Building VS Buying an Online Business
In this blog post, we are going to look at detailed comparison between building and buying an online business. Which one should you do? What are the pros and cons of building your online business. What are the pros and cons of buying online business.
Pros of Buying a Website: You are buying time back.
Bypass the initial work of setting up the site.
When you buy an online business, you Bypass the initial work of setting up the site. If you are very technical and know what you are doing, it will still cost you time to setup and build a new site. If you are not technical, buying a site will save you time and difficulties of learning how to build a website, how to setup a blog, and how to get the site up and running.
Bypass the time it takes to start ranking on google.
When you first start a website, your website doesn’t start ranking immediately. First, your website is put in something called the google “sandbox”. This is a period of 6–8 months or even 2 years where you website will get little to no traffic. Google does this to new sites because your website, well…is new. So, google doesn’t trust your website yet. It takes some time for google to crawl your site, decipher the content of your site, figure out if it’s a spam site or not, and whether your site is trustworthy or not.
This google “sandbox” period also applies to new blog posts on existing sites. Most bloggers know that when they publish a blog, they don’t expect it to start ranking immediately on google. It takes 6 to 12 months for the new blog to start getting steady traffic. So, most times when you publish a new blog, you have to wait about 8 months to see how well the blog is performing.
There is a way to shorten the google sandbox period. For new blog website, you can generate traffic outside of google and that would shorten the length of time it takes for your new blog to rank and start getting consistent traffic.
Buying an existing online business means that you get to bypass the google sandbox. You don’t have to wait for your new site to start ranking on google or making money, as soon as you have your new site, it’s already ranking in search engines, pulling in traffic, and generating revenue.
Bypass the work required to take it from idea to profitable
From the time you have an idea about a new business until the time the business start making money, you have to put in a lot of work. It takes a great amount of time, energy, and tenacity to take an idea to business execution to profitability. When you buy an existing business, you cut out the time and work it would take to execute an idea into profit. You will just be stepping into a profitable business.
You are buying a proven concept
When you start a new blog, it’s likely that you are not 100% sure your blog idea will pan out in the long run. There is no guarantee your blog will succeed or fail. But, when you buy an existing business, you are bypassing the guess work of whether your business idea will be successful or not. You are buying a proven business concept that is already profitable. This greatly reduces your risk of sweating your life and time away only to end up with a failed business.
97% of new online businesses fail and never become profitable. Buying an existing business will help you to bypass the phase of experimenting by trial and error and almost guarantee that your online business will not be in the 97% of failures.
Start making money from day 1
When you buy an online business, you start making money immediately on day 1 from the investment. When you start an online business, you may have to wait 2 to 3 years (depending on your level of skillset) to start making from the business venture. For example, my YouTube channel took 3 years before I started making money from it. But my blogs that I bought, started making money for me from day 1.
I can’t repeat this enough, but one of the most important things about buying an online business is that you don’t have to wait years to make your 1st dollar from the business.
You will be profitable from day 1 instead of being in the negative for months or even years before making money from all your hard work.
Can help you learn about online business
If you are new to the online business world, buying an online business can be a way to get started and start learning quickly while earning along the way. When some people enter the online business arena, they are overwhelmed with so many ways to make money online as well as so much to learn.
Most people who decide to start with online business fail in their 1st couple of years. They try out different things and fumble. The reason why they fail is not because there is something wrong with the person, but rather they just don’t know what they are doing.
They don’t know what skills to focus on, what to learn, how to run an online business, what to do and what not to do.
Buying a small online business for a couple of thousand dollars like $5,000 or less, will give you the learning ropes. It will show you what an income generating online business is supposed to be like and you can use it to learn how to build an online business while you work to grow the business you bought.
