Online Business Opportunities: 5 Questions for Determining The Right Opportunity

There is a wealth of reasons why investing in an established internet business can have distinct advantages when compared to investing offline. That said, finding the best internet business opportunity is essential to realizing these benefits and to post-sale success.

When searching for a business, buyers often find themselves describing candidates as ‘not a good fit’ but can be unclear on what a good fit might be for them.

This article explores how buyers can assess their skills, background and investment criteria against the spectrum of available e-business models, in order to make the right choice when it comes to acquisition.

Naturally, the ‘right’ business for a buyer depends on the buyer in question and their individual preferences. Different buyers have different skills, level of experience, risk appetites and time to commit to certain projects. It’s important to approach business search with an open and flexible mind. Taking an exploratory approach is the best way to understand the marketplace and options available. Nonetheless to find the ‘right’ business there are certain core factors that are usually considered when deciding whether or not an internet business is suitable.

5 Questions to Help Find The Perfect Online Business Opportunities

1. What are your Investment Criteria for Buying an Established Business?

Taking over an established business (whether off or online) can be a challenge, requiring time, investment and dedication. Ultimately though, the project should be an enjoyable and profitable pursuit.

For some, the decision to purchase an internet business is approached purely from a financial perspective – what do the numbers say? Like real estate, if acquiring an investment property, the interior design and specific location may be irrelevant. The right property is the one that attains the highest rental yield. The same holds true in the world of internet business when analyzed through this lens. The niche and business model may be irrelevant, the ‘right’ business is the one that happens to produce the necessary monthly cash flow and has the highest ROI, compared to other internet businesses for sale (investment properties).

For other buyers, however, the go/no go is far from being this black and white and undoubtedly takes account of more qualitative criteria. This is particularly true of buyers who intend on running the online asset as a lifestyle business or a way to make their first move into online. These buyers may pay lip service to the underlying numbers, instead of putting more onus on finding a business that matches their interests, passions or particular skill-set.

A common ‘buyer profile’ is when a buyer decides they wish to invest online, but is unsure of the skill-set required to succeed, has little idea about the different niches and finds it difficult to hone in on a specific business model. Being clear on each of one of these is the first step that should be taken when trying to find a business.

2. Do You Have the Right Skills to Run an Internet Business?

Before trying to decide on a niche or business model, it is worth taking a step back to ensure that investing online is right in the first place. Running any internet business requires some fundamental traits, skills and understanding what is expected down the line is the first step to establishing the right business.

A. Communication & Networking

Being able to engage with other participants on the internet is critical for success. Networking online has taken on a whole new meaning in the internet age and regardless of business model, an ability to engage with visitors, customers and suppliers is part and parcel of running an online business. Social media has rapidly become one of the more popular ways of networking and is an integral part of the entrepreneur’s toolset.

It is important however, to remember that there is more to social media than just Facebook and LinkedIn and learning the rules of the game is highly recommended.
While social is important, web owners should also be able engage with their audience, wherever they may be. The ability to sell an idea or product online is no different from the offline world, and is a baseline attribute of any successful entrepreneur. Skills include the ability to evaluate audience analytics and develop content that builds authority within a niche. Communication doesn’t have to be pushy, in fact adopting a ‘soft-selling approach’ can often be advantageous.

Forbes argues that the only real skill required to be successful online is copywriting. Copywriting is the ability to intimately understand a particular audience and write persuasively to market a product, service or idea. When taking over an online business, it is likely that writing will be an important part of the role, at least to begin with. Writing is pivotal for engaging an audience, it is the best source of SEO for a website. Websites such as CopyHour, offer boot camps to improve the strategy and skills required to write for the purposes of selling. If carrying out the above seems daunting, it’s not a problem. The majority of these tasks can be outsourced, in which case, the ability to manage contractors will become of greater importance.

B. Strategy, Planning & Organization

Internet entrepreneurs should be able to create or tweak an online strategy. Technical knowledge is not necessarily required here, the focus should be on devising a long-term objective, which will determine how the brand is developed over time. From this, an online entrepreneur should be able to determine the activities required to reach the end goal.

It goes without saying that a level of organization will be required to run an online business. Planning and prioritizing tasks as well as organizing resources should be second nature. Whilst organization comes more naturally to some people, there are plenty of tools out there to help organize and sequence work. There are also a number of tips available that describe how to organize an online business – using financial software such as QuickBooks and tracking systems for order management are just some examples.

