# How to Buy an Existing Dropshipping Business in 2023
Purchasing an existing dropshipping business can be a smart shortcut to getting your ecommerce career off the ground faster compared to starting completely from scratch. Acquiring a proven business with established processes, traffic, suppliers, and revenue can give you a major head start.
In this 10,000+ word guide, we'll cover everything you need to know about buying, evaluating, transitioning, and scaling an existing dropshipping business in 2023.
## Why Buy an Existing Business?
Launching a new dropshipping store from the ground up involves significant effort. You need to handle all the startup tasks covered in this blog like securing suppliers, building a website, finding a profitable niche, driving initial traffic, and proving out your model.
Purchasing an existing business allows you to bypass much of this upfront work. The core infrastructure, traffic sources, and operations are already in place.
Benefits of buying instead of starting a dropshipping business include:
- **Speed to revenue** - You can take over an already profitable business and start earning income faster. Don't have to wait months or years to recoup startup costs and see revenue.
- **Established processes** - The business likely has product sourcing, order fulfillment, and customer service processes already ironed out.
- **Proven business model** - Lower risk since you know the business and model are viable by seeing the current owner's success.
- **Turnkey website** - No need to build a store from scratch and drive that initial traffic. Take over a site that's already ranking and converting.
- **Supplier relationships** - Start with reputable suppliers already secured instead of vetting yourself.
- **Momentum** - Build on the existing brand awareness, reviews, email list, and social media following.
- **Leverage experience** - Learn from the current owner's experience operating the business.
The main tradeoff is the upfront capital required to purchase the business. However, with the faster speed to profitability, the ROI timeline can make sense.
## How to Value a Dropshipping Business
A core step is learning how to accurately value an existing dropshipping store you may want to purchase. This enables you to determine fair asking prices and negotiation starting points.
Dropshipping businesses are usually valued based on some multiple of their average monthly profits or revenues. Common valuation methods include:
- **Price-to-Profit Multiple** - Annual net profit x multiple (2-5x). For example, if net profit is $100K/year, at 3x multiple the value would be $300K.
- **Price-to-Sales Multiple** - Annual gross revenue x multiple (0.5-1.5x). For a $500K/year revenue business, at 1x multiple the value is $500K.
- **Seller Discretionary Earnings** - Net profit + owner salary, benefits, perks. Accounts for the owner's full compensation required to operate.
- **Discounted Cash Flow** - Projects future expected profits discounted to today's dollars. Factors in growth forecasts.
- **Asset-Based** - Total value of tangible assets like inventory, equipment, domains, software, etc.
**Multiples approach** is most common since dropshipping is light on fixed assets. Focus on verifying revenues and profitability through tax returns, bank statements, and financial records during due diligence.
Also assess less quantifiable aspects like supplier relationships, branding, website strength, customer loyalty and retention rates.
Aim for a valuation of 2-4x profit or 0.8-1.2x revenue if the business fundamentals are healthy. Rely on experienced brokers to determine fair pricing if needed.
## Where to Find Dropshipping Businesses for Sale
Once you know how to value potential businesses, next is identifying ones for sale that match your criteria. Some places to find dropshipping stores for sale include:
- **Broker marketplaces** - Brokers list established ecommerce businesses for sale like [FE International](https://feinternational.com/), [Empire Flippers](https://empireflippers.com/), [Quiet Light](https://quietlight.com/), and [MicroAcquire](https://microacquire.com/).
- **Direct to seller** - Experienced owners may want to sell directly instead of via broker. Look for sites/stores mentioning the owner is selling.
- **Business for sale platforms** - Listings on sites like [BizBuySell](https://www.bizbuysell.com/), [Flippa](https://flippa.com/), and [Shopify Exchange](https://exchange.shopify.com/).
- **Word of mouth** - Talk to other entrepreneurs/investors about deals. Join ecommerce-focused Facebook Groups where deals are sometimes posted.
Vet any business thoroughly before buying - independently verify revenue, profitability, traffic, email list size, and other claims made by the seller. Require proof to avoid misrepresentations.
Factor in platform fees, local sales tax, potential value-add work needed, and any broker commissions into your max offer price. Be ready to move quickly for quality businesses that hit the market.
## Buying Process and Timeline
The process to purchase an established dropshipping business can move quickly once you find a fit, or slowly if negotiations drag out. Have funds ready for a fast close when needed.
Here is an overview of the typical buying process timeline:
**1. Initial Research**
- Search marketplaces/forums and vet potential acquisition targets
- Shortlist 3-5 businesses that fulfill your requirements
- Ask questions about profitability, costs, time commitment, growth etc.
- Get on discovery calls with owners and brokers
- Have owners sign an NDA if needed
**3. Due Diligence**
- Gain access to performance dashboards, financial records, and key accounts
- Independently verify reported revenues and traffic
- Assess customer retention rates, lifetime value
- Review supplier agreements and product sourcing pipeline
- Work with professionals to determine fair valuation based on due diligence
- Make initial offer contingent on further verification
- Price should reflect profitability and growth prospects
- Carefully negotiate deal structure - upfront payment, earnouts, equity involvement etc.
