Before the hyper-digitalisation we see now, buying a business was the privilege of aspiring entrepreneurs who could raise the required capital and garner adequate resources. Now, in the digital age, this dream is more accessible due to the robust growth of online businesses coupled with low barriers to entry.
The revenue in the e-commerce market is projected to grow, while technology like augmented reality and artificial intelligence has further blurred the lines of experiential shopping. As technology develops and evolves, the opportunities for digital businesses will only increase. If buying an online business is something you have been thinking of, now is the time to take the plunge.
What is an Online Business?
Any business that is run entirely via the internet is an online business. It could be an e-commerce store selling products or a service-based digital business, for example, web development and design, book-keeping or an online educational platform. While an online business could also have a physical brick-and-mortar store, the main criteria that distinguishes a digital business is that it can conduct business efficiently even if the physical store were to close down.
What is the Best Online Business in South Africa?
There are many kinds of successful online business in South Africa. These sectors are often in demand due to their flexibility and high profit potential, making them good targets for entrepreneurs thinking about buying an online business. A few of the best online businesses in South Africa are:
- E-commerce. The e-commerce industry in South Africa is projected to grow. There are a number of services which will allow you to easily set up a shopfront and start building a base of customers. Business models such as dropshipping allow you to keep your operation flexible, and remove the need for warehouses full of stock.
- Digital Marketing. Companies which offer digital marketing services have always been in high demand, but they're only going to become more relevant in the future. Organic traffic and a strong SEO strategy are an increasingly essential tool for small businesses, and standing out in the developing field of AI search presents a huge opportunity as well.
- Training & Tutoring. Training and tutoring services have increasingly moved online in the wake of the Covid-19 pandemic, and are a good option for a flexible business which doesn't need a headquarters. Becoming a tutor doesn't require any special license in South Africa, and can be a profitable option for those who want to pass on their wisdom.
- Apps. Buying an existing app could allow you to skip the potentially lengthy development phase involved in these businesses, and jump straight into making money. If you have marketing skills and can identify where the seller missed opportunities to promote or grow their app, you might be able to grow it exponentially.
- Content Creation. It could be blog writing, video editing or creating a podcast - creative content is always in demand. Online businesses which provide these services always come with opportunity, so buying a successful one could be a solid investment.
How to Identify a Profitable Online Business for Sale
With an online business, some metrics can help you identify potential profitability, over and above the usual due diligence required while buying a brick-and-mortar business. Before you buy a digital business or a website for sale, do the following:
- Analyse the traffic the website or e-commerce store attracts using tools like Google Analytics.
- Evaluate the website, analyse the SEO score, and conduct a content audit to identify keyword gaps using tools such as SEMrush and Ahrefs.
- Review their social media feeds, website content and any affiliate/influencer brand deals.
- Conduct a competitor analysis, identify the target keywords your competitor ranks for better than your website and review their content.
- See what your competitors do differently and assess the effort and resources you need to outrank them in Google searches.
- Review the tech stack used for operations and marketing, the cost of subscriptions, the return on investments, etc.
Six Advantages of Buying a Digital Business
1.) A Low Barrier to Entry
Buying an online business is much easier than buying a business with a physical presence or a large inventory. The operating costs are lower, as are overheads like rent, utilities and insurance. This minimises the risk of draining your life savings and facing financial losses if the business is not successful.
With a dropshipping e-commerce business, you do not need to hold inventory or rent a warehouse. Your investment will largely be in designing your e-commerce store and marketing your products.
2.) No Downtime
An online business is always open for business and has the potential to make you money 24/7. There are no opening hours, holidays, sick days, etc, to restrict you from making a sale. Once your website is live, your digital business can generate revenue even when you sleep, minus the hassle of day-to-day involvement.
3.) Location Freedom
When your physical presence is not required to run your business, you can enjoy the freedom to work from anywhere. With a Wi-Fi connection, you can manage your business from the comfort of your home or a beach in Bali, empowering you to create more flexibility and abetter work-life balance.
4.) Larger Customer Base
A physical store is limited to a local area, but with an online business, you are not restricted to serving a particular geographical region. With strategic marketing and advertising, and implementing effective SEO you can reach potential buyers from around the globe.
Buyers from anywhere can order from your e-commerce business as long as your distribution channels are in place. If you offer digital services, like book-keeping or print downloads, then even the barrier of supplier relations is eliminated. The world becomes your oyster!
5.) Higher Growth Potential
It is easier to scale an online business as you are not dependent on foot traffic and the business's location to thrive. Once you get your marketing right, you can broaden your target audience and reach potential customers globally.
A dropship e-commerce model also allows you to increase the number of products you offer without investing in inventory. This allows you to buy a small online business for a good price and scale it exponentially.
6.) Better Data Tracking
You can collect a wealth of data by setting up tracking capabilities like Google Analytics to help analyse customer behaviour. You can know which pages of your e-commerce store your customers visited, the products in their abandoned shopping carts, the pages that attract a lot of traffic, etc. This data will help you better understand your target audience, improve your products and services, and tailor your marketing efforts to potential buyers.
Legal Considerations Before You Buy an Online Business
Whether you are buying a brick-and-mortar business or an online business, it is crucial you carry out the necessary due diligence to avoid potential risks. While there is an overlap in the due diligence required, like assessing the value of the business and understanding the operations, if your business is entirely online, there are important considerations to avoid legal ramifications in the future.
Intellectual Property
One of the most important assets and a primary legal consideration in the sale of an online business is the transfer of intellectual property (IP). IP includes:
- Trademarks like logos, copyrights, designs, patents and other proprietary rights
- Social media accounts and content
- Domain names
- Website content, including copy and images
- Any other digital assets
Ownership Rights to Software and Apps
If you are buying a SaaS business (software as a service) or one that has an online app, a few things you should be aware of and include in the transfer agreement are:
- the ownership rights to the code
- who has created the code
- and any third-party developer agreements
Transfer Supplier Agreements
Most dropshipping e-commerce businesses do not manufacture their own inventory or products. It is a very supplier-driven business model. Hence, all supplier agreements should also be transferred when you buy an online business and ensure you confirm this with the suppliers.
If the online business you want to purchase works on a hybrid model and owns physical goods, you must assess the quantity and quality of the products before making the payments.
The Future is Digital
The numerous advantages of an online business, coupled with the fact that the world now prefers buying online, led to an increase in the number of digital businesses popping up globally. If you are still on the fence or at a loss for a small business idea, look at online businesses for sale on our website.
The freedom, flexibility, low overhead costs, a broader market and immense growth potential, despite limited resources, make buying an online business a very lucrative business proposition.
FAQs
What is the best online business in South Africa?
Industries such as e-commerce, digital marketing, training/tutoring, apps and content creation are among the most profitable online businesses in South Africa.
What are the advantages of buying an online business?
Low barriers to entry, lack of downtime, a flexible location, an existing customer base and easier data tracking are some of the advantages of buying an online business.
How do you value a small online business?
You can value an online business using Seller's Discretionary Earnings (SDE) valuation if they provide you with their financial statements for the past year, salary and benefit information, and profit/loss statements. BusinessesForSale.com's ValueRight platform is a free, easy way to do this in five minutes.
How do I go about buying a small business?
Conducting thorough due diligence, putting together a strong business plan, and applying for finance from a bank or other lender are some of the key steps in the process of buying a small business. BusinessesForSale.com's How to Buy a Business guide can provide a more detailed step-by-step breakdown.