Want to Sell Your Online Business? Here’s Who Buys Them
Understanding a Buyer’s Motivation Is Key to a Profitable Exit
If you’ve reached a point in your online business where you might be considering an exit, it’s wise to understand who your target buyer would be.
Not every buyer will consider acquiring your business, so it’s important to understand what the typical digital-property investor is looking for. When first contemplating the option to exit their business, many first-time sellers are lost in terms of finding high-quality buyers. They often wonder what the ideal buyer looks like, and, knowing how difficult it was to build their asset from scratch, why anyone would bother buying the business to begin with. The fact is, many online property investors are looking for just such a scenario: a business that is now a success because someone has already done the startup work required to make it so. The best part is, these buyers are willing to pay a premium for your asset depending on how adverse it is to copycats coming in and creating more competition for the business you’ve created.
Before we dive into the types of buyers who would consider your business should you want to exit it with a huge capital gain, we should first discuss why anyone would buy an online business. After all, couldn’t they just start one of their own? Well, there’s more to a well-optimized business than using the cookie-cutter site approach.
Why Buyers Want to Acquire Your Business
Let’s choose a monetization to use as an example. We’ll go with an Amazon FBA business in the home niche. After you’ve done all the grunt work of product research, sourcing a high-quality product manufacturer, and optimizing your listing copy and product images, the chances are you’ll have spent more than a year working on the business. Fast forward to when you’ll have managed the business for 15+ months, and you’ll most likely have worked out all the bugs that caused problems when you first started.
After you’ve established a profitable business and have a decent market share, a majority of the hard work is finished. From then on, you’ll focus more on optimizing your pay per click (PPC) ad campaigns, launching new products within your niche, and rinsing and repeating that process.
Investors are interested in purchasing your business because you’ve created a proven product that has shown market demand. This is the biggest challenge for most startups and why so many fail within the first two years. Stepping away from traditional brick-and-mortar establishments, entrepreneurs are seeing the gold rush that online investments offer in return on investment (ROI), especially given the lower risk involved compared to traditional passive investments such as index funds and real estate. Many people don’t talk about the risks associated with these types of investments, and often, having steady income doesn’t mean it’ll all go into your pocket as net profits at the end of the day.
Showing that your online business is already making money provides the foundation that many digital-property investors are looking for. It not only provides a great opportunity, but it also gives them something that can be scaled up to provide a quick return and steady cash flow. You don’t see this happen very often in real estate because it would require increased rent, which, with most leases, takes a year or more to become an option. In contrast, digital assets offer investors more capital return up front and the ability to scale their net revenue in little time. This will often require less time to see returns, something very important to entrepreneurs who outsource funding for acquisitions. Having raised funding from private investors or other private-equity sources, these buyers often look beyond building something from scratch because of the startup time required (typically 15+ months to get things in motion).
So now that you understand “the why” behind someone who would pay you anywhere from 20‒60x your average monthly net profit, let’s cover “who” these individual buyers are.
Who Are These Buyers?
Every business model on the market today has a slightly different buyer pool based on the skills and knowledge required to be a success in that market. Many content sites generate revenue from affiliate offers and display advertising, and Amazon FBA businesses account for the largest buyer pool in general. This is expected, considering the popularity that these business models have gained in just the past five years. A majority of buyers search among everything from niche sites to personal affiliate profiles.
Service-based businesses such as marketing agencies tend to have a much smaller buyer pool based on the niche and the service being offered. Despite this, the same types of buyers exist in almost every digital-property space.
The Buyer Personas
After selling more than 1,000 online businesses, we’ve gathered a great deal of data and have distilled who buys online businesses down to six personas.
Newbie Norm
This is essentially where all business owners and investors start when first entering the digital-acquisition space. Newbie Norms usually have regular 9‒5 jobs and are looking for something that can get them away from the daily grind they’re stuck in. These buyers look at your online business as their way to escape the hamster wheel and, ultimately, as their ticket to freedom from their day job.
Remember, these buyers are new to the world of online business. Don’t expect them to know everything about search engine optimization (SEO) or conversion rate optimization (CRO), or how to build a successful email marketing funnel just yet. They may have some general knowledge of these skillsets, but the more cut and dried your business is, the more likely it is that you’ll make a timely exit.
The way to target Newbie Norms is to have systems in place that help automate most of the workload required to maintain the business. Having automation tools, virtual assistants (VAs), and business management software already set up gives them peace of mind despite being new to it all. If you can provide support after the deal is done, Newbie Norms may well be more comfortable moving forward because they know they won’t be left high and dry once the funds clear.
