Leaving Corporate America to Buy a Website
As a Group Manager of VotanWeb, I receive a lot of email. One frequently asked question relates to making the transition from the corporate world to the entrepreneurial world of the internet.
Many people have always dreamed of owning a web site and finally they decide to move toward that dream. They wonder how much money they need to invest as well as how they can obtain financing to purchase an existing website. Often, they have plenty of experience and determination, but very little money.
I must make it very clear that it is rare for anyone to purchase a website without putting some of their own cash into it. Few website acquisitions are 100% financed. There is no free lunch. Any potential lender or investor will want to see that you are putting your own money into the website.
There are many sources of money to finance the purchase of a website. Many online entrepreneurs start with a second mortgage on a home, tapping into their existing equity. Others are successful starting with funds from friends or family members. This could be either a loan or an investment in return for a piece of the business. Either way, make certain that it's spelled out in writing and all parties understand what they're getting into.
The Small Business Administration is another possibility. Remember, the SBA does NOT lend money for people to buy websites. The SBA guarantees loans made by lenders, up to a certain amount, for small website acquisitions. There are both good and bad points to an SBA loan.
The good news is that there is money available; up to $1,300,000. The terms for repayment are favorable. When a website passes the SBA qualifications, you can be fairly confident that it is a solid website. If you do not have at least 25% equity in your home, you may not have to fully collateralize the loan. Typically, they will finance 70-80% of the deal.
It might be possible to secure seller financing if you've demonstrated some knowledge of the market and you can convince the website owner that you have a high probability of success. If you have risen up through the corporate ranks, then you have already demonstrated leadership skills. Investors look upon track records of leadership with approval.
Investors certainly have respect for accountants and lawyers, but they are a dime a dozen. A true leader – someone who has vision and the ability to articulate it and execute it -- is hard to find. A variety of experience can bring out the leadership quality in many people. It may be a corporate position, or a position on a football or basketball team. Even military experience can be extremely effective in developing leadership skill. If you can say with confidence, 'Here's how I can develop this market and make us all rich,' people will listen.