A great deal of attention has been given to the term “sustainability” in business circles and this often refers to a company’s ability to successfully manage its use of energy, constrain its carbon emissions and act as a good corporate citizen within society. When it comes to the prospect of buying an Internet business for sale, we can consider the word sustainability here, as well. There are an increasing number of opportunities available to the entrepreneur these days as the Web becomes such a critical part of all of our lives. As more and more business is conducted via the Internet, expect to see an increasingly sophisticated array of Internet businesses available for purchase. It’s very important to understand however that business conducted over the Internet is essentially “virtual.” This is very different from the traditional business, also known as “bricks and mortar” and as such it can be difficult to value the business online. This business sector is very dynamic and we do not have many points of reference or benchmarks to consider. When buying a gas station and convenience store for sale for example, there are a number of different accounting ratios and industry averages to help you consider your options, but when you are purchasing a website for sale, you may have to be rather creative when you’re trying to work out what value it has for you.

Be very careful and very thorough when you buy a business like this, so that you can see exactly what is involved. Does it have a particular hold on any niche area; does it feature specific and more tangible products such as extensive content, for example? How many clients does the business have, are they loyal and what methods of marketing does the outgoing seller apply? You have to be able to see some depth and substance here and more importantly, there has to be a clear path ahead. During your process of due diligence, always remember to look for signs of continuity and sustainability.

In many cases, when you buy website business assets, the input of the seller over time can prove to be key and you must be careful that you do not lose any continuity, marketability or in any way confuse potential clients, should the seller be no longer involved. Be wary if the business revolves around the seller’s personality. Does he or she have some significant and specific skills that you simply could not do without? It’s possible that the outgoing seller would be more than willing to work with you on an ongoing basis, but this is where you need to be very careful indeed. Will you be able to come up with an enforceable, non-compete agreement in this situation? In more regular types of business, a geographical non-compete agreement is often expected and is relatively easy to enforce. In Internet circles, you can, to a certain extent, be invisible and still conduct a successful business. In the worst-case scenario, the outgoing seller engages with a third-party operation somewhere else and sets up another operation, doing business that could be harmful to your fledgling operation.

Consequently, you should take on legal advice from somebody who really knows what they’re talking about in this area, so that you have an enforceable agreement to work with. The best approach may be to apportion some of the purchase price, so that it’s tied to the non-compete agreement. This will involve the creation of a legal “note,” which only allows a certain amount of the funds to be released when it is evident that the seller is working with you and not against you.

Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation - The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business.

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This entry was posted on Thursday, September 9th, 2010 at 3:21 pm and is filed under Business and Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.