Did you know that it’s common to pay too much for an online business?
Sometimes it’s because of a failure to perform due diligence. Only to discover after purchasing the company that it’s not that profitable or even losing money.
The Phantom Online Business
But the most common mistake buyers make is to purchase something that doesn’t exist yet.
Here’s what happens…
Absurd Multiples
Sellers often have an inflated view of what their ecommerce companies are currently worth based upon the potential these businesses have in the future. So, they’ll set their asking price 5, 10, or 20+ times the business’ actual value.
However, that potential hasn’t been realized yet. And it may never happen.
The Work Hasn’t Been Done Yet
The current owners haven’t invested the time, money, and energy to make it a reality.
So, why should a seller be paid as if the phantom future business already exists?
Now it’s theoretically possible that a seller has put into place everything that’s necessary for his company to become that success over time.
But as a prospective buyer, understand it’s not at that point now…and you shouldn’t pay more than the company is actually worth.
Avoid Paying Twice
Because overpaying the seller for something that hasn’t been built yet means you’ll probably pay a second time to build that reality yourself post-purchase.
If you need help buying an online business, schedule a phone consultation with Internet Business Lawyer Mike Young.
