Buying an Internet Business – Case Study

Martin Enis bought his first internet business through FE International in April 2014. This week we spotlight his experience as a first-time buyer new to online, following his story from searching for a business through to closing the deal and beyond.This is his experience of buying an internet business…

Starting the Journey of Buying an Internet Business

“I started out thinking about buying a website or internet business around Christmas time last year. I had previously bought 2 offline businesses over the last few years and I was keen to add an income stream to my portfolio that didn’t require any flying around like my other companies.

I’ve always had an interest in the internet and its power for business but I’m not technical at all so I knew that whatever business I was going to acquire it needed to be self-contained and not require a lot of technical knowledge. Being a first time internet business buyer I was certainly nervous about acquiring an ‘invisible’ asset for a six figure sum but as I went through the process my confidence grew significantly and by the end I felt very happy to close the deal…

Initially I spent some time searching the internet for information about how to buy a website, speaking with friends about their experiences and talking to brokers. I used the major business-for-sale marketplaces such as BizBuySell and BusinessBroker to search for internet businesses and websites for sale and was checking each week for about 2 months until I came across FE’s listing.”

Researching the Opportunity

“After reaching out for more information I went through the prospectus in detail. It was a very well laid out and detailed pack covering the business’ operations, financials, traffic and the owner. The website was selling software for music-creation (beats-making) which I thought was a good space to be in and fitted with some of my personal interests in music too. I liked the product a lot and I could see it was a quality piece of software once I had tried it out. Just as importantly, the business was consistently generating $5,000 of net income per month with very little work or technical input from the owner (perfect for my background). The majority of the sales were affiliate-driven (it’s a ClickBank product) which meant the marketing was passive too and ClickBank were taking care of all the invoicing, sales tax and refund hassles.

I decided to set up a call with the seller (Ben) and FE International and after an hour or so of Q&A I was very happy with the owner and the business. I had a good feeling about Ben and he see seemed to answer all my questions very honestly. This was definitely a deciding factor in putting in an offer…

I discussed an offer with David (FE International’s broker) and he helped structure a deal with some owner financing to help bridge the gap between my available funds and the sale price. I was happy with this arrangement because it was a good show of faith from the seller (in me) and also left me with a decent marketing budget for growing the business post-sale.”

Due Diligence

“With an offer accepted I started due diligence on the business. FE International provided me with ClickBank screenshots and spreadsheets of the entire transaction history of the business for the last 3 years. They also provided the seller’s bank statements so I could see the money flowing through into his account. I went through the Google Analytics for the site to check the traffic history and all the channels in detail too.

After I had gone over the documents for a few days we had a live screenshare with the seller to go through the logins for ClickBank, the website and the software source code on-screen. It was a really good opportunity to see everything on screen, discuss things live with Ben and build up a better picture of how things worked day to day. By the time we finished I was pretty satisfied and happy to move forward.”

Closing the Deal

“FE International drafted the Asset Purchase Agreement for me which I went over with my attorney. We discussed a few terms like the non-compete and the period for training after sale. There were some funds owed to the seller after the transfer because of the delay in ClickBank payments so we factored that in too. We agreed that the broker should hold onto the domain until the seller financing was paid in full. That offered protection to both sides which I thought was fair. Otherwise speaking the legal side of things was a very smooth process.

Once both sides had signed, FE International set up the Escrow transaction for me. I wired the funds in and then we initiated the transfer. I was worried about this being a headache but actually the change of ownership was quite easy. I set up a hosting account with the same provider as the seller (LiquidWeb) and then the host helped facilitate the transfer of the content to me. The seller also sent over all the files and the source code for the software so I had that for my own keeping. The ClickBank account was easy, I just inherited Ben’s existing account and swapped out the ownership and payee details. The social media accounts were easy enough to change over too.

I was really happy with the seller throughout this process, Ben was extremely helpful in guiding me through the first few days of ownership. I had a 2 day inspection period with Escrow before releasing funds and during that time I could see purchases being made, answered a few customer queries and got to understand the business from a more hands on perspective. He was on hand for a month afterwards to sit with my on Skype and email to go through anything I was unsure about.

Once the inspection period was up I was very happy with the business and released funds to Ben…”

Reflections on Buying an Internet Business

“…Well, that was all 6 months ago now and I’m pleased to say the business is performing great. I have not had a great deal of time to work on it with other offline ventures taking up my schedule and despite this it continues to perform very well. I have got plans in motion for a new mobile app version of the software which I think will be a great expansion opportunity that Ben recommended. He has been on hand to help out with the odd query here and there and there have been no issues to speak of.

All in all, it was exactly 3 weeks from the day of finding the listing to the day of closing which is the fastest I’ve ever bought a business. I think this was mainly due to the speed of the due diligence process and FEI’s preparation. They had everything ready to go, templates for the letter of intent (LOI) and asset purchase agreement (APA), helped facilitate due diligence and kept everything going at a good pace.

Being a first time buyer I was certainly nervous about the process and what I might end up with. I think my best advice to new buyers would be to pick up the phone and speak with the broker and the seller as soon as possible. FE International were brilliant and I felt David presented his brokerage and the business very professionally and honestly. At the end of the day, after all the due diligence, it was the dealings with FE International and Ben that got me comfortable with spending and I am very glad I did!

Now I know about buying an internet business, I shall be back next year to acquire another.”

Want to know more about online business brokerage? Contact me or check out our resources for more information.