How to Buy a Dropshipping Business!

Let me be honest and upfront, I have never purchased an existing and established dropshipping business. I do however have a lot of experience and understand what to look for and know multiple people who have purchased successfully established dropshipping stores.

Whether it’s Shopify dropshipping or an Amazon FBA business you plan to purchase, I suggest you read the entire article first because what you should look for may surprise you. I’ll cover this in more detail below, but first, should you even consider purchasing a dropshipping business?

It is worth buying a dropshipping business if the business has been generating a consistent income for a minimum of one year, the income and traffic are not declining and the store is automated and not reliant on the owner to manually operate the day-to-day tasks.

This article is a guide to buying an established and successful dropshipping store already making sales. It is not for a turnkey pre-built store that has not yet generated any income. If you would like some information on this, I have an article Is it worth buying a pre-built Shopify store?

What you Should Look for in a Dropshipping Business?

Everyone should have criteria of what they require when purchasing a dropshipping business, however, the requirements below should be essential to every buyer.

1. You are already experienced in the dropshipping and e-commerce space.
2. The dropshipping store has been in business for at least one year but preferably two to three years.
3. The business is not dropshipping from AliExpress.
4. The business is not selling a generic product with a lot of competition.
5. The business does not rely on the owner to run ads, deal with returns and refunds, customer service and any other tasks.
6. The business has all its profit/loss income statements.
7. The business has the potential for improvement and growth.

There are actually more points to consider when buying but I believe the above criteria are non-negotiable.

Another point I have not listed above is buying a store that is currently on a downward trajectory. Obviously, buying a store with a positive upward trajectory in terms of traffic and income generated is preferred.

However, the vast majority of sellers don’t sell when business is booming, they sell because the business is doing poorly and they want out. Their traffic and income are going down and they are willing to take whatever money they can before the business is gone.

If you are experienced in e-commerce, often you can pinpoint the problems with the website and make the necessary changes to turn the store profitable again and you can often get that store at a bargain price.

Below is a screenshot of dropshipping websites for sale on Empire Flippers. Both are in the home niche and both have a similar monthly multiple. Both these businesses would be a risky purchase.

For starters, the home niche is extremely broad, I prefer a specific niche that a brand could be built around. The age of each website is over two years which meets my criteria. However, neither have made any significant increases in traffic or revenue in the last 12 months which means they are too risky for their current price.

To unlock a listing and view the actual website on Empire Flippers, you need proof of funds. This is a unique feature as it protects the current sellers from other merchants replicating their current website and it means only serious buyers have access to view the store.

Below are the 7 most important factors to look for when buying an established dropshipping business.

1. You Are knowledgeable in the Dropshipping Business you Purchase

If you have no experience and minimal knowledge in the dropshipping and e-commerce space, don’t purchase a dropshipping business. If you assume dropshipping is a passive stream of income that can run on autopilot, you’re wrong!

Profit margins with dropshipping will fluctuate and problems will arise and only a buyer with this specialized experience will know how to manage it. There are options to outsource many of the tasks in a dropshipping or e-commerce business, however, expertise will be extremely beneficial.

Empire Flippers has a program called Web Street (Formerly EF Capital) which connects buyers with operators who are experts within the specific niche. This can be for dropshipping websites, Amazon FBA websites or content websites.

This is a popular option for many buyers and investors who run a portfolio of websites and require operators to run and operate the websites.

2. The Business Has a Proven Track Record

Do not buy a dropshipping business that has been in business for less than a year. Dropshipping is a volatile industry and there are many factors that can impact a business throughout a year, including seasonality.

Ideally, you should purchase a dropshipping business that has been in business for at least two years (The older the better) and is growing year over year. A consistently upward trajectory of sales and profit over a long period is the best way to reduce the risk associated with purchasing an online business.

A common mistake most sellers make is they try to sell their e-commerce store at the wrong time. Selling their profitable store is not on their mind when business is booming, however, when income is going down and they don’t know how to fix it, selling becomes their main priority.

Whilst this is a risky investment, many experienced e-commerce experts can improve and flip these websites for a healthy profit margin.

3. Don’t Buy an AliExpress Dropshipping Business

Acquiring a dropshipping business that can bring in a sustainable income over a long period of time is your goal. To achieve this you should be avoiding risk as much as possible. Unfortunately, the AliExpress dropship business model is very risky.

Although it’s the most popular platform in the world for dropshipping, it’s also full of unreliable suppliers, inferior product quality and slow shipping times. All this makes for a bad customer experience and an unsustainable business.

Another big risk is the fact that a business dropshipping from AliExpress can be replicated in a day. With the abundance of competition in the dropshipping space, you can expect copycats to replicate any store that is showing signs of success.

4. The Business Should Be Unique

Avoid investing your money in a dropshipping business you could create yourself relatively easily. Look for a business that is unique and different from competitors selling within a similar niche.

Uniqueness could be in the form of the products being sold, the website, the ads, the traffic source or the social media strategy. Generic products can still be unique if they have some USP (Unique Selling Point) that sets them apart from similar products.

Purchasing a dropshipping website that product cycles the latest trends is an unsustainable business model and is often used by dropshippers to test products.

There is a reason aggregators acquire e-commerce businesses that are unique brands that have a consistent upward trajectory of profit and sales as opposed to a trend that fizzles within a few months.

5. The Business is Automated

This is a very important part of buying a business and one that many people do not consider. Often when you buy a successful dropshipping business, it’s successful because the owner made it successful. The owner does not come with the sale!

Is the business only successful because of the owner’s ongoing experience and knowledge with running ads, product research, supplier relationships and negotiation skills, etc? How will the business run when the owner is no longer running the daily tasks?

