Buy a Shopify Store | A Guide to Using Shopify's Exchange Marketplace to buy an online business
Online businesses may differ in a lot of respects from their ‘bricks and mortar’, physical equivalents, but they share one key characteristic: you can either set one up from scratch, or you can buy one.
And, assuming you have the capital to hand, the latter approach can be a much safer bet — by buying an established business, you can avoid a lot of the financial risk that comes with setting one up from scratch, and be more confident of seeing a return on your investment.
Because physical businesses have been around so long, buying one is a fairly straightforward process — there are plenty of agents, accountants and lawyers available to lend a guiding hand. For a fee of course, but you shouldn’t have much trouble finding an expert who can guide you through the process.
Buying an online business however is arguably a less straightforward affair: the internet is in many ways a ‘wild west’ and the businesses it contains can be very young. It can be hard to know who to trust or indeed even where to find a business to buy; the whole process can feel very scary.
To help investors navigate this minefield, Shopify — one of the world’s leading e-commerce solution providers — has developed a platform called Exchange Marketplace which aims to make it safer and simpler to both buy and sell a Shopify store.
The idea behind Exchange Marketplace is pretty simple: it’s there to help people buy a Shopify store in relative confidence. This is because on Exchange Marketplace, you get to see data pulled directly from Shopify on the performance of that store: revenue, traffic, sales and inventory. Those selling their stores via Exchange Marketplace can’t tweak or massage any of this data, so you can feel certain that these numbers are correct.
Additionally, Shopify vets the sellers who are listing their stores on Exchange Marketplace to help ensure high quality listings. Merchants with a negative history of chargebacks or bad customer relations are not able to list their stores on Exchange Marketplace.
This transparency and vetting should help minimize any negative experiences on Exchange Marketplace. However, as with the purchase of any type of business, you still need to exercise caution when buying an online store via the platform.
So, we’ve put together some key tips on how to use Shopify’s Exchange Marketplace successfully, which you’ll find below.
1. Narrow down your requirements
Exchange Marketplace contains thousands of Shopify stores for sale, so before you start looking for stores to buy there, it’s worth trying to narrow down your requirement. Basically you need to work out what sort of store you’d like to buy, and what sort of commitment (financial or otherwise) you can give it.
First, you need to establish a budget: how much are you prepared to invest? Listings on Exchange Marketplace can range from $50 — for a site which has been set up and is fully functional but is yet to generate a profit — up to hundreds of thousands of dollars for an established site which generates tens of thousands of dollars a month. As you might expect, the Shopify stores on Exchange Marketplace that generate the biggest monthly profits are the most expensive ones.
Second, you need to work out how much time you are prepared to spend on the day-to-day aspects of running the business you purchase. Some online businesses — particularly dropshipping businesses — can run themselves to a reasonably large degree, but others will involve a lot of graft (be that in terms of PR, marketing or operations). If you are time poor, you may need to stay clear of the latter category, even if you spot a profitable store and have the cash to buy it.
Third, you need to think about what products you are comfortable with selling. Are there niches you are particularly experienced with, or particularly want to avoid? Do you have any ethical concerns about where certain dropshipping suppliers source their products? It’s good to have a clear vision when it comes to product type ready before you start looking for a store on Exchange Marketplace: this will help you identify a suitable opportunity more easily.
2. Do your research
Once you’ve got a clear sense of how much time and money you are prepared to put into a store that you buy online, along with a rough idea of the sort of business you are hoping to buy, it’s time to browse Shopify’s Exchange Marketplace platform and do some preliminary research on the stores which might meet your criteria.
Exchange Marketplace allows you to browse stores using the following filters:
Business type (dropshipping, inventory, print on demand etc.)
Try and use these filters judiciously — based on your earlier ‘narrowing down’ exercise — to identify some stores to buy.
Once you’ve got a set of contenders in front of you, you now need to take a careful look at the data provided about each store, to see what looks like a reasonably safe purchase.
At the top of each store listed on Exchange Marketplace, there are four tabs which take you to key information about a store. These are as follows, and each should be studied in depth:
This section of an Exchange Marketplace listing gives you
an overview of the business
the reason why somebody should buy it
some suggestions regarding how the business could be grown
a history of the work already put into the store
the time it takes to run the business per week.
The key thing to remember about all the above information is that it is provided entirely by the existing owner. It’s straight from the horse’s mouth — and accordingly, you may be able to judge the seller’s character to a degree from it.
Does the seller come across like a trustworthy individual? What is their motivation for selling the store — do they seem like they just want to make a quick buck, or do they seem to have genuinely good reasons for selling their business?
