Online vs. Offline Deal Flow
Which is better to find a great online business deal?
When it comes to investing in online businesses, deal flow is the eggs for your egg basket.
Deal flow is a term used in multiple investment sectors, but in the mergers and acquisitions (M&A) industry, it has its own meaning.
The deal aspect represents the prospective acquisitions, i.e., the online businesses that can be acquired by the buyer.
For the flow aspect, similar to a flow of leads, customers, and sales in business, flow in M&A represents the frequency and volume of opportunities the buyer sees.
Contrary to what you might think, getting the best deal flow isn’t a case of bringing in as many opportunities as possible.
As a buyer, you want to make sure that you only see the right kinds of opportunities that match your buying criteria. You don’t want to be overwhelmed by a high deal flow that includes the wrong types of deals.
As with a lot of things in life, it’s about balance.
When building your deal flow, you want to aim for an efficient pipeline that weeds out unqualified or bad deals and presents only the deals that are likely to be worth investing in.
So, how do you build your deal flow?
Offline Deal Flow
Although digital assets are primarily online, it’s still possible to build an offline deal flow.
With the number of in-person conferences, meetups, co-working spaces, and other areas where online business entrepreneurs and investors come together, there are many opportunities to build an offline deal flow.
It doesn’t just have to be through in-person meetings, either. It’s possible to generate deals over the phone.
It’s all about building connections and a presence within the industry.
Pros of Offline Deal Flow
There’s no way to create better social connections than to meet people in person.
Attending conferences and meetups will expose you to 100s or 1000s of people you can build connections with.
You can quickly get to know prospects and build relationships faster than you can do online via email or a Zoom call.
It’s also easier to weed out unqualified prospects as you’ve met them in person.
In marketing, there are few levers stronger than the power of word of mouth.
By building a strong reputation, you can generate a passive deal flow since the people you are connecting with will recommend you to their contacts. This way, you develop a large web of connections that grows with the in-person events you attend.
Cons of Offline Deal Flow
As you might imagine, this deal flow strategy is very labor-intensive and costly.
Conferences are expensive, especially when you have to travel to attend them. Naturally, given the intense competition, you should have good networking skills to differentiate yourself and create a stronger impression than your competitors.
It’s a time-consuming process to build an offline deal flow because your interactions with prospects take longer, and some prospects will want numerous face-to-face meetings to develop the relationship.
There are high upfront costs in terms of how much you have to pay to attend the conferences, with no guarantee of success. When attending a business conference, you’re either in or out. There’s no option for testing the waters with a low budget in this strategy.
It’s also harder to track the success of your networking compared to online outreach, where you are provided with multiple metrics to track.
Online Deal Flow
The internet provides you instant access to a global audience.
While this does spell potential, it can be overwhelming in the beginning.
With this more open environment, you need a different strategy for creating your deal flow.
Pros of Online Deal Flow
The most obvious benefit of building an online deal flow is scalability.
You can reach more people more quickly and easily compared to offline outreach.
If you’re not skilled in networking or don’t have the time to do it, then online outreach is the best alternative for you.
Once you have an outreach system that generates a good deal flow in place, you don’t even have to maintain the flow yourself. You can automate your deal flow by creating standard operating procedures (SOPs) and hiring virtual assistants (VA) to manage the deal flow.
To scale your deal flow pipeline, you can simply create more deal generation systems and hire more VAs to manage those systems for you.
An added benefit of this is the time you save, which allows you to filter through more deals at a higher rate to get you to your ideal acquisition faster. Another benefit is that it’s much easier to track the effectiveness and progress of your deal flow.
Cons of Online Deal Flow
The strength of online deal flow is also its weakness.
While you have the massive reach potential, you lose the interpersonal element you get with offline deal flow.
This makes it harder for you to carry out due diligence on the digital assets you’re assessing. Due diligence is the process of qualifying an asset for investment.
If you meet a prospect in person, you can come up with a list of questions and get all your answers right away. This isn’t as easy online.
If you’re not experienced in conducting due diligence online, you won’t know how to get the required information about the prospective businesses. This creates a bottleneck in your deal flow and slows down the acquisition process.
Building a reputation online is harder than doing it offline because of the sheer amount of competition.
One strong in-person connection can quickly lead to many more connections. Online, there is a lot of noise to break through, so it is harder to build a deal flow pipeline that brings deals to you.
A Broker Has a Deal Flow Ready for You
The alternative to handling digital asset investment on your own is to use a broker.
The biggest benefit of this is that the broker already has the deal flow built up.
Something to bear in mind is that not all brokers offer the same quality of deal flow. Some don’t vet the businesses they add to their pipeline or their marketplace. Others package a business to look great to get the seller on board, which is a dangerous situation for a buyer.
As an online business broker, Empire Flippers rejects over 90% of online businesses submitted to our marketplace to prevent this problem.
Take a look around our marketplace and check out the types of online businesses we sell to see if it fits into your deal flow strategy.
