Exchange Marketplace and the New World of Buying Businesses Online

Last updated on October 3, 2018
Shopify Exchange and buying businesses online

‘Business acquisitions’ usually brings to mind visions of boardrooms, backrooms, and lots and lots of lawyers. It’s a specialized world. Or rather, it used to be. The internet has democratized all manner of things in its short lifetime — knowledge, news, art, you name it. In recent years few spaces have grown as aggressively as online retail. Global ecommerce sales are predicted to fly past $3 trillion next year.

Believe it or not, this isn’t all down to the likes of Amazon and Alibaba (though they are doing swimmingly). Platforms like Shopify have opened up online retail to anyone. Over 500,000 businesses across 175 countries are powered by Shopify, most with a strong entrepreneurial spirit.

What happens when you want to cash in on a successful online store? We caught up with Nicholas Montgomery, head of growth at Exchange Marketplace, to talk about the next step in ecommerce — buying and selling the businesses themselves.

Marketplace Marketplaces

Exchange Marketplace is part of a class of sites that mediate the buying and selling of businesses online. Think of it as a marketplace marketplace, where stores are the commodities. Below are a handful of the major players.

Exchange is unique among these sites in the fact that it only serves Shopify stores. Rather than going to a third-party site, store owners simply put a listing up on Exchange. As a Shopify service, Exchange displays key information like revenue and traffic automatically. It’s a shop’s shop window.

When someone expresses interest in buying a store, Exchange automates much of the brokerage process, providing structured time-frames and extensive documentation to ensure everyone gets the best deal possible. And it’s quick. Of stores sold, most sell in under a month.

The platform serves two key functions. One, it centralizes the acquisition process so that practically anyone can do it. And two, it makes it possible to own fully-fledged online businesses without having to build them from the ground up.

Since being rolled out last year Exchange has been toiling away, refining its processes. Sites like it are treading new ground. How do you balance the freedom for anyone buy a business with the red tape necessary to prevent people from getting hurt?

Top-Down Transparency

Transparency is integral to Exchange. Its integration with Shopify means potential buyers see the exact same numbers sellers see. Head of growth at Exchange, Nicholas Montgomery, is no stranger to ecommerce success. He says a transparent approach is healthier for everyone, that it “sets more realistic expectations for both sides.”

This isn’t to say everything is out in the open on Exchange, at least not initially. Profit margins, a fairly important part of any business, can’t be be verified by Exchange. Sellers put those numbers in themselves. Some of the key information sellers supplied by sellers on Exchange is:

  • Average profit/month
  • Average overall profit margin
  • Average number of sales/month

Sellers cannot change total revenue, nor traffic figures. Once someone expresses interest in buying a store, they can enquire into numbers not shown in the ‘shop window.’ Exchange mandates a good deal of transparency, but hammering out the details remains between the buyer and the seller.

More than Facilitators

What stands out about Exchange is its interest in the success of the businesses being sold. Third party platforms don’t need to care whether transactions leave everyone satisfied. That’s between the buyers and sellers; someone should have been more careful.

Exchange, meanwhile, has an interest in the transactions going well and stores flourishing. “The biggest difference between Exchange and other marketplaces,” Montgomery says, “is Exchange is a product by Shopify, so we’re not just with you through the process of selling the business.”

The desire is not only to sell businesses, but for them to be as successful as possible. “That’s the main ethos that drives a lot of our product decisions and how we operate that’s different from a lot of other marketplaces.”

This no doubt is why Exchange encourages an extensive handover process, where sellers act as mentors to their successors until they’re ready to go it alone.

A Natural Extension to Shopify for Entrepreneurs

The Exchange platform is an obvious next step for ecommerce. Shopify’s user base has always had a strong entrepreneurial streak, and Exchange offers both the beginning and end of a journey. Those who have worked hard to build up a viable business have a way of cashing in and walking away. Those looking to get into a market can do so instantly by buying proven sites.

Indeed, Montgomery views Exchange as a natural step in the life cycle of many online stores. That’s why there hasn’t been much of a marketing push. “When the time is right Exchange will be there for you and support you on that path.”

He does, however, think Exchange is a useful tool to have on your radar. “One of the things I encourage people to do, even if they’re not directly thinking of selling their business tomorrow, is install the Exchange App on their Shopify store.” The app looks at numbers in your store’s backend and weighs them against other sources to suggest a valuation price. Good to know, tempting even.

Given the level of integration and support, it would be odd for Shopify users not to keep Exchange in mind.

Change Comes from Users

Similarly, it would be remiss for Exchange not to keep its users in mind. As a fledgling platform in unfamiliar territory, feedback and suggestions are of critical importance. Innovation is all well and good, but in needs to be in tune with what people want and need.

As Montgomery notes, “whenever you’re building a company or an entrepreneur, you have these visions and ideas of how things can be made better, but at the end of the day it’s by speaking to the customers that you get the most credible feedback.”