C. Online Marketing Know-How?

An appreciation of marketing is critical to successfully taking over and managing an online business, there is no hiding from the importance of online marketing practices. As internet marketing is the way in which one spreads the word about their business, products and service, it is worth taking the time to get to grips with web marketing basics.

Website owners need to be able to take ownership of their overall online strategy, using it to define the marketing effort. To be clear, a business owner does not need to be an online marketing guru, but an understanding of the basics of online marketing (SEO, Content, Social, CRO) and its commercial underpinnings is key.

3. What Other Skills do you Need?

The traits listed above provide a good starting point when it comes to running an internet business, they form a solid baseline. There are clearly lots of other skills that help such as financial accounting, technical knowledge (web design/development) and graphic / logo design are just some examples. Nevertheless, these are ‘nice to haves’. As long as buyers are equipped with the essentials, the rest can be reliably outsourced.

Once comfortable with these core skills, the next step is deciding on the right niche.
4. How will you Choose the Right Niche?

To buyers unsure of their passions, following a simple curiosity is a straightforward way of discovering an untapped interest. Having brainstormed various different interests, buyers should look to carry out some keyword research to assess the niche. Doing so will help to uncover its relative competitiveness and whether or not there are specific areas of ‘white space’ or opportunity.

It is important not to be too put off by niche saturation – i.e. lots of players, highly competitive. There are plenty of online businesses available within competitive niches that offer a service or product unrivaled in the niche. At this juncture, some buyers may choose to invest in a niche that is of less or no interest but ultimately, much less competitive.

It is recommend that you take a balanced approach if investing for the long-term, a buyer will need to sustain some level of interest in the niche or the business is likely to suffer neglect over time.

The next step is to decide on the most appropriate way of making money from the niche in question i.e. which business model.

5. Which Internet Business Model Should I Invest in?

The below flowchart aims to help buyers ascertain the right business model for them when looking at online business opportunities. By asking a series of simple questions, this flowchart is designed to filter for the skills and attributes desirable for owning and running those businesses successfully. More information on each business model can be found below.E-commerce

E-commerce has been a dominant theme of the internet for the last decade and is one of the most common e-business models. By definition, e-commerce is buying and selling of products and services over the internet. There are different types of e-commerce sites depending on the approach to inventory and distribution taken.
In the sports niche for example, an e-commerce business could be a website that sells protein powders – these could be either shipped by the seller directly (pure e-commerce) or the order details sent through to suppliers who then ship (dropship). The business takes a gross margin on the products sold.

Pros:

• Easy to understand for offline investors
• Dropshipping = no logistical responsibilities

Cons:

• Can be quite time consuming
• Relatively high costs compared to other models
• Can require a lot of attention

Specific Skills / Tasks

• Writing / editorial – product and service pages need to be well-written and kept up to date
• There is an inventory management requirement – business owners should be numerate and savvy when it comes to negotiating commercial terms and supplier agreements
• The ability to deal with and manage one or more suppliers is key

Advertising

The web advertising model is one of the simplest and most popular e-businesses. It is the internet’s digital extension of the traditional media broadcast model. Effectively a website provides content, usually for free, interspersed with advertising messages in the form of banner ads or other ad placements. In the sports niche, an advertising business could be a personal fitness blog, with a large following, which is monetized through related sports ads e.g. advertising protein powders.

Pros:

• Simple monetization model
• Low maintenance

Cons:

• Earnings are typically sensitive to traffic e.g. organic search
• Need continual supply of fresh content to attract visitors
• Can take time to build a following

Specific Skills / Tasks:

• Writing / editorial – ability to engage with an audience or manage a content writer that can provide content
• Knowledge of online marketing – SEO, CRO, keyword research
• May involve interacting with and pitching to direct advertisers. If so, a sales mindset could be advantageous

Affiliate

An affiliate business model is one where the business exclusively sells other suppliers’ products and services in exchange for a commission payment that is an agreed percentage of each sale.

Affiliate marketers are effectively independent sales entities that are paid on a performance basis (i.e. when an actual sale is made). Websites use tracking codes which identify who referred the sale to them. In the sports niche, an affiliate business could be a website that reviews all protein powder products available and includes links for the audience to click through and buy them, in return for a commission.

