce businesses.
As such, prices also vary. Starter stores can cost as little as $50, while established six-figure ecommerce empires can sell for more than $1 million.
3. Understand why the business is being sold
Businesses are bought and sold for all sorts of reasons. Hopefully, the business you’re considering is a good business in good standing and the current owners are simply retiring, but there’s always the possibility of more troubling reasons.
If possible, sit down and speak with the previous owners and ask why they’re selling their business. Ask them questions like:
- What debts and liabilities does your business have?
- Can I take a look at the financial track record and/or a cash flow statement for your business?
- Have you had any supply issues?
- What is the state of your equipment?
- What sort of working capital did you start out with?
- Can I see your business plan and business operations?
Find out everything you can before you make this business purchase—from the selling owners, your own online research, and conversations with customers and employees.
Remember: the problems and successes of this business become yours once it becomes your business.
4. Value the business
Once you’ve chosen the business you want, the next step is calculating its market value. There are a lot of things to consider when assessing the value of a business, and there’s no one equation that fits all.
However, armed with the information you learned in the last step, there are four musts for getting an accurate measurement of a business’s value:1. Understand how the business stacks up in its industry. That means figuring out the seller’s discretionary earnings (SDE). You can do this by going through financial statements and balance sheets, then figuring out what the receivables and expenses are for that business. Measure that up with the SDE multiple for that industry.
- Check the business’s books.
- Look over tax returns.
- Review profit/loss statements from at least three years.
- Read any permits, licenses, or proprietary documents.
3. Take stock of both its tangible and intangible assets. That means everything from property and inventory to intellectual property and the value of a loyal, established customer base.
4. Take a hard look at a business’s liabilities, which could mean a faulty business plan, accrued expenses, and business loans.
Combine all of this and the information you learned about why the business is being sold to figure out the business’s true value. Then weigh that against the time and commitment you’ll need to get this business to where you want it to be, which will make up the ultimate valuation.
5. Negotiate price
Now that you’ve done your due diligence, it’s time to negotiate on the price you’re willing to pay for this business. The purchase price listed by the seller is not a fixed price. It can be adjusted based on the valuation you’ve discovered and with the terms of your payment.
Expect that you and the seller will go back and forth in submitting offers and counteroffers to each other. You’ll also begin to figure out the general terms of the sale during this process, like whether you want to purchase the assets of the business or just make it a stock sale.
One note: when you make an offer, don’t belittle the business owner by severely undervaluing their business or they might choose not to negotiate with you at all.
6. Submit a letter of intent (LOI)
A letter of intent is simply a letter that states you intend to do business with the recipient of the letter. LOIs usually include:
- Who is making this deal (i.e., the parties involved).
- The general terms of the deal, but not any details. For example, it may just state that Party A desires to purchase Party B’s business.
- Requirements and restrictions of the deal. A lot of times that can be the inclusion of a confidentiality agreement or NDA.
- A timeline of how the deal will be made.
Before a business acquisition, it’s a good idea to submit an LOI so all parties are on the same page before any contracts are hammered out and signed.
7. Review important legal documents
After both parties have signed the LOI, review any and all legal and important documents. This is another chance to make sure you’re going into this deal with your eyes fully open.
Examples of documents you should look through are:
- Property documents, like commercial leases or rent rolls
- Existing contracts and whether they can be transferred over to a new owner
- Marketing and advertising materials
- The business tax returns for the past three years
- Any incorporation documents, certificates, business licenses, etc.
- Current income statements, payroll, balance sheets, and cash flow statements
- Business loan/debt information
- Any legal records, like pending litigation
8. Get funding
Once all of your due diligence has been taken care of, the next step is finding financing options for this purchase. Usually, you put down some sort of down payment and then take out a loan for the rest.
There a few kinds of financing to choose from:
- Shopify Capital. You potentially can receive financing for inventory, marketing, or hiring staff, without lengthy bank approvals or giving up part of your company. Repay the funding through a percentage of sales, with flexible payments that work for you.
- An SBA loan is guaranteed by the Small Business Association. This type of loan offers more flexible limits, interest rates, and payments than traditional bank loans. Because of this, these loans tend to be used for more high-risk ventures.
