When buying an online business there is no doubt the most important step is to perform some serious website due diligence. However often online business buyers are so enthralled with the business they have just came across that they overlook some incredibly important steps in website due diligence.
Checking Ownership
First of all you should be checking ownership. Many people don’t even consider this when conducting website due diligence. And sure it’s great to be able to put trust in the seller but this too can turn around to bite you in the butt.
So checking ownership can be anything from checking out who the seller really is, seeing if they own the domain or even asking for some form of evidence that they own the website and the business.
Depending on where in the world the website was set up will depend on what type of ownership proof you need to proceed and this should be the very first step!
Traffic Sources
It’s great to see that when performing website due diligence a website is generating a lot of traffic. However one thing people don’t take notice of is where the traffic is coming from. Yea sure it may be coming from Google, Yahoo, Bing, Facebook and other social media sites.
Which sure, that is great. But, is the traffic diversified?
Is the traffic of the website from just one source?
And this is one of those website due diligence secrets that most look over.
With only one traffic source, this could be risky especially if Google changes its algorithm, or if Facebook is not as popular in the next few years (this happens, look at myspace).The website could lose a lot of traffic. And we all know that traffic can be monetized and when lost is damaging to the business.
This is something you should be checking, not just that the traffic is trending but how reliable the traffic sources are and are they diversified or not and why?
Hidden Expenses
The seller of the website usually always provides a profit and loss statements with expenses and ect. Although never for a second entrust these statements whole heartedly. And I say this because sometimes there may be expenses they had “forgotten” to add and then poor old you (the investor) is footed with a bill for an email service (or something alike) you didn’t know the business used and they just “forgot” to add it in the profit and loss statement.
Which is just an example, for there could be so many possible expenses that aren’t transparent on the profit and loss statement.Which is a big one that can catch many investors off guard.
So ALWAYS double check the profit and loss statements and ask as many questions as you need. This is all part and parcel of the website due diligence secrets you need to remember.
PBN
Do you know what PBN even is?
It’s scary but most website investors don’t!
A PBN is a ‘Private Blog Network’ usually used by the seller to build up SEO and rankings through linking into the website they are selling. This is through external blogs and websites, which could be one blog or a whole network of blogs usually owned by the seller or a friend/family member.
The tricky thing about PBN’s that have been used to build a website is. You may not be informed that they are being used and even if they are, and you know they are. Sometimes an agreement may not be put in place (when buying the business) stating that those links will continue to link to the website you may purchase as an investment.
If this is the case you could invest in a website and see a lot of traffic decline, which is scary business. Literally!
Proof Of Financials
Let me ask you, do you really believe that a screenshot or an excel profit and loss sheet is enough to warrant calculating the real value of a business?
I can tell you right now, if you were to do this you almost deserve to get taken advantage of and you would be amazed at how many people actually have!
Instead of being content with the profit and loss statement when conducting website due diligence, which is a huge mistake. What you should be doing is asking for real proof! And I am not just talking about screenshots. You want video evidence, or screen share evidence of the sellers Paypal, Stripe or bank account. For wherever the money for the business is coming in and going out you want live time evidence of this.
Please folks, don’t be fooled here like so many investors already have been and are still are. Cover your back and ensure you have proof.
I could go on forever with website due diligence secrets but this post would take me months to write. However, if you are serious about learning more about Buying Online businesses, check out the Buying Online Businesses blog here.