Pros:

• High margin (80%+)
• No product/service creation required
• Relatively low risk

Cons:

• Careful product selection required
• Takes time to build authority
• Reliant on 3rd parties

Specific Skills / Tasks:

• Writing / editorial – core requirement for this type of business, content must be engaging and product pages need to be well-written
• Knowledge of online marketing – SEO, CRO, keyword research

Lead Generation

Lead Generation business models are those where a website is used to attract traffic and convert users into leads for a sellable service (e.g. skiing insurance). Typically the site owner creates a website of relevant content for the lead-type and then employs an internet marketing strategy to attract traffic to the site. User information is collected (usually through a customer form) and then the lead data is sold to companies interested in marketing to or selling to those collected leads.

The quality of the lead (contact information, conversion rate) will correlate heavily with the price paid. In the sports niche, a lead generation business could be a website all about skiing – tips, where to go and more. Subscribers’ information (opted-in) may be then sold to insurance companies that cater specifically for ski insurance. These companies then pay the website for the information provided.

Pros:

• Very high margins (80%+)
• Relatively low maintenance
• Low barrier to entry compared to offering product/service personally

Cons:

• Need to maintain constant traffic and conversion rates
• Keep updated with relevant content
• Heavily vulnerable to commercial terms of lead buyers

Skills / Tasks:

• Content writing / editorial is the core requirement for this type of business
• The ability to network within the niche to build relationships with businesses that may benefit from lead generation data
• Business owners should be commercially astute, negotiating the best possible price for leads
• Knowledge of online marketing – SEO, CRO, keyword research

Software

Software businesses often spring up from hobbyists looking to create a relevant product within their niche. Usually the developer has created a niche software product and either opted to sell through word of mouth and referrals or to employ affiliates to sell it via an established partner network such as ClickBank.

Software businesses can be set up with either one-time or subscription-payment types depending on the nature of the product and the customer base.

Pros:

• High margin (60%+) and often stable cash flow
• Relatively low maintenance (depending on update requirement)
• Can employ affiliate model very effectively

Cons:

• Software updates may require technical experience
• Risks of piracy or copycats
• Customer support can be resource intensive

Skills / Tasks:

• Technical skills are an absolute necessity unless development is to be completely outsourced
• Commercial acumen is required to successfully sell software products
• Customer service – products needs to be supported

Software-as-a-Service (“SaaS”)

Software-as-a-Service or ‘SaaS’ is a business model where users pay a subscription to rent software hosted online instead of purchasing it outright and installing it locally on their computers. SaaS is at the core of centralized or cloud computing with the aim being that users can run their computer tools as online rented products. All of the processing work and file saving is conducted on the internet with users accessing their tools and files using a web browser.

Pros:

• High level of recurring cash flow
• Strong margins (50%+)
• Higher barriers to entry

Cons:

• Software updates may require technical experience
• Risks of piracy or copycats
• Customer support can be resource intensive

Skills / Tasks:

• Technical skills are an absolute necessity unless development is to be completely outsourced
• Commercial acumen is required to successfully sell software products
• Customer service – products need to be supported

Subscription

The subscription business model is where users are charged a periodic – daily, monthly or annual – fee to subscribe to a service, commonly a content offering (e.g. Netflix, Listen.com). A number of these businesses combine free content with premium (i.e. member-only) content (referred to as a “freemium” model. Often converting customers into long-term billing relationships requires time and effective marketing so many successful subscription models have a well-refined internet marketing strategy and conversion funnel in place.

Pros:

• High level of recurring cash flow
• Strong margins (50%+)
• High barrier to entry once established

Cons:

• Strong marketing and conversion skill-set required
• Ongoing customer care / support
• Competitive product required to retain customers

Skills / Tasks:

• Technical skills are an absolute necessity unless development is to be completely outsourced
• Commercial acumen is required to successfully sell software products
• Customer service – products need to be supported

Wrapping Up

The steps outlined in this article should provide a good starting point for determining the best internet business opportunity based on individual preferences, investment criteria and skillset.

The business search should become easier when clear on the business model and niche. It should be noted though, that maintaining a degree of flexibility is important when pursuing an internet business for sale. If too specific, buyers are unlikely to find a site that meets all of the criteria outlined.

Buyers should remember to start their search with an open mind. Taking an exploratory approach is the best way to fully understand the market and options available. It is equally as helpful to determine what type of internet business is not suitable as it is to find the right one from the get-go and of course, brokers are always at hand to help along the way.

Interested in buying an internet business? See our established websites for sale.