It is not uncommon to make 30% or more per year when you buy an online business.
It’s hard to find anything that can cash flow and appreciate like an online business. It is one of the least known but best investment opportunities available today.
What Do I Mean by an “online business”?
A online business is a business that is web or mobile-based. Think of an e-commerce website selling baby gifts. Or, a subscription website that teaches people how to cook healthy meals.
Yes, you can buy these businesses like you can buy brick and mortar businesses. There are even marketplaces and brokers that specialize in this area.
How Much Does it Cost to Buy an Online Business?
You can buy an online business for about 2-3 times its annual net profit. “Net profit” is the amount of money the owner takes home after paying all the business expenses.
That means, an online business earning $50,000 of net profit per year will cost about $100,000 – $150,000. By comparison, a typical multifamily real estate investment earning $50,000 of net profit per year would cost well over $500,000.
You can get financing to buy an online business.
Like real estate you can use financing to buy an online business. With an SBA loan you can buy an online business for as little as 10% down. That means you could buy a $100,000 business for $10,000. If you buy it at a 3x multiple you’d make $33,000 in profit every year (before debt service). That’s a 330% return on your cash outlay. Brokers often identify which businesses will qualify for SBA lending.
You can increase your return by improving the business.
If you work to grow the business even greater returns are possible. It’s not uncommon to double or triple the revenue from an online business with a little elbow grease. Then you can enjoy the increased profit or sell the business for much more than you paid.
You don’t have to be a computer programmer to run an online business.
Many online businesses are simple to run and need no specialized programming knowledge. They often run on user friendly platforms like WordPress, Shopify and Amazon. You can outsource more technical tasks to freelancers from sites like UpWork. Often the current owner will already have a team in place that is willing to continue with the new owner.
If you want to be completely hands off you can outsource all the operations to a management company. This is like apartment investors hiring a management company to run their apartment building. The management company does everything while you sit back and collect a check.
You can run an online business from any location.
All you need is internet access and you can run most online businesses from anywhere in the world. Online businesses are not dependent on expensive “prime” real estate locations. It’s one reason expenses are much lower for an online business than a brick and mortar business.
Online businesses are also easy to sell because your pool of buyers is global. You’re not limited buyers who live near the business.
You can run an online business in your spare time.
Many online businesses owners only work a few hours per week on their business. This is because you can automate many of the tasks in running a online business with software. You don’t have to quit your job to invest in an online business. But you might want to!
You don’t need employees.
Many online businesses have few or no employees. When you need extra help you can hire virtual assistants and independent contractors.
You can make even more money by buying multiple online businesses.
Many investors start small and build up to portfolios of 5, 10 or more online businesses. The skills needed to run one online business transfer to running several. The amount of income you earn is up to you.
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