- A standard bank loan is guaranteed by the bank that issues the loan. The interest rates and terms of these loans tend to vary depending on the bank and the credit/financial history of the person taking out the loan.
- Rollover for business startups (ROBS) is a way that you can use your 401(k), IRA, or another retirement fund to pay for a new business startup cost or business acquisition cost. However, this financing option only works if you have a strong retirement plan to borrow from.
- Seller financing is a loan offered by the seller of the business instead of an outside lender. For example, the seller could offer to sell you their business for a down payment and monthly payments with a fixed interest rate until the business is paid off. Just make sure to do your due diligence on the business and seller before using this option.
- There are a slew of crowdfunding sites like GoFundMe, Kickstarter, and Indiegogo that help startups get on their feet. If you can write a compelling crowdfunding campaign, you might be able to get the public to help you acquire this new business.
- If you are part of a specific demographic—like veteran owned, minority owned, women run, etc.—you may be eligible for business grants.
- Private investors can be angel investors, friends, family. The people in your life can assist you in getting the funding you need. Don’t forget to look to your own network to see where you can get help to achieve your dream.
9. Close the deal
Now that everything has been researched and discussed, it’s time to close the deal. This is where your final purchase agreement comes into play. This is the legally binding contract both you and the seller must agree upon before the ownership of the business is transferred.
It’s a good idea to spend a little money and have a lawyer look over the agreement, as well as negotiate on your behalf. That way, you can make sure you’re getting everything you and the seller agreed upon.
Once everyone has agreed to the terms of the purchase agreement and signed it, your lender will put the necessary funds in escrow to hold them for safekeeping until an agreed-upon closing date.
When all the legal documents have been signed and submitted by both parties, the funds will be released from escrow and given to the seller, and you’ll be the official new owner of the business.
Congratulations! After you’ve closed the deal be sure to follow up on transferring and applying for the necessary titles and licenses for your new business in your name.
How to buy a business on Exchange
Exchange is home to stores of all sizes and in all industries. You can find dropshipping, print-on-demand, established, and high-growth stores across product categories like fashion and apparel, sports, furniture, and more.
Starter stores are already built and ready for marketing but have done less than $100 in sales (traffic and revenue data won’t appear for them). As a result, these stores often sell for much less and should be evaluated based on the potential you see in the store and whether you think you can unlock it through marketing.
When you’re browsing Exchange for a store to buy, first determine what type of investment you want to make by asking yourself the following questions:
- What are your revenue goals for the website?
- How much money are you willing to invest to get there?
- How much time are you willing to invest?
- Is it a store that you only need to maintain or does it have growth potential that you will need to figure out through marketing?
- Are there ways you can add value to the site that the original owner hasn’t?
These questions can be further explored as you discuss the exchange with the seller.
1. Do your due diligence
Each listing contains a description of what you get with the store, along with traffic and revenue throughout the past year and an asking price, which you can negotiate with the seller by sending them a message through the contact form. Many sellers also list their reason for selling the store, which is often due to a lack of time or a life-changing event.
Additionally, the listing will show what the seller is willing to give you for the asking price, including:
- Physical inventory
- Supplier lists
- Email list
- Logo and branding assets
- Social media accounts
- Personal support after sale
- Product photos
- Anything else you can negotiate with the seller to include in the final deal
Sellers and buyers can communicate directly through Exchange using an anonymous email to discuss additional information about the store or the sale.
Keep in mind that some sellers stop actively marketing their stores when they put it up for sale, so a drop in traffic and revenue could be due to that (check with the seller).
Also, since profit margins can’t be verified by Exchange, you should also ensure that you:
- Verify and understand all traffic sources. Make sure you know exactly where traffic is coming from and if it’s a source you can replicate after purchasing the store.
- Confirm financial info. This includes expenses (inventory and marketing) of the store. Make sure you know exactly what they are spending to generate the results they’re getting.
- Vet their social media accounts. Look at the engagement rate to ensure their followers are real. Don’t take a large following at face value.
- Know exactly what’s included. Try to get all of the related inventory, social media, email list, etc., if possible. If it’s something that’s necessary to run the store, make sure it’s part of the deal.
