Start Building Your Empire with the Stepping-Stone Strategy
How to make your money work for you by investing in digital assets
Before anyone can achieve unicorn status within the digital acquisitions space, you need to have a stable foundation of experience to help manage any sudden growth.
If you are new to the idea of buying an online business to use as a side source of income — or perhaps your primary source one day — you have come to the right post. Our goal is to give you the “stepping-stone strategy” to buying, building, and growing your own online business empire. We hope you achieve stable growth while gaining insight into what you should avoid when acquiring your first online business. Before we dive into how you can locate, grow, and scale a portfolio of digital assets, we should start at the first stepping stone which is performing your due diligence on a potential business acquisition.
Look Before You Leap
Before you make a purchase as with any type of investment where risk is expected, you need to consider the risks associated with online business investments. The digital acquisitions industry is on the rise, and you should be cautious prior to investing any amount of capital in something new to you, especially if you’re doing so without any help.
Because so many entrepreneurs are buying and growing digital businesses all over the world, these types of investments are now recognized as stable — and often far more rewarding than opportunities such as real estate. While it’s easy to take control of your return on investment (ROI) with digital assets, real estate has far more risks you have little ability in changing. This is not to say that you can take a leap of faith without performing your own due diligence on any investment opportunity and expect to get rewarding returns. We always suggest that every buyer, whether new or a seasoned veteran, take each and every business investment seriously and have a detailed entry and exit strategy in mind prior to making any type of serious commitment.
Starting small (and this limiting your risk) will help you to be successful in this industry and building your own “stepping-stone” plan will help you learn and grow in tandem. The last thing anyone wants to experience is rapid growth that burns them out before they reach their 5-, 10-, or even 15-year personal and business goals. Speaking of goals…
What Are Your Business and Personal Goals?
Before you can sign off on any business and make your way to the amazing lifestyle of working full-time from anywhere in the world, you need to establish your business and personal goals. This is where you need to think about the bigger picture for after you eventually go on to sell this business and many others like it. The strategy for most is to acquire a smaller business and eventually use the capital windfall from a well-timed exit to roll into bigger acquisitions.
In the process of growing any online business, you gain valuable skills needed to eventually manage larger assets, making double or triple the monthly revenue numbers you were hitting previously. While operational skills are valuable for reaching your business goals, having clear goals on how much you are willing to work on your business everyday will help your personal life as well.
At the start of your digital journey, set a realistic goal of acquiring a smaller business that leaves you with plenty of working capital to build and scale your new investment. This is important should the asset need attention in an area you may not be familiar with or a skillset you may not have. Having a safety net of working capital not only protects your investment from unforeseen problems but also gives you room to scale should the business become very profitable right from the start.
When first starting off in the online business space, you should also consider a smaller acquisition range to help ease any sudden impacts to traffic or revenue, as is common with these types of investments. A content site or a dropshipping store are good examples of great beginner-friendly business models to help you gain valuable skills before branching into other monetizations down the road. These types of assets can create stable income from minimal effort once the businesses have started seeing profits coming in. These smaller acquisitions will help you build a solid foundation of core skills, and this will eventually help you to move on to bigger assets if that is what your business goals happen to include. But what about those who don’t have enough working capital to buy an established business already generating stable income?
Raising Capital to Acquire an Online Business
Raising capital through any means necessary is often the most tempting scramble new entrepreneurs make when starting out in this industry. While it may work for larger VC and angel investors, it usually doesn’t for first-timers who are brand new to this industry. We recommend you stick with smaller amounts (less than $100k) of capital and never attempt to raise larger amounts without proper experience in this industry. Remember, raising capital isn’t a make-or-break business investment and should be approached as a stepping stone allowing you to move your way up to larger pools of capital.
Another important point to bring up on the subject of raising capital as a first-timer is that you will often be turned down for larger amounts of funding if you lack any real experience in the game. Seeing you as a potential risk yourself, investors are not always willing to dish out funds without an operator (you) having any real life experience in your target monetization. You need a really great track record of growing other assets before you start to see any real funding come to the table.
The best option for those first starting out is to work within your own limits of capital, never spending more than you are willing to lose. You may be able to raise funds from family and friends as a way to get you to your goals sooner, but again you should stay within the limits we just covered. If raising capital isn’t holding you back, you may be wondering where you can find that first deal that will set you up to hit your empire goals sooner.
Finding the Right Deal
There is truly no perfect deal; instead, every first-time buyer should strive for “good enough” for their first business acquisition. If you wait around for the “perfect” business, you will never accomplish a completed deal. Finding the right business for you will largely depend on your budget, your core set of skills in the online business space, and your working capital to help scale the business once you take it over.
For any first-time buyers looking to find the right deal based on their business and personal goals, we recommend that you get some help from a broker to ease the learning curve. You can certainly find a private deal or business for sale using an auction site, but this may be too advanced and risky for you to attempt on your own when starting out. Whichever route you decide to take when purchasing your first online business, it is important to follow a strict due diligence checklist based on your specific criteria. Things you may want to consider before you purchase a business include the hours of work required each week to maintain the business, whether any standard operating procedures (SOPs) are included to help ease the learning curve, and what type of support the seller is willing to offer you during the transition period.
When locating your very first business to grow, try to avoid something already optimized to the max. You want something with room to grow but that won’t require more work than you would be willing to put into it before you start to see any returns. The key here is to find a happy medium, with plenty of growth potential while maintaining a semi-passive workload that can be set to autopilot when necessary. So, now that you have a better idea of what you should be looking for in a first-time business acquisition, what else can you do to reach your business and personal goals sooner?
Buy to Build
Once you have decided on a business acquisition and taken full ownership, the work begins. The time to build your newly acquired business begins the day you complete the migration period. A common mistake we see is that once a business has been acquired, the buyer feels they can just leave the business to run itself. As a new buyer, it is important to start off slowly but still keep things in motion. Get accustomed to the systems and processes in place while operating the business just as the seller had before you. This is important to continuing the business trajectory according to what the asset was valued at and keeps you on track for a nice ROI.
Once you are familiar with the daily operations of your new business, you will want to begin reinvesting any profits back into the business. This is important to help you reach larger acquisitions one day if that is your goal. Once you have the daily operations under control both during growth and slower months, you then may want to consider adding a project to your workload.
At this stage of the stepping stone strategy, you will most likely have an outsourced team helping you scale your businesses. This is huge for those who are looking to build a portfolio of 7-figure + assets as a dedicated team helping you will be required. Once you have a stable team of outsourced workers helping you maintain your business, adding another asset to your portfolio will now be highly feasible. After you have reached a point with any business in your portfolio where you may want to make an exit for a large amount of capital, you may wonder why you would sell it in the first place.
Stick or Flip?
If you’ve owned your digital property for six months to one year and are considering selling it for a large capital gain, you will have two options to choose from. One option is to stick it out and continue growing the business. The second option is to exit and flip this capital into a new business, pushing you into new territory. The choice boils down to your own business and personal goals and where you see yourself in the next few years within the digital acquisitions space.
One thing to keep in mind when looking to acquire an online business for the first time is that you can obtain support to help ensure your first experience is a pleasant one. Contacting a business advisor to start your acquisition planning right will set you up for empire-building success from day one.
