Buying an eCommerce Website with One Key Employee
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Q: Hi Richard - I have read your course and found it very helpful. I am currently in the process of buying a business, but I have one question. The business I'm looking at is a small eCommerce website. There is only 1 employee, but he handles all the technical aspects of operating the website. The owner just does marketing and non-technical stuff. I am similar in that I have some technical background, but not enough to be able to take over the whole operations of this site. The employee doesn't know the business is for sale. If I buy the business, I would like him to work for me. But I don't know if he will. Is there any way I can find out beforehand, or make the deal contingent on that? Without that employee I wouldn't want to buy the business. Any suggestions?
A: Thank you for your kind words about our program. As you know the online world is very dear to me as we repositioned our entire operation to be online and it has been great.
It is common to have an owner/operator, Mr. Do Everything operation in the online world. The key questions here are:
- How automated is the business?
- Can you or anyone else step in and within a short period of time understand the workings of the business
- From a technical standpoint can a "techie" figure out the internal programming that operates the business or is it a "big pile of spaghetti" like my friend Bill says that will be foreign to anyone else.
Now, having said all of this, here are my points related to this deal:
The technical employee will likely stay if he/she is happy and well compensated BUT, you'll definitely want to have their employment or at least a reasonable training period as a contingency to the deal. Since the seller cannot bind the employee, you will need to speak with them directly at the appropriate time. You may want to bring in an outside person after this meeting who you trust and who is technically sound to evaluate what is in place just in case the employee gets hit by a cement truck.
How critical is the technical aspect of the business and can it be duplicated or rebuilt? Personally, if the techie is the one who holds all of the strings in the business and is the only person on the planet who can manage the technical side of the business, then you should consider another venture because you'll always be looking over your shoulder in fear or he/she could eventually hold you hostage.
One other thing to consider when buying an online venture: you need a bullet proof non-compete clause because unlike a traditional "bricks and mortar" business, the seller can open up anywhere, and you'll never know.
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Richard Parker author of: How To Buy A Good Business At A Great Price(TM), the most widely used reference resource and strategy guide for buying a business. He has purchased ten businesses in his career and has helped thousands of prospective buyers worldwide learn how to buy the right business for sale. He is also founder and President of Diomo Corporation - The Business Buyer Resource Center. Richard Parker is also the author of BizQuest's Business for Sale Blog |