- Understand why they’re selling the site. You might not get a reason, but it’s still worth asking.
- See it for yourself. Use screen sharing or obtain “view only” account access for necessary verifications (traffic, sales, ad spend, etc.) with the seller.
Once you’ve vetted the store, you can contact the seller to make an offer.
2. Initiate the transaction
Exchange marketplace has partnered with Escrow.com to ensure a safe and trustworthy store exchange.
If you’re not familiar with how making a transaction in escrow works, it’s a method of payment where money is protected by a third party (in this case, Escrow.com) until both the buyer and seller agree the conditions of the deal have been met.
In order to start an Escrow.com transaction, the seller needs to come up with some terms for the sale (i.e., what’s included in the sale and whether they’re going to offer some support to the buyer), as well as how long they’ll give the buyer to inspect the shop after the exchange (an escrow period). It’s the seller who initiates the Escrow.com process.
The buyer then pays Escrow.com whatever price has been agreed to. Escrow.com acts as the intermediary and holds onto the buyer’s money until both the seller and the buyer tell Escrow.com that they’re 100% satisfied with the deal and everything’s been transferred over to the buyer. That’s when Escrow.com gives the seller their money.
You can consult our FAQ for help with conducting a secure transaction.
3. Transfer ownership
The transfer process usually takes three business days, during which time Exchange prepares the store to make you the new owner.
To make the transfer easy on both you and the seller, make a checklist of all the items included in the deal, like what assets and accounts need to be transferred, going through them one by one.
You can contact Exchange support with questions about transferring a domain name, social media account, or anything else. Escrow.com also offers excellent support in these matters.
In the process of transferring ownership, before the agreed-upon escrow period expires you should also:
- Check the suppliers for responsiveness and quality.
- Change all passwords for the accounts you received access to and remove the original seller’s access.
- Take advantage of any support from the seller so you understand how to replicate their results, asking every question you have while you can.
Once the escrow period is over and the exchange is done, you’ll be the store’s new owner, free to take it in any direction you wish.
How to find the right business for you
Shopify’s Exchange categorizes its stores to make choosing the right business for you even easier.
Dropshipping businesses for sale can be found on Shopify’s Exchange. Dropshipping stores are some of the most popular businesses to buy right now. Dropshipping allows you to sell goods to a customer without carrying inventory or needing to ship to customers, as the product manufacturer does that work for you. This is a beginner-friendly business model, so you’ll find many starter stores that are set up for dropshipping.
2. Print on demand
Some entrepreneurs prefer building a unique brand with exclusive products. Maybe you’ve always wanted to buy a business that’s branded but lacked the design skills to make it happen. Fortunately, you can buy print-on-demand businesses for sale that already feature exclusive designs to sell.
3. Retail businesses
If you’re looking to buy online businesses in the retail space, you’ll find plenty with inventory for sale on Exchange. Whether you’re looking for access to a supplier in a certain industry or are interested in opening up a retail business to call your own, you’ll find retail stores for sale on Exchange.
4. Established businesses
If you’re an experienced entrepreneur looking for established businesses for sale, you can buy ones catered to you. You’ll find countless successful businesses in this category with social media followers, email lists, and other key marketing perks for a head start on taking your newly purchased business to the next level.
If you’re looking to run a business in your home country, you’ll be able to find businesses for sale on Exchange from many different countries and in different languages featured. Not only are some businesses based in different countries, but some of them also operate internationally.
6. Stores that sold on Exchange
If you’ve browsed around but are still unsure of what type of store is worth buying, you might want to check out the sold stores section on Shopify’s Exchange. There, you’ll see what types of stores people are buying and how much they’re paying. You’ll also gain some design inspiration for your own store setup.
Exchange: Buy or sell an ecommerce business
Exchange is a marketplace of Shopify stores for both people looking to invest in a fully functioning business or who just want to skip the time required to find an online business idea and hit the ground running with marketing.
Buying an existing business FAQ
How do you buy an existing business?
- Decide what stage business to buy.
- Browse businesses on sale.
- Understand why the business is being sold.
- Value the business.
- Negotiate a price.
- Submit a letter of intent.
- Review legal documents.
- Get funding.
- Close the deal.