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3 Ways To Succeed In Online Business

By Angel Investing, Startup Lawyer, Startups

online business ownership conceptThere are three primary methods for succeeding as an e-commerce business owner. Of course, there are pros and cons to each. And, depending upon the assets you have, risk tolerance, and other personal factors, perhaps one or two of these options aren’t the right path for you.

1. Startup Founder

The most popular method is to found or co-found an online venture. To succeed, it requires years of dedication and lots of sweat equity. The money available in the early years will come out of your own pocket or through the small amount of revenue the company generates as you ramp up.

Because your labor is the primary driving force behind the startup, it takes less money to get it up and going. However, bootstrapping as a founder has a high failure rate too.

2. Acquisition

If you have some money saved up or can get access to it from other sources, you may decide to buy an online business that’s already profitable and continue to grow it as the new owner. This is a proven method. And I’ve created a course that shows U.S. entrepreneurs how to buy an online business that’s already successful. This is a popular option for those who leave a white collar job and want to own a business instead of becoming an employee again.

Of course, a downside to this option is that it does require money to invest on the front end to make the purchase — your assets and/or other people’s money (OPM). If you’re broke and don’t have friends/family willing to invest in the acquisition, it’s probably better to stick to the first method and found your own business and grow it by bootstrapping.

3. Angel Investing

If you qualify as an accredited investor, you may want to consider the third option of becoming part owner of one or more startups as an angel investor. With this method, you’re essentially placing calculated bets on founders/co-founders and their ventures with the expectation that there will be a profitable payoff down the road when the startup gets acquired or goes public in an initial public offering (IPO).

As an angel investor, it’s unlikely that you’ll have control of the company’s direction. In fact, it may be a strictly passive investment or one where you provide advice when asked for by a founder.

You may invest directly as an angel. However, many newbies choose to invest as a limited partner in an angel syndicate where a more experienced investor is the syndicate lead. A good place to learn more about these types of investments is AngelList.

Although the payoff can be huge if you’re lucky enough to invest in an online startup that becomes a decacorn ($10 billion+ valuation), understand that’s not the normal outcome. For this reason, many angel investors spread their money across multiple startups with the expectation that out of every 10 startups selected, 6-7 will fail within 3 years, 2-3 will break even, and 1 might generate a return on investment (ROI) that exceeds the losses from others by being acquired or going public.

How To Make An Offer To Buy An Online Business

By Business Lawyer, Internet Lawyer

buy online businessWhen you find an online business you want to buy, the fear of missing out (FOMO) often leads to making mistakes that can hurt you legally and financially.

In the rush to acquire the venture, it’s a common mistake to throw an informal offer at the seller verbally or in an email to the seller or the seller’s broker.

This type of offer will typically be defective because it lacks key terms designed to protect you, including your ability to walk away from the potential deal if something is wrong with the business or its financials.

For example, you might think you’re making an offer to buy some of the essential assets but the seller mistakenly believes you’re offering to buy the company’s equity (e.g., corporate stock).

And when a deal falls apart badly, that’s when lawsuits and other nasty stuff happens because either you or the seller feels cheated or deceived.

The potential damage from a blown deal can really add up if the seller turned down other offers (lost opportunity costs) based on the mistaken belief you would follow through and purchase.

To reduce the risk of this happening, it makes sense to make your offer using a non-binding letter of intent (LOI) that spells out the key details of the offer and provides you the ability to walk away (or revise your offer) if you discover something important that adversely affects the value of the business to you.

An experienced Internet business lawyer can help you create an LOI that’s designed to be a serious offer to purchase an online business while protecting your interests in the process. If you’d like help with this from Attorney Mike Young, the first step is to book a phone consultation with him.

Are You Overpaying To Buy An Online Business?

By Business Contracts, Business Lawyer, Internet Lawyer, Website Lawyer, Website Legal Documents

couple buying an online businessDid 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.