Investing in Online Businesses
Online businesses have taken a significant uptrend, especially ever since the coronavirus pandemic. The pandemic has taught everybody a new normal, and businesses were the first ones to learn. From bakeries, clothing ventures to tech – all businesses have now gone online and operate with the same force as any other company would.
In fact, it is easier to reach out to more customers, scale and save on renting space costs by having an online business, and so it’s no surprise that more and more investors are now backing them! In our article, we will discuss everything you need to know about investing in online businesses.
What is an online business?
As the name suggests, an online business is any business activity that happens on-line or over the internet. An online business does not necessarily have a physical location, and they provide their goods and services through the internet.
Investing in online businesses can provide investors with a hedge against the market falls in other assets, help you cope with the surging inflation and give you attractive returns.
Why should you invest in online businesses?
The world’s biggest tech and social giants, Apple, Microsoft, Facebook, Amazon, Alphabet and more, are all online businesses. Their growth over the years is evident to everybody, but what is less known about all these companies is that they largely exist in the online business domain and were started as small companies with the same aim – taking over the internet and making it a place never imagined before.
Numerous companies solely in the online business field are coming up year by year, and investors are targeting them with the hope of them making it big, too. Here are the top reasons why you should invest in an online business –
- It includes low start-up costs leading to lower risk and high return on investments long term
- Introduces you to the new-age business world and opens up more significant opportunities to benefit from
- It gives you access to a global network
- Online businesses use much more advanced and state-of-the-art technology and marketing tools to stand out
- Allows you incredible scalability options
- It gives you access to international markets
- Promises appreciation in value if the good/service to offer is worth it
- Online businesses are highly liquid
- Involves low overhead costs leading to high margins
Ways to invest in online businesses
1- Indirect investments
Indirect investment in online business refers to buying some shares or stocks of a big publicly traded online business/company. This is where you can get exposure to the market giants like Amazon, Alibaba, Wayfair, and hundreds of other companies operating in the online space. These companies offer significant returns through long term capital appreciation. You can also earn profits through the dividends that companies provide.
Since these big giants are trillion-dollar companies, each share in such companies costs a few hundred dollars. This means you can only invest a handful of amounts to buy some point percentage of the entire company. So, stocks are a good option if you have limited money that you want to invest wisely with decent returns and low risk.
However, if you have a larger chunk of money, you can opt for direct investment, the second way to invest in an online business.
2- Direct investments
Direct investment in an online business means you invest a significant amount of money directly in a small online business with high risk but higher returns. This means you buy a substantial stake in the company directly from the company’s owner in exchange for our investment.
Directly buying an online business gives you a larger control over the company, its business operations, assets, growth, and much more, leading to more significant value creation in the long term. However, the work is always super active and can get hectic since it requires hands-on participation of the investors to help with the business processing, network, brand building, financials and everything else related to the business.
But, if you are someone who has the money but not the time to manage the business, you can still directly invest in a small business. There are platforms that manage your direct investments by actively participating on behalf of you as the business managers/operators. All you have to do is choose a business from the ones identified by the managing experts, invest in the business and enjoy the returns later.
Conclusion
Online businesses are soaring in the market right now as almost every new business is launching online, and the ones offline are going online. It is the best time to invest in online businesses if you wish to create more wealth in the future, and there are plenty of options to do the same. In 2020 alone, over 30% of the businesses existing in the world were conducted only in online form. The internet is here to stay, and each passing day is going to mark a new beginning for another online set-up!
If you want to learn more about investing in online businesses, then click the button to below to request an introduction to a financial adviser.