Higher returns than stocks and real estate
Buying an online business typically has higher returns than investing in the stock market or real estate. With online businesses, you can expect to pay anywhere from 30X to 45X of the monthly profit. For example, if a business is making $1,000 per month. If you buy it for 30X, you will pay $30,000 for the site. If you are buying it for 45X, you will pay $45,000 for the site. Depending on how much you pay for the site and your existing skills when it comes to online businesses, you could be looking at a 20–40% annual rate of return.
In comparison, the stock market is expected to return anywhere from 10–15% annually and real estate has an average annual return rate of 4–8%.
Don’t get carried away by the higher rate of return with online businesses yet. You know what they say, higher returns come with higher risks. Keep reading to find out the risks associated with online businesses.
If you are looking to get started with online business and you don’t have a lot of capital, I suggest you checkout motion invest (I have used them 2x to buy an online business), Flippa (Careful if you are new in acquiring online assets. They have a history of scams.), and Human proof designs. If you have a little bit more capital, you can also checkout empire flippers. If you are looking for a starter site that is not generating revenue yet, you might want to consider alpha investors and brand builders as well as human proof designs. Also, checkout exchange marketplace by shopify for dropshipping and ecommerce businesses.
Cons of buying online business
Takes money to make money
You need to be comfortable spending your own money to buy a business. To be honest, you most likely have to invest your hard earned money to buy a profitable business. I know there are some internet gurus that tell you that you can buy a business with zero-money down. While that might be true in brick and mortar businesses. Majority of the time, for online business, you will have to put down money to buy it.
Good news is that you don’t need a lot of money to get started. You can start buying online businesses with as little as $2,000 dollars
Usually, the bigger your investment, the higher profit you will generate from the asset.
Difficult to find lending.
With brick and mortar business or big giant software companies, it’s easier to find a bank that will lend you money to buy that business.
But, with online businesses, most traditional & non-traditional banks don’t understand the online business arena enough to risk loaning you money to buy it.
Although, there are places where you can get a business line of credit or a loan to buy your online business.
Risky
Just with any investment, you can loose all your money. But, online businesses with their high returns also possess a higher risk. Depending on your business model, you could lose all your money overnight. For example, google might do an algorithm update that knocks your traffic down significantly, amazon can change their affiliate commission amount and that would greatly reduce income.
That’s what happened to me with my 1st online business purchase. I bought it and less than a month later, amazon changed their commission amount and I lost a great deal of money. The site went from making average of $350 per month when I got it to struggling to make $50 per month. So, that’s a risk you have to be willing to accept if you are stepping into the online business arena.
An affiliate program you have been promoting might shutdown completely, google might ban your ad sense account, your affiliate program (especially amazon) can ban your affiliate account.
And if any of these events occur, there is chance it will significantly reduce your monthly revenue or even wipe it out completely.
So, online businesses are not just roses and rainbows. They can be dangerously risky.
Less Passion
Most times, the sites people buy are for business transaction and not necessarily something they are passionate about. If you want to operate an online business you are passionate about, it will be difficult to find that in an online business marketplace. Now, it doesn’t mean you don’t like your online business, it just means that you see it more like a business than a passion project turning profit.
Buy other people’s mistakes.
Majority of the sites you will see available for sale was not built by website pros. Usually, it’s built by amateurs and by everyday people. This means that even though the site is profitable, there is a good chance the site has a decent amount of problems. Problems in the form of technical problems, SEO problems, site configuration problems, wrong plugins, awful themes, and other things.
When you build a site yourself, you have more control over the site structure. But, when you buy an online business, if the online business is a website, you have to be ready to accept mal-built website sometimes and put in the work to properly structure the site how you want.
Another common problem you will run into when buying a blog based business is lot’s of errors in the blog content. I can’t tell you how many times I have bought an online business only to realize that the blog has many mistakes in how the blog was formatted. Everything from the image placement & URL, the affiliate link placement, the in-page and off-page SEO, the title, and the content. Once you are more experienced in the online business arena like myself, you will begin spotting this things and it will be up to you the new business owner to fix them.
