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Should I Buy a Starter Online Business First?

One of the questions I’ve heard the most is, “Should I buy a “Starter” online business first”?

This is a fundamental question, as time, money, and resources are extremely limited. I didn’t know anyone when I started even to ask this question, so I dipped my toe in gently.

I Bought a Starter Online Business First

Personally, that’s exactly what I did when I started. I bought a $20,000 Amazon Associates website from Empire Flippers. The seller turned out to be a great professional. He had a lot of experience making Amazon Associates sites to sell to other buyers. Empire Flippers made the process simple and helped me learn many of the challenges of the buying process. Just these simple steps taught me a lot about buying my next online business.

I bought a starter business because I believed it would help me be a better long-term online investor.

Since that first business, I’ve been on both sides of the argument regarding starter purchases. Is it the best use of time and capital for someone new in the space?

I’ve found there are four questions that help resolve whether a starter business is a good idea:

  • Am I sure this is the direction I want to go?
  • Do I believe I can jump in and start this career without a “warm-up” business?
  • Do I have the time and money to invest in this (eventual) side project?
  • Do I have enough technical and business experience to dive right into managing a real business?

These aren’t tough questions, but if you can’t answer each one with a resounding “yes,” then buying a starter online business might be a good option to consider.

Let’s tackle each one…

Am I Sure this is the Direction I Want to Go?

Let’s be honest; how do you know this is exactly what you want to do as a career move?

I know I wasn’t sure.  Back in 2014, there was a lot less information online about running your own one-person online businesses. I certainly didn’t even know I’d specialize in software and SaaS way back then.

When you’re thinking about 5, 6, and 7 figure purchase prices, you’re putting a lot of money at risk for a new type of business model. Some will argue it’s just another type of business. Others will say that it’s unique and more volatile than traditional businesses.

People have been investing large sums in real estate and equity/debt markets for hundreds of years; these are investing models many people understand. But investing in online properties? Virtual assets? That’s new and is still encompasses many unknowns. I can assure you, banks, loan officers, the government, and the IRS don’t understand these types of businesses yet. These rules are still being written.

With that in mind, are you sure you’re ready to dedicate your time and money to this career path? A starter business is one way to start to answer that question for yourself.

Am I Buying Myself a Job?

Running an online company can be like buying yourself a job. If you work in your business – especially if you’re the primary driver of the business success – it will feel like a job.

The challenge for every business owner – not just online – is to work on your business, not in your business. The first step in this process is to buy a business that already either has a team to do the day to day work or has enough profit to hire contractors to run the business for you.

Personally, I love operating my businesses, and in many ways, it is a part-time job for me. I love talking to customers, helping fix issues, and following the companies’ day-to-day ups and downs.

That’s the lifestyle that I enjoy. For many people, they want these businesses to be more passive and less active. If they have other responsibilities, that’s exactly the way to plan and structure your companies.

In the end, it’s really up to the buyer. Some buyers want to run their business like they are in the center of the war room. Others want the business to be an investment that they check in on once a week and guide from afar.

A starter business is a good way to learn which you prefer and if you can succeed in the long term.

Do You Believe You Can Jump In and Start this Career Without a “Warm Up”?

Before I started buying businesses, I had a 20-year career as an employee and as a consultant working as a quasi-employee. Yet, I was always selling something online, ever since 2004. Even during my busiest consulting years, my free time was devoted to reading and studying successful online people, like Ramit and Jon.

If you’ve always been an employee and/or never sold anything online, the idea of placing a lot of money into an online business can be like staring into a void of the unknown. If you’ve never repaired a broken website theme, run down a hosting bug, set up an advertising plan, or spoken with a customer who is personally giving you money, then such tasks can be intimidating.

One of the best ways to get this type of experience is to buy something small so that you can see all the moving parts involved in these types of projects. Even something as simple as a small content site or AdSense site can help.

In the End, It’s Not Rocket Science

You can learn all the different disciplines needed to transition from working in a corporate environment – where you’re a specialist in one or two things, and the company does everything else for you – to an environment where you are responsible for everything, from legal requirements, financial requirements, technical requirements, and personnel requirements.

You may also find out that this isn’t really right for your interests, background, and skills. If you’re an excellent content marketer, you may find running a content marketing business is a lot more work than just content writing. Many people are interested in perfecting their craft, not wasting time on administration, billing, legal issues, and tax compliance. That is really good to know before you buy a content marketing business. Buying a starter business can help show you which type of career works for you.

Do I Have the Time and Money to Invest in this (eventual) Side Project?

If you’re successful in buying a starter business and decide to purchase a larger entity, are you comfortable putting the starter business aside?

Are you comfortable spending time not putting your capital to work?

Can you accept stepping away from the smaller project to work on a bigger project?

Simple questions, but for a few people, not always simple answers.

Do I Have Enough Technical and Business Experience to Dive Right into Managing a Real Business?

The most important question is whether your background lends itself to jumping straight into managing a business that has a large virtual component to it, no matter what type of online business you purchase.

No matter how involved you are in the business, the owner should be responsible for many of the most critical tasks. Domain name access, password management, secure hosting setup, financial accounting, bank relationships, technical team management, project roadmap, and planning. These are just some of the things you may not be able to outsource, at least, not at first.

Unique Online Business Challenges

Have you ever managed developers before? It’s not the same as managing a “team” before at a corporate job. Completing software/online development projects on time requires the mastery of a unique set of skills.

Are you comfortable managing access to your critical systems? Creating, storing, and managing SSH keys? Can you create a plan such that your technical team can’t lock you out of your own business? Are you comfortable with interruptions in your day to approve requests to access critical systems that only you should approve every time?

There are so many things that people without an online business/technical background can’t know when running an online company. You can learn, but it’s going to take some time and some mistakes.

This can be the best reason to start with a starter business first, just to you can learn these skills, invest the time and energy into educating yourself on these types of challenges, and truly know if this type of investing is right for you.

Summary

Of all of the above questions, the last one causes the most pauses regarding online business investing.

You’ll learn many things from buying a starter business, but these are really the four main questions that are worth answering.

Once answered, you’ll have a better idea of the direction you want to go and what niches you want to carve out for your career.

Interested in the question I’m asked most often?

 

Who Am I?

Moving to Grand Cayman
Acquisition Entrepreneur (a hoity-toity way to say I get really excited about buying and running companies) based out of Las Vegas, NV.

I write essays about my experiences as a buyer of online businesses at MichaelFrew.com, steward the The Best Damn Newsletter for Buying Online Businesses, and provide back stage insight into running a real online business portfolio at Online Business Ride Along.

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Online Business Ride Along

Online Business Ride Along

Online Business Ride Along is an all-access backstage pass to learn how I manage my 7-figure portfolio of Internet-based businesses. I share exactly how I’m operating these companies, the monthly P&L’s, and all the behind the scenes activities of managing multiple online companies.

If you ever found yourself saying “I’ve spent years taking courses to learn more about online business, but none of them explain what is it really like?”, then this is your answer.

Recent Posts

  • Gigalixir Software Acquisition (SaaS)
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  • Online Business Acquisition Costs You Won’t Find In a Broker Prospectus
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Online Acquisition Newsletter

Point of Frew

A buyer’s perspective of online business acquisitions

Not one sided information pushed by an online broker or business marketplace.

  This is from in the trenches, from an actual buyer of software, SaaS, content sites, and E-commerce stores, sharing what really goes on behind the scenes in the world of online business sales.


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