Build or Buy a Store—What’s the Best Way to Get Started in Dropshipping?

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Posted by The Savvy Retiree on August 1, 2020 in Make Money

One of the most common questions I’m asked by newcomers to dropshipping is whether you should build a new store from scratch or buy an existing one. 

I began my own e-commerce journey by purchasing a store. In the years since, I have built and bought stores and I have coached students who have adopted each approach. 

These experiences have taught me two lessons. First, while there are intrinsic advantages and disadvantages to each strategy, both are viable ways for newcomers to create an online income from dropshipping. And second, both builders and buyers must ultimately learn how stores are constructed. This is perhaps the most important concept. Only by knowing how a store is built will you recognize the fundamental strategies that make it attractive and successful. 

Building Is a Good Option

If you’re not in a hurry, it can be an advantage to build a store so that you know every single aspect of how it was developed. And don’t worry, you don’t need to be a technical genius to do this. There are platforms that can do the work for you. 

Of course, when you create a store from scratch, it will take longer to earn your first sale. In many ways, that’s the hardest part of building a new store: waiting for that first customer. But what a great moment when it arrives. 

While you’re waiting, you can work on upgrading your website, creating product guides, and doing search engine optimization (SEO), which will pay off in the long run. These are all things you can outsource later when you’re generating income and want to scale your business.

Building a store can be a positive and lucrative experience for people who want to roll up their sleeves and make money in dropshipping. Getting from zero income to $2,500 a month is a realistic goal. And once your store reaches this level of income, you’ll probably have to work only a few hours a week to maintain it at that level. Then, after a couple of years, you could sell it—likely for somewhere in the region of $75,000—and repeat the process and build another store, this time with the knowledge of how the entire process works. 

Learning on the Job

When my wife and I bought our first store, we knew almost nothing about the day-to day running of dropshipping stores. I prepped myself with courses on dropshipping, so thankfully, I understood how the platform worked. Still, I’d never actually run a store, so the possibility of failure was real. But we took the leap and learned on the job.

We’ve now purchased over a dozen stores. Some of those were “starter stores,” while we’re currently focusing on more mature stores for our portfolio. 

Buying an existing store gives you peace of mind as you already have an income-generating business. That’s the key advantage. Established websites come with customers. People don’t just shop in your store once. If you’re doing it right and capturing their email and giving them excellent customer service, they come back. So when you buy a store, you’re not only getting the online real estate and organic website traffic, you’re gaining a customer base.

The disadvantage is that buying an existing business is an expensive option. Online businesses are sold at a multiple of how much money they make a month. Different types of online businesses are sold at different multiples. For instance, sites that have recurring trade are sold for more than websites that don’t. 

So buying a store can seem like a large investment. There is, however, another way of looking at this. Companies listed on the S&P 500 are often sold for over 20 times their annual earnings, with tech stocks even higher at over 25 times. However, you can buy a good dropshipping website for only two to three times its annual earnings. This makes dropshipping stores an attractive investment.

By Ian Bond