You can buy antique chairs, vintage toys, even computer equipment on eBay. You can even buy a business.
Rob Bellenfant, an entrepreneur since age 12, has done just that. Over the past few years, he has purchased five businesses through the online selling platform. Unfortunately, four of them have failed. So this raises the obvious question. Just because you can buy businesses on eBay, should you?
Business consultant and columnist Josh Patrick, who recently used Bellenfant’s experiences as a cautionary tale in the online “You’re the Boss” column of the New York Times, explains:
“Mr. Bellenfant’s big mistake in all four of his eBay busts was that he didn’t perform due diligence. In fact, when he first started buying his businesses, he had never heard of due diligence. Over time he learned that before he wrote a check, he needed to make sure the businesses were telling some approximation of the truth. Fortunately, Mr. Bellenfant wasn’t paying a tremendous amount of money for these businesses. Each one cost less than $20,000.”
Also fortunate is that Bellenfant’s fifth purchase, Technology Advice, which provides companies with assistance meeting their tech needs, was profitable even though it took several pivots to make it that way.
In a recent search, Patrick said he’d found hundreds of potentially viable businesses listed for sale on eBay. About 870 of these are priced between $10,000 and $100,000.
So what are some tips that can help you zero in on the good opportunities and avoid the bad ones?
Hiring a business broker is one option to make sure you have all the bases covered.
But even if you don’t hire a professional to help sell your business, Patrick suggests a simple checklist to increase your odds of success. Here are the basics:
- Insist on a financial penalty if claims made by sellers prove to be incorrect
- Use a due diligence checklist to see that you’ve adequately followed up on all details necessary in researching the company.
- Talk to customers and suppliers to see if what they say about the company matches what you’ve been told.
- Get interim financial statements and check for other problems in the business’s operations. Are there any signs of problems?
- Do some research to make sure there are no pending lawsuits against the company or any legal problems that might effect you when you purchase the business.
In some respects, buying a business listed on eBay is no different than buying one through a more conventional channel. The key, says Patrick, is to adequately research the business before you buy to avoid unnecessary surprises.
eBay Photo via Shutterstock