Unpacking SaaS, eCommerce and Main Street Businesses
The world of business is changing. Most companies have transitioned to remote work and shopping, dining, and retail stores have all moved online. This shift began well before the pandemic hit in 2020. However, it only began to accelerate over the last couple of years, and its acceleration is predicted to continue.
So, what do you look for when buying a business, and what are the pertinent factors when evaluating a SaaS, eCommerce, or Main Street business opportunities?
What Is a SaaS, eCommerce and Main Street Business?
Software as a Service (SaaS) refers to cloud-based businesses that allow customers to host websites, set up project management, complete invoicing and do more through a proprietary online database.
Electronic Commerce (eCommerce) refers to businesses that sell goods exclusively through an online network, typically using a third-party platform such as Amazon, Shopify, Etsy and Instagram Shop.
Main Street or Traditional businesses (which include franchises) are companies such as retailers, restaurants and others that have a storefront where customers can enjoy an in person experience.
Buying a SaaS Business
Understanding the components that go into operating a SaaS company is key before you get involved in this space. Early on in the process, you will need to complete a SaaS valuation that requires you to dig into the company’s revenue and growth rate. This is especially important with SaaS businesses because their revenue is typically subscription-based.
Two valuations should be taken into consideration: a “potential” and an “as-is” valuation. Potential valuation examines where the business is going, while an as-is valuation tells you what the company is worth at the present time.
You can break down the business’s growth rate by re-evaluating its price windows between 3 and 12 months. This is useful for discovering how the business will perform moving forward if revenues between those windows appear to have peaked or declined. Buyers should be looking for sustainability and ensure that the value of the business has the potential to increase over time.
One of the perks of owning a SaaS company is that you’ll be able to see the backend of your business’s operations. You will have access to data that not many businesses can see, including conversion rates and other information that can help you craft your business strategy.
To own a successful SaaS business, you’ll also need to ensure you have a strong team of programmers, developers and online marketing experts on your side.
Buying an eCommerce Business
Buying an eCommerce business is like buying a SaaS business in the sense that you need to have a strong understanding of the sector as well as the business’ position in the competitive marketplace. Go through the company’s records of sales, gross income, and expenses. eCommerce companies are taxed differently than a traditional main street business. Since the business model is online, this opens international sales, which means different taxes may apply depending on the company’s annual revenue and provincial and federal laws. SaaS businesses, by comparison, typically don’t pay sales taxes the same way.
Since the transactions are happening online, if you go ahead with this business, you’ll need a legal team to ensure all documents are in order to prevent any misdemeanours. Including Terms and Conditions, Privacy Policies, and a Security and Reliability clause.
Next, you will need to have a strategy to deliver your product(s) or service(s). If it is a physical product, you will need to organize shipping and handling with a distributor, this is also known as fulfillment. Most eCommerce listings are sitting on the foundation of platforms like Amazon or Shopify, in which they can help streamline this process for you.
Buying a Main Street Business
The nostalgia of owning a main street business or franchise is here to stay. Small businesses make up 40% of Canada’s traditional businesses including retail, restaurants, clinics, and more. With social media and digital advertisements, it is easy for a main street business or franchise to continue to grow successfully.
Research the geographic area of the business to determine if there is sufficient foot traffic within the shop’s location, and if it is both visible and accessible to customers. Many of your future customers will prefer an in-person experience, but you’ll also want to appeal to customers who prefer to search, scroll, and buy online. As the new owner, you should know how to operate your business both in the physical and digital world.
You also have to be prepared to adapt to new practices that will drive people to your business, which may mean considerable investments in the physical space. For example, restaurants give customers an experience, whether its a fast-food burger joint or a fancy steakhouse. So, the owner will have to invest in creating a space that will encourage people to return. This comes in addition to investments that will allow them to offer take-out services such as UberEats, SkipTheDishes and more.
Whether you decide to buy a Main Street, SaaS, or eCommerce business, you’ll need to ensure it is buyable. At BuyAndSellABusiness.com, this all comes down to three key areas:
1. The business has to be self-sufficient. Operations should not be dependent on a particular stakeholder.
2. Timing has to be right. The business opportunity needs to align with social, economic, and technological trends.
3. The Business Model is Strong. The business is consistent, and isn’t prone to prolonged periods where revenues drop off and they showcase strong recurring revenue.
BuyAndSellABusiness.com lists thousands of the best Main Street, SaaS, and eCommerce businesses for sale. If you’re interested in becoming your own boss, search through our marketplace and find a business you love. Best of luck as you search for the perfect business to buy!
Business Ownership Made Real.
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Opinions expressed here by contributors are their own.
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