Buying a Service-Based Website Business
What is a service-based website business?
A service-based website business is a website business in which the service is performed and sometimes delivered to the customer offline. Examples include websites that offer services such as writing articles or term papers, or even search engine marketing.
The user finds the service provider online and orders the product. But the actual work and delivery is performed offline. This differs from a pure online business such as a content website like a blog where the user receives and consumes the information product online. Or a product website where the customer purchases and receives the product online.
When looking to acquire a service-based business, the process is slightly different from a pure online business. There are a few more questions that the buyer must ask. As usual, website traffic and financials must be verified. These include revenues, cash-flow, traffic data, ad campaigns, etc.
In a service-based business, as a buyer, you must also pay special attention to the fulfillment process. That is, how the service is performed and delivered. You must understand how the website seller and his team perform the service and deliver the product to the customer.
The big question is “Can you perform and deliver the same service to customers as the previous owner did?”
Some websites require specialized knowledge to operate. A buyer must make sure he or someone on his team has this knowledge.
For example, you may be purchasing a search engine marketing business that attracts its customers through its website. The benefit of acquiring this type of business is that it has an existing customer base. It also has history that is very valuable in a service business, which depends heavily on its reputation. If you start a brand new firm, you have to build a reputation and client list by proving to clients that you can deliver a satisfactory service. This takes time.
Some websites require basic general knowledge to operate. For example, most websites that offer article writing services simply outsource the work to professional writers and pay them a fee. They receive the completed articles from the writers and deliver them to the customer who ordered them.
In this case, the website owner only needs to have good organizational skills to run the business successfully. He must get to know the writers and understand how and where to recruit more writers.
Another example are the popular sports handicapping websites that offer picks to sports gamblers. In some cases, the handicapper who makes the picks is the owner of the website. But sometimes, the website owner hires a handicapper. The handicapper often receives a salary or commission or both.
In this example, the website buyer must either have experience as a handicapper, hire a new handicapper, or retain the current handicapper. Again, the benefit of acquiring a business like this is that there’s an existing customer base to tap into. And there’s a proven successful customer acquisition process. There’s no need for the buyer to start a new business and create new systems through trial-and-error over a long period of time.
Therefore, when buying a service-based website business, it is vital for a buyer to ask the seller to walk him through the complete product fulfillment process. The buyer must establish whether he has the ability to fulfill every task. If he can’t, he must figure out where he will obtain outside help before he purchases the business.
It is also very important for the buyer to speak with any contractors that are involved in the business. If the buyer will need their expert help, he must make sure that they’re willing to work for a new owner. The nightmare scenario for any buyer is to take over the business and contractors decide not to work for him. This could be due to personal ties to the previous owner. Contractors are sometimes family members and friends of the seller.
These are a few things to investigate when acquiring a service-based website business. If you’re a professional with the appropriate skill set, why start from scratch building a new business? It’s faster and less risky to acquire an existing website business with a customer base, history, and proven system. Then, add your skills to this successful process.
Author: Kris Tabetando
Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.
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