So, you want to buy an e-commerce business. It’s an exciting new horizon, with much potential for growth. But you need to make sure you’re prepared before you buy.
Research, Research, Research
Ensure that you understand the platform and marketplace where you’ll be conducting business. Familiarize yourself with how it works for both consumers and businesses. You should also speak and network with people in the industry. Look for mastermind or mentor groups for your e-business. Attend conferences and meet people in the business.
Know What You’re Buying
Once you’ve focused on an e-commerce business to purchase, make sure you know exactly what you’re buying. For example, in some cases the tax treatment may be better if you buy only a business’s inventory and set up your own business structure, rather than buying the business as a whole. Are there outstanding accounts receivable? Who will own and collect those? Are there prepaid expenses? How have payroll or federal and state income taxes been handled? It may be best to specifically negotiate how issues that arise concerning the pre-purchase time period will be handled.
Think About Transition Services
Transitions from one owner to another can be difficult. Rather than try to figure it all out yourself, you may want to negotiate a transition period. You should consider a period of time where you observe the original owner and her staff; a period where you and your staff do the work with the seller observing and advising; and then an additional period of time where the seller is available for additional questions and troubleshooting.
Get Your Business Relationships in Order
Before you buy, ensure that you understand the suppliers, resources, independent contractors and others supporting the business you are buying and make sure that you have any necessary business accounts and suppliers on board. Some suppliers may have a select number of distribution agreements in place or may be wary of selling their products through online retailers. It may be best to get those agreements in writing before you close the sale.
Get Your Business Relationships Together and Protect Yourself
Finally, ensure that your purchase agreement protects you and your new business. Your purchase agreement should spell out indemnification clauses for problems that arise from issues that happened prior to your purchase. If the business is sued for something that happened before you came on board, you’ll want to figure out who will be liable for any damages. If necessary, the purchase should also include an appropriate non-compete agreement so that the seller can’t turn around and begin a business identical to your own. You should also ensure that you have all of the intellectual property licenses necessary to operate your new business.
Buying an e-commerce business can be exciting, but make sure you do your due diligence to set your future business up for success.
Who is Rochelle Friedman Walk?
Rochelle Friedman Walk, Esq. is an experienced, thoughtful and strategic attorney, business executive and neutral mediator. She has been court-appointed as a receiver and mediator, and is a member of the FINRA arbitration and mediation panels. She is known for her negotiating skills and the ability to bring parties together in win-win, creative solutions. She offers a practical and business-oriented approach to the practice of law. Her background in business enables her to relate well to clients and to quickly define the work and potential solutions. For more information about Rochelle, click here or email her.