What to look for when buying an online or e-commerce business

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Table of Contents

• Software and websites
• Existing customers
• Suppliers
• Restraint of trade clause
• Social media
• Conclusion

Here is a short list of the things that you should take into consideration when you’re buying an online or e-commerce business.

Software and websites

In general, online or e-commerce businesses run on software. This can be in the form of specialised proprietary software or subscriptions to specific service providers. In each case, you will need to ensure that access to the software is transferred to you as part of the sale. Have a list included as part of the sale, and if required, also include a training period during which the seller will be able to assist you in getting familiar with how the software works.

Existing customers

Repeat customers are generally the lifeblood of any small business. If the online or e-commerce business that you are buying has a list of existing customers, this should be transferred to you as part of the sale. Better yet, you should include, as part of the contract, a provision that requires the seller to introduce you to existing customers. This way you’ll be able to begin building a relationship with them and ensure that you’ll be able to keep them as customers.

Suppliers

No business can run without suppliers. Accordingly, unless you have your own existing suppliers, include a clause in the contract that requires the seller to introduce you to the existing suppliers and for them to also provide you with a copy of the contract that they have with the suppliers. This way you’ll be able to continue working on similar terms with the existing suppliers. If you would like to renegotiate any supplier contracts, our small business lawyers will be able to help you get the best deal.

Restraint of trade clause

Traditionally, in order to prevent the seller from setting up a new business to compete against you meant restricting the geographic area from which the seller would be able to compete. Online or e-commerce business are unique in that they are not restricted geographically. This means that the seller will be able to set up another online or e-commerce business that is located in another state and still be able to compete against you. A traditional restraint of trade provision which generally limits competition to an area within a 25km – 50km radius of the business premises will obviously not be very effective. Our small business lawyers recommend setting out a cascading restraint of trade clause. This means that the restraint will “cascade” from the largest possible geographic area (e.g. Australia) to the smallest possible (e.g. 50km).

Social media

Online or e-commerce businesses are heavily reliant on social media to generate traffic. This means that most online or e-commerce business will have some form of social media presence. Accordingly, you should ensure that, as part of the contract, the transfer of any social media accounts such as Facebook, Pinterest, Instagram is included as part of the sale.

Conclusion

Online or e-commerce businesses are great, as running one means you don’t necessarily have to work from an office and you can be flexible with your working hours. You do, however, need to make sure that your legal interests are protected when purchasing one. If you’d like one of our small business lawyers to assist with the purchase of an online business please fill out the form on this page or give us a call on 1300 544 755!