Niche content websites are a popular and profitable type of online business. These sites are commonly around one general niche or topic (though not always), are based around large amounts of informational and buying guide articles, and are monetized through ads, affiliate offers, digital products, and Amazon affiliate.

These are not only good for building up passive income but often offer opportunities where you can buy a website, grow it, and then sell it to receive a lump-sum payment.

There’s a huge upside with a good e-commerce or dropshipping store. These sites sell products directly, often using dropshipping to produce the goods and fulfillment services like Amazon’s FBA to have the products ordered and delivered.

These online businesses have a very high revenue potential because instead of getting paid per click or a small percentage as an affiliate, being the provider of the product means more potential revenue (and profit) per sale.

Newsletters can be an incredibly effective online business because they are designed around providing excellent information in a very specific niche to people who wanted and signed up for, that newsletter.

This means an engaged audience looking forward to the next release. Monetization could be from paid promotions, sponsors, partnerships, or even the development of your product.

Amazon FBA is an extremely popular program offered by Amazon where items are stored at their warehouses. The person lists the products and the prices, while Amazon takes care of storage and shipping to the customer.

These involve a successful online presence, require rental fees for the Amazon warehouse space, but then Amazon acts to fulfill the orders.

Lead generation websites are all about bringing in traffic from people already interested and then funneling them towards making a decision like filling out a contact form, setting up an appointment, or even giving an email for further contact.

The right high-end businesses can pay a lot for a hot lead because a single client or sale is worth an enormous amount to them. A single new client for an attorney can be worth many thousands of dollars. A real estate agent closing hot leads can make six figures.

A good lead generation website has enormous revenue and profit potential.

Kindle Direct Publishing isn’t talked about nearly as much as other online business models, but it can be very profitable whether focusing on fiction or nonfiction. Amazon KDP businesses could be in the form of a pen name used for a wide array of fiction books, or it could be a large series of books on nonfiction topics. 

The royalty potential for this type of business is excellent, especially for good writers or business owners with a good team of writers.

SaaS businesses provide an excellent solution to common problems that businesses need to solve. A good software product can lead to a multi-million dollar business. The software could be to manage workflow, team management, internal linking, or help aid on-page SEO.

As long as the software is good enough and solves a common problem the potential is there. This does require either high technical ability or a tech-savvy developer to make it work and maintain it, but the pay-off can be huge.

There are some services that will always be in high demand, and good online service business can build up a large customer base when it is well run and developed. Online service businesses require a lot of work but can pay off in a big way.

Online businesses have an unusually high ROI and a high percentage of total revenues as cash flow. It’s possible to start a niche website for $70 in year one, and that can be a site that eventually makes five figures a month. Examples of this are covered in our niche site case studies. 

The return on investment is often in hundreds or thousands of percentage points, and it’s possible for an online business to have 80 or 90% of revenues as incoming cash. That’s normal for online assets but very hard to find anywhere else.

An online business can be run from anywhere that has a steady and reliable internet connection. That freedom of location means you can work from wherever you are most productive, or wherever you wish to live.

There are even online business owners who travel the world constantly because that’s what they want to do - and the right online business setup makes that completely viable.

You can take up more work to scale a business. You can put systems in place that let you cut back on hours. Systems can be created to shift where your attention needs to go and what can be more or less put on autopilot. 

Online businesses are surprisingly dynamic and can be reshaped and recreated in different forms or processes to make a workload that is more appropriate to your goals, schedule, or simple convenience.

Online businesses in particular are well-positioned for outsourcing. Because the service, the framework, and the business itself are online, it’s possible to train others to run the business. As long as they can jump online, they can do anything that you are currently doing.

Outsourcing writing to freelance writers is a common step in scaling content websites and is just one common example of outsourcing as part of a growing online business model.

One of the biggest benefits of building from scratch is learning the process inside and out. When you know every problem that comes up, how to fix those issues, and need to learn the creative solutions or workarounds yourself, which makes it easier to create excellent training for later outsourcing.

Learning these skills firsthand also increases your ability to spot potential deals when buying a business in the future. Since you’ve built from the ground up, you can see where others are making mistakes or not optimizing.

Spotting those easy wins can help you spot a great deal when you do shift to buying in the future, and you know you have the skills to build that online business up after purchase.

The major benefits of building an online business from zero are:

• Learning every aspect of an online business and how it works
• Better ability to produce teachable systems or effectively outsource due to this knowledge
• Increases ability to spot easy wins for future purchases
• Much lower initial monetary investment

The largest immediate benefit is cash flow. If proper due diligence has been performed, the business acquired should be profitable from day one. The best online assets will be profitable with cash flow and have multiple easy wins to scale up.

Major benefits of purchasing an existing online asset include:

• Immediate cash flow
• Good infrastructure setup
• Can focus on revenue-generating easy wins and scaling versus necessary setup and foundational work

There are multiple things to look at in due diligence, but there are seven metrics, in particular, to focus on before going for a deal.

Those are:

1. Business age
2. Niche
3. Revenue 
4. Operational costs
5. SEO
6. Partners & vendors
7. Valuations

These factors tell a lot about an online business, how firmly established it is, and what work can be done to make it even more valuable. These factors give all the information needed to see if a deal has potential or not.

Having someone familiar with the business type is crucial. There are professionals who specialize in doing full due diligence and finding the not as easy to find information on online businesses.

Having experienced consultants who can parse through the data, try to spot problems you might have missed, or find hidden potential that you missed is invaluable. Build a good team around you.

The disadvantages include often having to compete or pay a higher price because the public listing is going to get attention from like-minded investors also looking for a good acquisition.

A private sale opens up more options as you can approach online businesses that aren’t even publicly for sale. This also increases the chances of finding a good deal but makes due diligence even more important to confirm any numbers before pulling the trigger on a deal.

Empire Flippers is one of the most popular places to look for profitable online businesses for sale. They have a reputation as being one of the best marketplaces for proven profitable businesses and have an excellent system in place for protecting both buyer and seller.

Read our detailed Empire Flippers review.

Flippa is the world’s largest marketplace for online businesses and is considered by many to be one of the best places to find an online business for sale under $10,000.

Flippa has the largest array of listings and types of businesses or online assets, but due diligence is crucial as none is provided by the site.

FE International was one of the early website brokers and focuses on digital businesses that are in the six figures and above. They have a long-established group of buyers, which in turn attracts sellers with online businesses that can demand those higher prices.

Valuation formulas are a great way to get at least a good educated guess as to what an online business should reasonably sell for. If there is a common market way of valuing a type of business a simple Google search will help you find the right one.

Don’t use that as a hard and fast rule for valuation, but put some numbers through a website value calculator and see what comes up as a starting point.

Sellers want a higher multiple. Buyers want a lower one. Finding a reasonable multiple that is high enough to acquire the business but low enough to still give room for scaling and improving revenues is crucial.

The old saying goes that the profit is made during the buy, and there is definitely some truth to that when purchasing an online asset.

Keep in mind that paying an unusually high multiple can make sense if the business is underperforming, but your experience lets you identify enough easy wins that you are confident you can multiply the revenue of the business so that it’s worth it.

When you’re looking at a profitable business to buy don’t just look at revenues. Those are important, but you should also look at how stable that income is, what the potential for growth is, and are there any easy wins that could help you quickly make that business more valuable after purchase?

These factors can drastically alter the way you look at a potential digital business purchase. Is stability your main goal? Flipping for a large profit?

All of these are details that can change whether a deal is good or not based on your specific goals.