Ideally, you want to buy an automated dropshipping business that does not rely on the owner for any of their skills. Many businesses will outsource the marketing side of the business to an agency which is a preferred option as you want these tasks as hands-off and as automated as possible.

If the owner performs basic jobs such as customer service, order fulfillment or product updates, most VAs (Virtual assistants) can perform these jobs and are easier to outsource and automate.

Ask yourself, is it a real business or is it a seller/owner-operated business? The most valuable asset to a new business should be the actual business itself and not the person running the business.

My Related Article I Think You’ll Love:

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6. The Business Has its Profit/Loss Statements

Tracking financials is a neglected part of most dropshipping businesses. As a buyer, you can’t take the word of a seller without financial documents proving their profits and business expenses. This is one of the most common reasons a dropshipping business price evaluation is lower than it could be.

Whilst there are financial tracking Shopify apps such as QuickBooks and Hurdlr, it is better to acquire a business that has a bookkeeper or an account updating its financial information.

When you’re buying a dropshipping business you should have access to a P&L Statement (Profit and Loss Statement), CFS (Cash Flow Statement) and a balance sheet that shows assets and liabilities.

With larger businesses valued at $500k and higher, you’ll want to understand SDE (Seller’s Discretionary Earnings) which is another measurement of business earnings. EBITDA (Earnings before interest, taxes, depreciation and amortization) is another earnings metric that you will require for larger e-commerce brands.

7. The Business Has Room to Grow

If you invest in a dropshipping business, you should see potential in growing the business further. If the previous owner has maximized the potential revenue, there may be no room for the business to be scaled any further.

Look for improvements or changes you can make which can improve the website’s overall earnings. If you can’t find ways of optimizing the business for improved net profit, it’s probably not a wise investment.

Things to look for are;

• Can the advertising be improved or are the other platforms that have not yet been utilized?
• Is the website professional and trustworthy?
• Can the SEO be improved for more organic traffic?
• Has the website taken advantage of a large social media presence?
• Is the business only targeting a US audience?
• Can the offer be more compelling?
• Can the product range be expanded upon?
• Research the analytics and look for ways the store can be optimized.

How Much Should You Spend on a Dropshipping Business?

The most common metric used for evaluating a dropshipping business is multiples for its monthly net profit. According to The Website Flip, an average multiple ranges from 18x and 36x the monthly profit of the dropshipping business.

If a dropship business profits $2,000 per month, you can expect the selling price to be between $36,000 and $72,000. With a multiple of 18x the monthly profit, the business would break even at 18 months if the profit continues on the same path.

Private equity firms have invested heavily in e-commerce websites since 2021, this has increased the multiples for e-commerce businesses, especially Amazon FBA businesses. This is great news for sellers but for buyers, it means higher prices.

However, don’t be at all surprised to see multiples under 18 and over 36. There are many factors that can impact a business valuation including:

• If the store’s income and traffic are on an incline or decline?
• How old is the business?
• How unique are the products being sold?
• Are the products trademarked, copyrighted or have a patent?
• Is the niche being sold seasonally?
• How reliable and reputable are the suppliers?
• Is the store branded?
• Is the store automated?
• Where do the main traffic sources come from?

One of the biggest factors that will impact a dropshipping business’s price is risk. I would recommend that if you do plan to buy a dropshipping business you pay closer to the 18x multiplier than the 36x multiplier. This is because purchasing a dropshipping business is riskier than a regular e-commerce business for a few reasons:

• There is such a low barrier to entry which means you’ll likely have a lot of competition.
• Dropshipping stores are generally easy to replicate.
• The picking, packing and shipping side of the business is out of your hands meaning a large part of your success is reliant on the supplier.
• Dropshipping businesses are more prone to income fluctuations and failure rates are high.

For more information, I suggest reading this article on how valuable an e-commerce business is.

Where to Buy a Dropshipping Business?

There are a plethora of websites where you will be able to buy a dropshipping business but if you’re planning on making a large purchase I would stick to one of the more well-known websites listed below.

Platform	About the Business
Empire Flippers	If you want to purchase an established and profitable dropshipping business, Empire Flippers is definitely my pick. They use brokers who take you through the entire process and they vet their buyers and sellers which eliminates much of the risk.
Flippa	The largest online selection of e-commerce stores for buyers and sellers. They offer pre-built as well as established businesses in all different price ranges.
Side Projectors	Sells a large variety of different online businesses including dropshipping and e-commerce stores.
AliDropship	As well as being a plugin for AliExpress, AliDropship also has a marketplace for dropshipping and e-commerce businesses.
Buy Sell Empire	Large selection of various online businesses including Amazon FBA and dropshipping stores for sale.

Is Buying a Dropshipping Business Worth it?

In the e-commerce space, private equity companies offering IPO (Initial public offerings) have made it more difficult to purchase e-commerce websites at affordable prices. However, dropshipping businesses typically pose more risk than Amazon FBA businesses.

This means if you are knowledgeable in the dropshipping industry and understand how to take dropshipping store and transition it into an actual brand that purchases in bulk at wholesale rates, purchasing a dropshipping business at the right price can be a worthwhile investment.

I would suggest if you’ve never purchased a business online that you work with a broker. The buying process can be complicated and as a first-time buyer, it is worth it to fully understand how the entire process works.

Empire Flippers is a website broker and are renowned for vetting buyers and sellers and is one of the safest platforms to buy a website in my opinion. However, they typically sell high-priced websites with many of their listings being over $100k.

If you read this article and decide to acquire your first dropshipping business, please reach out to me and tell me about your experience, good or bad. I would love to hear from you and I may even create another article with some buying experiences.