Could You Start With an Already Established Business?
History in our industry was made in 2007 by the sale of resume.com for a whopping $300,000.
Domain buying insiders thought the name was purchased for a steal, while those in our industry, me included, felt the purchase price was highly inflated.
Why such a high buying price?
Though an established resume writing business, the domain name was the real appreciating asset in my opinion. The domain name is short and easy to remember.
Even now, shorter domain names are highly sought after, as is demonstrated here.
Without the sticker price, maybe there’s an established business currently in operation that would be a perfect buy for you.
Hadn’t thought about it?
The main reason for buying an existing business is primarily to avoid starting from scratch.
An existing business can mean certain mechanisms are already in place; e.g. website design, internal forms/contracts, business relationships, established clients for potential repeat business, and so on.
Remember, today’s e-businesses are entirely different than those made of brick-and-mortar.
A seller/operator in Tampa, Florida, could transfer a domain/business to a new buyer/operator located in Bridgeport, Connecticut, with just the few clicks of a mouse. Of course this works best if the seller and the buyer attracts mainly online clientele. For example, a business that secures only local clients would be better sold to another local buyer/owner.
Should you pay six figures to obtain an existing operation?
It’s ultimately up to you, but I would say no. I’ll go out on a limb and say very few resume-writing websites on the Internet today are worth six figures at this point.
My opinion is also based on the fact that many resume writing services would fail if a new owner took them over because the original business success was "built off" the other owner. Take that success ingredient away, and the new business owner may struggle with generating the same success as the previous owner.
What steps should you take and what should you look for?
First, contact several resume-writing organizations to inquire about writers who are retiring or closing shop. Place a “business wanted” advertisement within each organization’s newsletter.
Second, look for domains that have been used actively for longer than 12 months, if you can afford. Purchase a domain name that’s short, memorable, and will cater to any business name … unless you get permission from the seller to continue using their business name.
Third, lean towards a dot com with a fair amount of inbound links and in good standing with Google and other search engines.
Fourth, be aware of exactly are you buying versus what's being sold. Are you getting rights to the company name/logo, domain name, developed website, established client list, business equipment, copyrights to blog content, access to the complete newsletter list?
When making a purchase beyond the domain name, maybe the whole enchilada, it’s best to look at the company’s P&L and bank statements for the past few years.
Resume writing businesses commonly sell for two to three times their yearly gross sales, so this will give you some idea on what you might pay for an existing business. For example, a resume business generating $50,000 a year in gross sales may sell for $150,000.
Here’s a bit of "detail to chew" when contemplating whether to build or buy:
- Businesses spend $1,000 up to $100,000 for website design and development.
- Established client relationships generate an immediate flow of sales for you.
- Business equipment is costly to purchase new, so existing used equipment is an option.
- Developed websites come with content, shopping cart, and so on, already established.
Here are some "flip-side" thoughts:
1. The website may have cost top dollar to build, but may not be optimal in design or be mobile friendly. Be cautious when buying an already established website.
2. When taking over an existing business, you’re somewhat locked into the former owner’s price points.
If the former business owner charged $45 for a resume, while you intend to charge $200-$400, you may scare away repeat customers with your new price points. What do you expect your tolerance for customer loss to be?
3. Buying the former owner’s business equipment could result in outdated or unreliable machinery, so definitely beware.
4. Changing to a new logo or company name could turn off repeat buyers who don’t like change.
5. Content within the existing website may not generate an optimal amount of leads — or the right ones for that matter.
6. Maybe the site uses an unknown shopping cart system, making visitors uneasy about the security of their purchase. Taking on a site someone else built can pose problems or operational concerns.
Curious about what happened to resume.com?
The domain name was sold a second time in 2008 at a significant loss. Another major change is the site no longer offers resume writing, but rather, serves as an online resume builder (previously the site generated revenue from pay-per-click advertisers).
Acquiring an established business doesn’t mean a new buyer can sustain the same level of business that the previous Owner was generating, as mentioned above.
Do you have what it takes to avoid Resume.com mistakes?
What’s your financial loss threshold?
Is it $300,000 or a mere $1,000?
Maybe Starting Small is Better?
Starting a business and building it from the bottom rung was the better option for me. I was new to all things business … and when I now add up all the major mistakes I made in the beginning, and the following years, I’m glad I didn’t have a large financial investment hanging over my head and went in favor of a bootstrap business.