DIY Dave
Newbie Norms eventually transition to DIY Daves, who’re characterized as wanting to get their hands dirty and really figure out what drives the engine behind their business. After running one or more businesses, this person has a better understanding of what makes a digital property run.
Generally, DIY Daves are interested in purchasing a business above the $100k price point, but it depends on whether your business lacks one aspect or another they are an expert in.
Skillsets common to DIY Daves include:
- Search Engine Optimization (SEO)
- Conversion Rate Optimization (CRO)
- Google, Facebook, and other paid traffic advertising
DIY Daves are constantly on the lookout for potential businesses that lack one of these three categories. Which one of the three is lacking often sets one DIY Dave apart from another, because it all comes down to what their core skillset is. If you’re looking to exit your business and know there’s something you lacked focus on improving, highlight it when marketing your business to potential investors. If you can position your business as an asset that’s stable but could benefit in one area or another, a DIY Dave will take notice if it falls within their core skill.
Portfolio Paul
As the name suggests, this type of buyer often owns multiple businesses and may even own several assets within different monetizations. Portfolio Pauls may choose to proactively grow one or two of their assets, while the others just provide steady cash flow month after month. Portfolio Pauls are dedicated to having optimized systems and project management help in place and follow a strict protocol when creating standard operating procedures (SOPs) for scaling purposes.
Some portfolios can be huge, consisting of dozens of online businesses. If you can show a Portfolio Paul how your business can fit into their overall goals of diversifying income and fitting into their systems, they’ll show an interest in your offer. Of course, net profit is just as important, so these buyers often look at the margins your business produces in addition to the net profit.
Flipper Fred
On the other hand, Flipper Freds are very concerned about what your business generates in monthly net profit, as this needs to fit within their projected turnaround ROI. Similar to DIY Daves, Flipper Freds have a core skillset and a team or VA to help with smaller tasks, and they’re looking for businesses they can fix up and sell for a profit in a short timespan (often within 24 months).
These buyers love it when a business has systems in place to make its migration to their ownership easy. Knowing they can exit the business using these systems when the time comes is a benefit that this persona looks for in acquisitions. Flipper Freds have no intention of keeping the business long term, so they often wait for what they believe to be a great deal, not just something average. If you can position your business as a fixer-upper that offers huge potential to someone who has knowledge in an area you lack, you’ll certainly stir up some interest.
Strategic Sally
Strategic Sallys run multiple businesses at the same time, although one is their main earner. Usually, all their businesses are within related niches, and Strategic Sallys use them to support one another. Their ultimate goal in any acquisition is to buy a business that can help grow their existing ones.
If you can position your business as a way that helps them boost their other assets, you can present the opportunity to them as one that’ll provide some serious growth. While fewer buyers fit into this persona than some of the others, these buyers do exist. Because many digital asset investors are searching for one specific niche or monetization, you could say many of the personas on this list fit into the Strategic Sally category in some way.
Investor Ivan
Investor Ivans are similar to Portfolio Pauls because they typically have their hands in several businesses at the same time. Of all the buyer personas, Investor Ivans tend to have the largest pool of capital to spend. One of their major differences from Portfolio Pauls is that Investor Ivans aren’t interested in managing the business themselves. Usually, they have an operator who’ll make the business decisions for them.
Investor Ivans are looking for higher profits paid to them monthly or quarterly without having a hand in the daily operation of the business. Because of this hands-off approach, Investor Ivans usually partner with Portfolio Pauls, DIY Daves, or sometimes even Strategic Sallys to meet their business goals.
These investors are institutional buyers like Perch or Thrasio and have raised immense capital to acquire huge assets. Knowing who these buyers are, what they’re looking to acquire, and how to position your business in the best possible way to attract each one is just the start.
Knowing Is Half the Battle
When people talk about marketing a business, no matter what the product or service, the first subject that usually comes up is how important copywriting is. Copywriting is mostly knowing what a target audience is seeking and connecting with that audience on a more personal level. You find out what their pain points are and how to position your product as the only viable solution to help them solve their problem. Knowing what types of buyers you’ll be dealing with when exiting your business is similar to discovering what a buyer’s pain points are. This also gives you the upper hand when positioning your business as the best solution to solve all their problems.
When you discover which persona gravitates toward your business the most, the battle is only half over, but knowing what these buyers are after helps to ensure that you reach ROI success. If your goal is to one day sell your e-commerce store, exit your content site, or walk away with a capital windfall from a SaaS startup, you’ll want to be familiar with how to get the most from your exit by following this guide. If you’d like to learn more about what your business is worth today, head over to our business valuation tool. There, you can see what your business is worth today, and if you’re ready to leverage our help to gear your business toward one of the buyer personas described here, we can help you sell your business.