If having read the site description you feel that you are dealing with somebody you can trust, and a site that could turn a profit for you, it’s time to drill down into the performance figures.
The performance tab shows you the monthly revenue and traffic of the Shopify store for sale. Now, importantly, this data comes directly from Shopify, and can’t be edited by the seller — so you can have confidence that it is genuine.
However, it’s important to remember that revenue does not equate to profit, and traffic does not equate to ‘organic traffic.’ When doing your due diligence (which we’ll discuss later in this post), you will need to get to the bottom of what the profit levels are and precisely how the traffic is being generated.
Nonetheless, the two stats will give you a reasonably good picture of how the site is performing.
This section of the listing tells you what the core outgoings of the business are, and can help you get a sense of what the monthly profit — as opposed to the revenue — of the business is likely to be.
Look out for the good stuff (i.e., high levels of revenue without accompanying high levels of expenditure) as well as any gaps that might ring alarm bells (is there an expense which you’d expect to see which isn’t there?).
The ‘Sale includes’ section gives an overview of what’s included in the sale — for example the inventory, domain, social media following, after-sale support and so on.
You can use the data here to make a quick assessment regarding two things: first, value for money of the sale (are you getting everything you need to run the business after you buy it?) and second, how successful and established the business is (the social stats will give you an indication of this).
By drilling down into each of these sections, you should be able to establish whether a store is worthy of consideration for purchase.
And, if you think you’ve spotted a potential winner, it’s time to perform due dilligence...
3. Perform due diligence
Once you’ve identified some good contenders for a purchase, it’s time to proceed with due diligence. Performing this is one of the most important aspects of buying a Shopify store (if not the most important) and it is crucial to get it right.
In Shopify’s Exchange Marketplace, buyers can communicate directly — via anonymous email — with store sellers. When doing so, these are the key questions worth asking:
Where is the site traffic coming from?
Broadly speaking there are two types of site traffic: the stuff you pay for (via advertising) and the stuff you don’t (organic). For obvious reasons the latter is more valuable to you.
Accordingly, you need to be crystal clear about where your seller is getting his or her site traffic from. This is one of the key questions to ask the person whose business you are considering buying. Dig down until you get a very comprehensive answer.
If the seller is relying on paid advertising to generate traffic, you will need to be able to replicate this when you take over the store. Accordingly, it’s important to get as clear an understanding as possible of the budgets and mechanisms involved, and a commitment that a full overview of the current advertising process (as well as some after-sales support specifically on this aspect of things) will be supplied to you when you buy the store.
If the seller is claiming that their site traffic is largely organic, you should ask to see Google Analytics reports which confirm this fact. Ideally, you should be temporarily added as a read-only user of the seller’s Analytics account so that you can have first hand access to the stats. This reduces the chance — however unlikely — of a seller trying to pass off doctored PDFs from Analytics as evidence of organic search results!
When investigating organic traffic to a site, it’s also worth using a tool like Ahrefs to check the backlink profile of the store. Backlinks — external links to a site — are one of the best indicators that a site will perform well in organic search results, and Ahrefs allows you to check any domain’s backlink profile simply by entering it into the software.
If there aren’t many backlinks pointing to the store you’re thinking of buying, it’s worth thinking twice about the purchase. Equally, if there are loads of backlinks to the site, but they are all ‘spammy’ or low-quality in nature, that should ring big alarm bells about the sale — whilst dodgy link building practices can temporarily boost a site’s performance in search results, they usually get spotted by Google’s algorithms and can lead to a significant drop in traffic overnight.
And of course, if you see lots of great, high-quality backlinks pointing to the store, then happy days: this is usually a good indicator that your new store will perform well in search results.
How much does it cost to run the store?
The next thing you need to get to grips with is the financials. You need to be very clear about how much it costs to run the store, so ask the seller for the full list of expenses.
Costs that you should enquiry about include:
marketing (paid advertising campaigns, both online and offline)
...and anything else that might be specific to the business.
The aim is to come out of the costs conversation with a clear picture of what the seller is spending to generate the headline results that they’ve posted on Exchange Marketplace.
What’s included in the sale?
You should ask your seller exactly what assets are included in the sale. Ideally you should try to get all of the following as part of your purchase:
Social media accounts
Current process overviews
All of the above are important, but the domain (www.thestorename.com etc.) is particularly important to proceedings if you are buying an established business that relies on organic search traffic to generate sales. This is because if the seller keeps the domain, he or she is also keeping all the backlinks pointing to it — and since backlinks are so crucial to good search results, your new business will be deprived of a lot of traffic from the get-go.
How good are the social accounts and mailing lists?