Now that we have explored the pros and cons of buying an online business, let’s dive a little deeper into the pros and cons of building your own online business from the ground up.
Pros of Building a website (Opposite of everything inn cons of buying)
The pros of building your own business especially a blog or website is you get to avoid the cons of buying an online business 😆
Doesn’t take a lot of money to start.
When you start your business from scratch, you don’t have to worry too much about cost. If you are short on cash and have plenty of time, you might want to consider building instead of buying.
You can start an online business for as little as $20. All you have to do is go to siteground and buy a domain name for your site for $8–14. While at siteground, you could also buy hosting for as little as $4 per month and you will still have money left to buy anything else you want for your online business.
No lending problems
You won’t have difficulties finding lending because you most likely won’t need it.
Less risky
With building your online business, you have a lot less to lose. If google changes their algorithm or amazon changes their affiliate commission rate, you don’t have to worry too much about losing your investment.
You can use this as a process to learn how to build an online business without risking your money.
Just be aware that even though you are not risking money, you are still risking the time it takes to build the business from idea to profit.
Passion filled project
When you build your online business from scratch, it’s easier to become emotionally attached to the project. This passion can be a good thing or a bad thing. It’s good because it will most likely drive you to work harder on your business. But it’s bad because it will make it more difficult to let go when you want to sell the business.
Build it right from the scratch.
When you build your own business, you won’t have to worry about buying other people’s mistakes in the form of content mistakes and site structure mistakes.
When you build the site, you can make sure the site is properly structured for technical search engine optimization purposes. Is not unusual to buy a site only to find out the owner of the site didn’t do a good job setting up the structure of the site (speaking from experience).
You can also make sure the content of the site is done properly. No funky formatting, no mistakes with images alt tags, no affiliate link mistakes, and a host of many things that could go wrong.
Cons of Building a website (Opposite of everything in Pros of buying)
Maybe you can spot the pattern already 🙈, but the cons of building your own online business will be the opposite of the Pros of buying your own online business 💭😂.
Work Work Work ⚒
When you build your online business from scratch, you have to do all the initial work required to setup the website or app or kindle publishing or software needed to get the business off the ground.
You can do all the work or you can pay someone to do all the work for you. Either way, you are taking on the risk of setting up the initial business.
Google sandbox
If you are setting up a site for the 1st time, you have to wait 6 to 8 months for your site to start ranking. That’s time you will never get back.
There are ways to bypass this “google sandbox” time period. You can shorten your ranking wait time by using expired domains. What exactly are expired domains?
Expired domains are domains that has been previously used in your niche for a different site but is not longer being used. By using this domain that has already gone through the google sandbox period and also has some domain authority, you don’t have to wait months for google to “trust” your new site. You can start ranking almost immediately. To buy a site built with expired domains, check out alpha investors here.
Take on risk of bringing your idea to profitable.
When you start a business from scratch, there is no guarantee the business will succeed. So, by starting the business you are taking on a big risk of spending your time and maybe a little bit of your own money to build this idea into something that makes money.
There is a possibility that despite your sweat equity, nothing will ever come from your business.
Besides most new online businesses has a 97% failure rate. There is a chance your business will fail.
When someone is looking to buy your business, they don’t care how much time you put in to get it to where it is today or how much money you put in. No, what they are going to consider is the viability of the business moving forward, the profit of the business compared to the amount of work required to run the business.
Wait before making your 1st $1
When you start a business from scratch, there is a good chance you won’t start making money immediately. If it’s the case of an online blog or a youtube channel or a podcast, you could potentially find yourself waiting 2–3 years before you start making a dime. It is possible to make money from a new online business venture in less than a 1 year, but that is not the norm. It requires prior skills and experience in the online business space to achieve that. If you are a complete newbie, give yourself time and patience to learn the ropes before you start making money. Speaking of learning the ropes….
Learn online business with little to no risk.
