How Do I Purchase an Online Business in England and Wales?

Purchasing an online business is a big step. Much like purchasing a physical business, you should do thorough legal and market research. This will help you assess the risks associated with purchasing an established online business and give you an idea as to its value. 

Legally, purchasing an established online business is similar to purchasing a physical one, but some features may be slightly different. This article will highlight some of the critical commercial factors to keep in mind when purchasing an online business. 

Identifying a Good Online Business

An online business is typically a business model where most of its transactions occur over the internet. Some key examples of an online business include:

• e-commerce;
• software;
• virtual services (such as app development, graphic design);
• social media websites; and
• online courses.

You should first identify the online business you wish to purchase. In doing so, there are certain factors to look for to assess whether the online business is valuable. These include:

• website traffic;
• search engine optimisation; and
• growth statistics.

Website Traffic

Website traffic is essentially the online presence of the business. It reflects how many potential customers are visiting the website in a given amount of time. It may be worth requesting analytics on web-traffic volume from the online business owner. 

Search Engine Optimisation

It will also be worth checking if the company is search engine optimised. Search engine optimisation (or ‘SEO’) is the process of improving the quality and quantity of engagement with a website by making it ‘search engine friendly’. This may mean that the website is likely to appear on search results because the website has specific commonly used keywords. 

Growth Statistics

Finally, you will also want to look at growth statistics. This may be relevant, as online businesses can be particularly fast-growing, and this will affect your purchase price. This will be especially important if it is a new business, and it can inform your strategy for reaching your customer base. 

Online Business Assets

In addition, you will also want to consider the business’ assets. Typical assets for an online business will include intellectual property and a domain name. Intellectual property can include trademarks, copyrights, and possibly even patents (each of which can be highly valuable).

Marketing Strategy

Another asset (which may not be reflected on a balance sheet) might be if the online business has an established and reputable marketing strategy. This can help further grow the image and brand of the business, which is necessary for overall growth. Along this vein, good web design and graphic design go a long way in running a successful online business. It is all the better if the online business already has this, as it saves you the effort of hiring a web designer. 

Physical Assets

One way online businesses differ from physical businesses also concerns assets. If most of the business is online, it may not have physical assets (e.g. land or a lease over land). As physical assets are usually quite valuable, this will also affect the purchase price of the online business. 

Because of this, it will be essential to make sure that you have a complete list of all of the company’s assets. At the same time, you will want to make sure that you know of some of the costs.

In any case, it is a good idea to make sure you have thoroughly researched all of the details of the business. It will also be good to speak to a trusted business consultant for advice. 

Process of Sale

Once you have identified the business you wish to buy, you should consider how best to finance your purchase.

Even if you have the capital to buy the business outright, it might be a good idea to get a loan so you can have some cash in a reserve fund.

Next, you will then want to begin buying the business. You should not hesitate to contact the business seller for further details before commencing any proceedings. That way, you can request information about assets, stocks, and contracts and check whether the business is fully registered with the HMRC (Her Majesty’s Revenue and Customs). Failure to provide registration with HMRC documents could indicate a scam.

After concluding the sale agreement terms, a final step will be to go to a business transfer agent to transfer the business. This process is similar to if you were purchasing a non-online business. 

Key Takeaways 

Legally, the process of purchasing an online business is very similar to purchasing a physical business. But some of the commercial factors you should consider will be different. This includes the type of assets and liabilities that the online business will have, such as intellectual property. Further considerations will include whether the business is search engine optimised, the projected growth, and how much traffic the business is getting.

If you need help with purchasing an online business, LegalVision’s business sale and purchase lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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