• Online vs Offline businesses?

    I think the startup costs are definitely lower for an online business. Even if you need to hire a Wordpress developer such as yourself, the cost is pretty much always going to be lower than starting any kind of brick and mortar business. I think one of the key differences after that is getting to profitability. I don't know if I could say it's harder for an online business, but if you're not good at marketing I think it's more likely an online business will never earn a penny whereas a brick and mortar can make money based on location (ie, a retail business placed at a location with lots of foot traffic like a coffee shop at the entrance to a busy commuter rail station).

    Along the same lines, the expenses of keeping a business going would be lower for an online business. Compare things like paying for rent (which around where I live is at least in the thousands if not tens of thousands a month) versus a web server (which for a small online business could range from ten bucks a month for a cheap shared hosting account to a few hundred for a decent managed server). Online business typically uses contract labor often from overseas where brick and mortar uses payroll workers with benefits and are almost always higher paid than the type of freelance labor you use online.

    Where it gets interesting, in my opinion anyway, is comparing buying a web business with buying a brick and mortar. I've quite a bit of experience with buying online business (small ones at least, my deals are almost all in the $10,000 to $100,000 range), but none in the brick and mortar. I've been looking for a few months at brick and mortar businesses in my area. Unfortunately it seems like almost all the businesses for sale are c stores or pizza places, and I'm just not interested, but in looking at the deals available I've noticed that brick and mortar business sell at lower multiples while at the same time brick and mortar businesses account for many expenses that an online business for sale won't (like labor costs).
    This article was originally published in forum thread: Online vs Offline businesses? started by danieleB View original post