When you buy an online business without prior online business experience, you are at risk of losing your investment. So, you have greater pressure to get things right and learn what you need to know to run the business.
But when you are building your 1st online business from scratch. You have more leeway to make a mistake. You can take your time to learn and grow in the online business space without worrying too much about what you have to lose. Because quite frankly, you don’t have much to lose except your time.
Yes, you might discover the online business space is not for you. In that case, the only thing you would have lost is time and maybe a little bit of money. But still, you learned something in the process.
When you should buy vs when you should build
Build:
Personality based business.
There are some things you can’t buy no matter how much money you have. You can’t buy personality and passion and joy and excitement and learned knowledge. So, if you are looking to have a business that is based on the things you love to do, you are better off building the business instead of buying it.
Some types of youtube channel
If you want Something like a youtube channel, you might consider building it. Although some people buy youtube channels as investments, if you are looking to have a personality driven exciting passionate youtube channel, building it is the only way to get that.
Teaching others
If you want a business where you teach other people what you know, then building is the way to go because you really can’t buy head knowledge. You might be able to buy a business in the same industry you are looking to build in, but you can’t buy a replica of what is in your head in the form of learned knowledge and experience.
sharing your experience, documenting your life.
If you want a business centered around sharing your lived experience, you got to build it, you can’t buy it. Also, if you want a self documentary style kind of content, there is a good chance building is your only way to achieve that.
something no one else has built
If you think you got a business idea that no one else has implemented before, then go ahead and build it.
can’t quite find the business in the niche you want built the way you want
If you search online business marketplace and you can’t find something that vibes with you, then maybe is time to build it.
self promotion in terms of career
Ain’t nothing wrong with promoting yourself because quite frankly, if you don’t promote yourself, no one will promote you. So, you can build a business centered around your career. It has a few benefits mainly, it will give you ample opportunity to dive deeper and understand your craft better. If you have a blog, podcast, or youtube channel in your industry, it might just help you land your next job.
don’t have money to invest
If you are tight on cash or you don’t wanna spend your own money to dip your toe into the online space, then building an online business is a good place to start.
has lots of free time
If you have plenty of free time, you can occupy yourself with building an online business.
want to learn online business from the ground up
Want to learn the online business ropes without buying something that is already made, then building is the right place for you to start. Some people prefer the experience of learning by doing it the first time instead of learning by what has already been done (aka, buying an existing business)
Buy:
When you don’t care about being passionately attached to the business.
To some people (myself included) buying an online business is more about the transaction than buying a business because you absolutely love it to death.
When you have capital to invest.
this goes without saying but, the size of the asset you buy will depend on the size of your capital. If you are willing to invest a lot of time to grow your online business, then you will be able to get away with buying smaller asset because your business expense will be low considering that you are the business operator.
If you have more capital and can buy a bigger asset, you might be able to pay an operator and still turn a profit. And you will be able to invest less of your own time in growing the asset.
Remember…Building vs Buying Summary
when you have less capital and some time to invest — can buy smaller assets
when you have more capital and not time to invest — can buy bigger assets
when your goal with online business is to build another revenue stream
If your primary objective with entering the online business arena is to build another stream of income, then you might consider buying an online business instead of building one.
looking to diversify your investment portfolio
If you are an investor like myself looking to diversify your investment portfolio, then online business is a great addition to your portfolio
looking to save time and cut through the red tapes of starting from scratch
If you want an online business but you want to save yourself a ton of time from building to generating revenue, then buying an online business is the way to go.
If you want to start making money from day 1
The #1 obvious reason to buy an existing business is if you want to start generating revenue from your business on day 1
looking to buy the hard work other people already put in to get the business to profitability instead of putting in the work to bring it to profitability.
And second most importantly, when you are looking to take the guess work out of the successfulness of the business but rather buy a proven concept.
Originally published at https://www.evidencexperience.com/blog/building-vs-buying-an-online-business.