**6. Close and Transition**
- Finalize purchase agreement and transfer money/equity
- Coordinate business transfer logistics with seller
- Update business license, accounts, tax filings etc. under your ownership
Don't rush through due diligence - take time to fully verify all business aspects to feel confident before closing a deal. The right acquisition can fast track your success.
## Key Aspects to Evaluate
During the due diligence and negotiation phases, you need to dive deep into all aspects of the dropshipping business to determine if it's worth buying. Focus on assessing:
Request 2+ years of detailed financial statements, tax returns, and bank records. Verify revenues, costs, and profitability. Watch for inconsistencies or gaps. Assess margins and operating leverage potential.
### Website Platform and Performance
Review analytics for traffic volumes, conversions, page speed, mobile experience. See if SEO can be improved. Assess site security and uptime.
### Product Sourcing and Suppliers
Learn how products are sourced and vetted. Review supplier agreements and relationships. Ensure favorable terms and bulk pricing.
### Order Processing and Fulfillment
Understand the order procedures in place. Assess fraud protection. Confirm reliable and fast shipping. Review returns and refund processes.
### Marketing and Traffic Sources
Verify sources driving traffic like email, social, organic search, paid ads. Check Google Search Console and social engagement. Review campaigns and funnels converting customers.
### Customer Service
Evaluate support levels and systems. Assess reviews and feedback. Check for gaps where service could improve. Understand lifetime value metrics.
### Technology Stack
Document platforms and tools used for security, automation, analytics, ads, etc. Ensure scalable solutions are in place with room to expand.
### Legal/Regulatory Standing
Confirm business licenses, tax registration, and regulatory compliance are all in order in current and any past jurisdictions of operation.
Conducting an in-depth assessment of all of the above fronts ensures you know what you're getting into and can identify any changes needed post-acquisition.
## Transitioning Ownership Smoothly
Once the sale closes, your next focus is to smoothly transition the business to your ownership with minimal disruption:
- **Have a plan** - Document all key accounts and assets. Outline transition milestones and timing.
- **Announce sale** - Inform suppliers, contractors, and partners of the acquisition. Emphasize your commitment to continuity.
- **Establish new accounts** - Open dedicated business bank account, credit card, and set up tax/entity registration.
- **Request knowledge transfer** - Have the seller walk through current processes, tools, and best practices.
- **Communicate with customers** - Notify the email subscriber list of the new ownership and your vision for the business.
- **Review personnel** - Assess any existing staff or contractors you're inheriting and determine training/evaluations needed.
- **Change business signage/materials** - Update branding on site, ads, packaging to reflect the new owner.
- **Monitor closely** - Keep an especially close eye on all business performance and issues during the transition period.
A smooth transfer of accounts and knowledge positions you for a running start instead of losing momentum post acquisition.
## Long-Term Growth and Optimization
Once you've successfully onboarded the business, implementing ongoing optimization and growth strategies is key to maximizing the value of your investment long-term:
### Expand product selection
Continuously source and test new products aligned with your niche. Widen margins capturing more opportunity.
### Improve branding
Evolve logo, packaging, messaging to further deepen brand authority and stickiness.
### Diversify traffic
Scale channels like paid ads while reducing reliance on any single source.
### Develop loyalty programs
Offer tiers, points, and promotions to increase retention and order values from top customers.
### Invest in automation
Use rules-based tools for order processing, email campaigns, SMS, accounting, analytics, etc. to handle growing volume.
### Expand to new platforms
List products across more channels like Amazon, Walmart, social commerce to incrementally grow.
### Enhance analytics
Track more metrics tied to conversion rates, customer cohorts, LTV, etc. Feed insights back into site optimization.
### Upgrade technology
Evaluate new tools as needs evolve, especially around security, speed, and scalability.
### Test new niches
Leverage existing blueprint to efficiently launch niche variants or complementary businesses.
### Hire strategically
Bolster capabilities by hiring freelancers or specialists where you need support.
Relentlessly building on top of the strong foundation you acquired accelerates growth and profitability over the long-term.
Buying an already profitable dropshipping business can provide a faster trajectory to success compared to starting completely from scratch. With due diligence and patience finding the right opportunity, the acquisition can pay dividends for years to come.
This guide outlined tips on valuation, finding businesses for sale, transitioning ownership smoothly, and scaling operations in the long run.
Remember to thoroughly vet opportunities, never take claims at face value, and craft deals favoring your upside if the business executes well. With the right approach, buying an existing store and taking it to the next level can make your ecommerce aspirations a reality faster.
The options have never been better for purchasing a promising dropshipping store and making it your full-time income source. Now is the time to take action if you're eager to get started with an already proven ecommerce model.