How to Buy an E-Commerce Business on Shopify, Bigcommerce and Magento
When it comes to eCommerce mergers and transactions, Optimum7 reviews due diligence, the team encourages clients to build eCommerce businesses with an exit strategy. Even if you are doing great and just want to collect the profits, you always want to know what your business is worth.
There are a couple of different ways this works. One, somebody comes, and they want to buy an eCommerce business. Two, the company that’s being sold comes to Optimum7 and wants to prepare it for a specific sale or pitch. And three, it could be a venture capital or private equity that wants to buy a series of eCommerce businesses and consolidate it together.
eCommerce Companies And Acquisitions
What is the biggest challenge when going through this process?
The team looks at the business’s eCommerce platform or platform. Disorganization from a security standpoint occurs with Google Analytics, site admin access, or some tracking codes. In some cases, a third-party agency established their Google Analytics, and therefore, they don’t have ownership of it.
When the team goes in and tries to verify traffic, it becomes an arduous process because they don’t want to give it up. Therefore, that data is lost. Come up with a strategy of consolidation. To help them in the short term from potential security risk and that company that will potentially acquire them.
Forty percent of these M&A deals fall through because the selling party did not do their due diligence. So in your eCommerce operation, if you are not big enough to have a CTO or a COO, you’re going to run into problems with these kinds of access. A good firm looks at vulnerabilities.
Consolidation Within A Target Company
A structure like this needs categorization. Ownership is one, security is another one. You need to look at the properties. The properties go all the way to marketing if you’re using a marketing automation platform, analytics, or any kind of testing tool.
Marketing divides into many different sections. You might have a Facebook business, AdWords, AdRoll, TikTok, paid search properties, and social media properties.
How does one organize this?
Follow a specific process. The Optimum7 team has composed a checklist from ample experience. The developers know exactly every single step that needs to be taken to ensure that all of these different properties, all the way from your site security to your social media channels, are all housed under one roof.
Talk about consolidation.
Suppose that sizable private equity comes and buys ten different eCommerce sites. Five of them are on Shopify, three of them are on Magento, and the client doesn’t know the platforms for the remaining ones. Optimum then risks dealing with ten brands instead of one.
You need to ask if you need to merge the brands and how many to combine. Merging can be risky. You can also do ten brands under a multi-store structure on Shopify, BigCommerce, or Enterprise and give them the capability to manage operations from one admin panel and one source.
Pain Process With Online Retailer Brands
What is the pain process?
You’re going to run into multiple pain points throughout that process. With ten brands, the process multiplies accordingly. But in addition to that, the strategy behind merging brands comes down to putting together your market research for every one of these brands. Then determine which one has legs.
Which one of these brands has the potential and the scalability to existing for the next ten to thirty years? In the best-case scenario, they all will last. Then you want to house all of the backends under one admin panel. Those individually forward-facing brands must appear on the front end.
Explain eCommerce mergers and acquisitions.
The first thing that you need to do is categorize. You have security, ownership, marketing, validation, vulnerabilities, operations, logistics, and supply chains. So you have to look at all these steps if you are buying an eCommerce business, if you’re selling yours, or if you’re getting ready to sell yours, or if you’re buying multiple eCommerce entities where you want to consolidate them together.
You’re going to need an eCommerce M&A checklist along with an execution plan. If trying to sell your business, conduct this due diligence with an agency or partner who knows how to prepare for a sale. Other CFOs help on the financial side of this as well.
What Acquirer Companies Need To Do
If you are selling or buying a business, should you celebrate?
If you’re selling, pop the champagne. However, if you purchase the new business, you’re not popping bottles. Get to work.
After you buy or consolidate, look at the lowest hanging fruits from a marketing conversion standpoint. Where are you leaving money on the table?
Talk about that process.
In some cases, that existing brand that you just acquired is already working with a marketing agency or an advertising agency. Are they doing the best possible job? You don’t know.
Get a marketing or advertising consultant to vet those agencies that the brand was currently using to see if they were leaving money on the table or doing a poor job if they were just collecting a check month in and month out.
The brand was on autopilot and doing well. Go in, have an expert vet out the existing agencies that the brand was previously using to see if they’re going to stick around or if you need to start looking for a new agency.
Just because you acquired a successful brand doesn’t mean it will continue to do well. You need to grow and scale it. If you want to see an ROI a lot faster, you need to make sure that you’re now implementing a strategy that will take their existing profits.
Compare this to real estate, where you wait for the land to appreciate. It’s going to take a very long time. So, you need to focus on your marketing strategy and what you’re going to do for that brand moving forward.
If you need assistance with eCommerce M&A or preparing your company for sale, if you’re buying a company, eCommerce business, contact the Optimum team. The marketers and developers can help.