Social followings and subscriber lists are hugely important to generating repeat business and/or awareness of new products and services. Accordingly, you need to ensure that these are kosher.
To verify the quality of social followings, take a look at the profiles being included as part of the sale and look at
the engagement rates (i.e., how many people interact with posts)
a selection of followers (to try and spot if they are ‘real’ people or fake accounts).
Given the importance of e-newsletters to driving sales, it’s also crucial that you have full confidence in the quality of the mailing list that you are inheriting as part of the sale.
To verify the quality of a mailing list, ask for access to analytics reports and check the open and click-through rates.
You should also ask how the data has been captured — it’s important, particularly in an era of GDPR, to be certain that any processes used by the seller for getting people onto a mailing list are legally robust.
For example, if your seller built up a large mailing list through scraping addresses from the internet, or bought a bunch of email addresses from dubious suppliers, you may find yourself in a situation where you are both legally prohibited from emailing the list and not getting great results from it anyway (because you end up sending unsolicited mail to a low-quality list).
What is the person selling the site like?
So far, when discussing the due diligence process, we’ve talked a lot about using metrics and stats as a way to verify whether buying a Shopify Store via Exchange Marketplace is a good idea or not.
However, it’s crucial to think about the human dimension too: at the end of the day, what you are purchasing has been created and is being sold by a person, not an algorithm. So, you need to work out what that person is like before giving them a lot of your money!
To this end, it’s worth reflecting on any conversations you have with them and ask yourself:
Is this person trustworthy?
Why is he or she selling the store?
Can I be confident he or she will support me with any questions after I’ve made the purchase?
Of course, humans being humans, it can be difficult to find satisfactory answers to the above questions. But if you find yourself dealing with somebody who seems shady, won’t give you a genuine reason for selling and doesn’t engage with any queries you may have about the business in a meaningful way, it’s time to exercise caution about the purchase.
Can I have a behind the scenes look?
If at all possible, ask the seller if you can have a ‘behind the scenes’ look at the business. This could involve screenshares and read-only access to analytics and software.
The more of a glimpse you can get of the mechanics of the business, the better you’ll be able to make a sound decision as to whether it is worth purchasing or not.
And of course, the more willing a seller is to give you this insight, the more you can feel that they are a trustworthy person to do business with.
Is this the best use of my capital?
Whenever you decide to invest in a business it is always advisable to get professional financial (and legal) advice beforehand.
Although an online store can be a great investment, and Shopify’s Exchange Marketplace offers a good way to find a Shopify store to buy, depending on your circumstances there may be more effective ways to invest.
So, particularly if you are planning on investing a large amount of money in a store, it makes sense to talk to a financial advisor first. A chat with a lawyer can’t hurt either!
4 Start the buying process
If after all your browsing, research and due diligence you arrive at the conclusion that you wish to proceed with buying a Shopify store on Exchange Marketplace, it’s time to start the transaction process.
One of the major advantages of using Exchange Marketplaceto purchase an online business is that Shopify has partnered with a company called Escrow.com to help reduce the risk of fraud and protect both buyers and sellers during the purchasing process.
Escrow.com does this (as the name of the company suggests) by using a method of payment called ‘escrow’, where the money is protected by a third party (in this case Escrow.com) until both the buyer and the seller agree that the conditions of the deal have been met.
Because of the way that the escrow method of payment works, before starting to buy the business, you need to establish a very clear set of conditions for purchase along with an exhaustive checklist of everything you are expecting to receive as part of the purchase (domain, mailing list, social media accounts, after-sales support and so on).
After you transfer your money to Escrow you will be granted access to your Shopify store; there then follows an ‘inspection period’ during which you can perform an in-depth review of the business to ensure that all the data, orders and assets are as you’d expect.
Once you are happy you can approve your purchase and notify Escrow.com that you are happy for the company to transfer money to the seller of the site. After this, Exchange Marketplace will make the necessary preparations to fully transfer the store to you — this takes about 3-5 days, after which you will become the full owner of the business.
The good news is that Shopify can support you in many ways throughout this inspection period. The company has a dedicated team for Exchange Marketplace, who are there to guide you through the process and try to answer any queries you may have. Whilst they won’t be able to give you a definitive answer as to whether a particular business is a safe bet or not, they will be able to guide you through the process of purchasing an online store and share best practice with you.
Escrow.com also provides support to people buying a store through the Shopify Exchange Marketplace.
So, finally, if you do decide to use Exchange Marketplace to buy a Shopify store, good luck with your purchase! And if you have any experience of buying an online store, we’d love to hear it: just leave a comment below.