Before the hyper-digitalisation we see now, starting 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 reach $35.92 billion in 2024, growing at a compound annual growth rate (CAGR) of 8.33% over the next four years. Technology like augmented reality and artificial intelligence has further blurred the lines of experiential shopping. IKEA's augmented reality app, IKEA Place, makes it easier for shoppers to place furniture in their homes and try different styles, colours, etc., in true-to-scale real-world settings.
As technology develops and evolves, the opportunities for digital businesses will only increase. If starting 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.
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 in Australia 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
Privacy Act Compliance
The Australian Privacy Act 1988 includes 13 Australian Privacy Principles (APP) that apply to businesses with a turnover of more than $3 million. The Act holds businesses that handle personal information legally responsible for protecting the privacy of their customers.
- You must have a privacy policy or be an APP entity to buy an online business that handles personal data
- The digital business you want to buy must also be compliant with the rules of the Office of the Australian Information Commissioner and have a data breach response plan
- The online business or e-commerce store must have robust cybersecurity to protect its customers against data breaches and identity theft
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.
An Australian Digital Business Success Story
If you do have the aspiration to start a physical business but feel constrained due to the lack of capital, a great small business idea is to start or buy an existing online business that resonates with you, and then scale it and take it offline once it attains brand recognition and profitability.
The Australian personalised leather goods company, The Daily Edited, or tde., founded by lawyers Alyce Tran and Tania Liu, was initially launched as a lifestyle and fashion blog on Instagram in 2011. In 2014, they pivoted and released a trio of monogrammable leather accessories, selling in-store through a partnership with David Jones.
In 2017, tde. opened their first flagship store in the Chadstone shopping centre in Melbourne, Australia and then in Robinsons department store on Orchard Road, Singapore. By 2018, they had a store in Pitt Street Mall in Sydney's CBD, a permanent concept store at the Saks Fifth Avenue, and held rolling pop-ups at other Saks stores.
BJM, a company co-owned by former Myer CEO Bernie Brookes, acquired The Daily Edited at an undisclosed sum. As of 2024, the company makes over $20 million a year in sales.
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 and in Australia. 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 in Australia a very lucrative business proposition.