Ecommerce platforms have opened up business opportunities for hundreds of thousands of entrepreneurs. Advancement is fluid and fast, but it has to come from the user base to be successful. As Exchange continues to develop, that back and forth will be essential to their success. And it’s very much encouraged. “We love to hear feedback from buyers and sellers, or potential buyers and sellers,” say Montgomery. “Feel free to write us an email, send us a message on our Facebook page, or use the live chat on the website.”

Putting a Face on Ecommerce

One of Exchange’s focuses going forward is putting a face on ecommerce. Online business can often feel like a labyrinth of analytics, impersonal and data-driven. Those things are important to modern business (essential even), but Montgomery wants to make room for personality to shine through.

He says, “Right now the project I’m most excited about it is putting a face on a lot of the businesses that are selling on Exchange.” Listings at present emphasize the metrics, but Montgomery doesn’t want anyone to lose sight of the fact behind every business is people. “There are stories of people who have gone through a lot of hardship to get where they are, they’ve had a lot of success, and we really want to communicate that.”

This isn’t only being encouraged on the listings. Exchange will soon be launching a video interview series where entrepreneurs will share the stories behind their stores. “Why did you start this business? How did you get your first sale? Why have you reached the point where you’re selling now? It’s really inspiring to hear the answers.”

In that sense it seems like Exchange, as well as being a marketplace, wants to serve as a kind of community hub for entrepreneurs. A place where paths cross and experiences are shared for the benefit of everyone. “I think telling those stories and putting a face behind the business is really going to make people connect a lot more,” Montgomery says.

Calm After the Storm

It’s reassuring to hear that ethos from a powerhouse like Shopify. Ecommerce has grown massively in a short space of time, and such expansion tends to be tied more to technology than to people. As the dust settles and pioneers become tinkerers, one hopes there’s some more room for the human touch.

Montgomery seems to think so. As customers become accustomed to the possibilities of online retail, expectations become more reasonable. “I think if you’re able to be up front and realistic about the problems you’re facing people will have a lot of sympathy for that and understand. That’s almost an advantage small businesses have getting started, because customers really want to support the people behind them.”

Again you see that playing out in the Exchange handover processes, where being a novice is nothing to be ashamed of. A willingness to learn is the only real barrier to entry in online retail these days. Transparency and communication gives businesses the best chance of success, and mistakes the best chance of being understood. As Montgomery says, “The businesses that have repeat customers will definitely be the ones that are transparent about how they’re operating.”

The Future

It’s going to be an interesting few years for Exchange. As more Shopify stores establish themselves, and more entrepreneurs eye up online retail, good mediators will be essential for everyone. “Our ambition” says Montgomery, “is to help entrepreneurs to sell everything. Already people on the site are selling domain names, they’re selling different parts of ecommerce stores and other platforms.”

The end game? “We really want to be able to put people in a position where they can buy and sell any type of business asset on that platform.” Balancing that scope with a down-to-earth human focus is no small task, but you can’t help but feel it’s going to have to be that way. Exchange has a unique opportunity to model transparent, sustainable business acquisitions online. Let’s hope they seize it with both hands.

About Fred O'Brien

I know from experience that building a website is only as hard as you make it. The internet is more accessible than it’s ever been, with all the resources you need to join in and stand out. Anyone can get online. I’m here to help you do that.

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About Fred O'Brien

I know from experience that building a website is only as hard as you make it. The internet is more accessible than it’s ever been, with all the resources you need to join in and stand out. Anyone can get online. I’m here to help you do that.

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2 Responses to Exchange Marketplace and the New World of Buying Businesses Online

  1. #

    Hey Fred!

    I’m the director of marketing for Empire Flippers. First of all, thanks for mentioning us!

    Exchange is an interesting concept, but I would argue one of your points is not correct here about 3rd parties not caring about whether the buyer/seller are satisfied with their transaction.

    At EF, we have a philosophy that it should always be a win-win-win situation. It’s not a zero-sum game.

    As far as I know, we’re one of the only services with a revenue verification period after an ecommerce store is sold and given to the new owner.

    I think the Exchange is a fantastic addition to Shopify, but my advice to sellers is that I think a broker is still the better route. All the additional support, marketing, and help the seller can get on negotiating a better deal is worth its weight in gold.

    Of course, I’m fairly biased considering I work at Empire Flippers haha 🙂

    Anyhow, great article and thanks again for the mention!

    • #

      Hi Greg,

      Thanks for reading and sharing your perspective! I certainly didn’t mean to imply third parties like Empire Flippers aren’t interested in buyer/seller satisfaction — only that Exchange’s ties to Shopify mean that commitment is baked-in in a pretty unprecedented way.

      There’s so may variables behind a site being put up for sale and bought that I’m not sure there can ever be a single best route. For some convenience and speed is most important, for others its top quality brokerage. Whatever the priorities, I think we can all agree competition (and even good old fashioned variety) is good for everyone in the long run.

      Cheers,

      Fred