Acquiring a website or an online business may seem like a straightforward job. Generally, websites are income-generating assets that require low fixed costs to run. Some people think this simply means that acquiring them is simple as well and you only need to remember a few passwords and take control of the asset. However, it’s a lot more complicated than it sounds and there are several questions that you’ll want to ask before buying a website.
As a potential buyer, having background knowledge of the website and the reason for selling is essential.
If a business is up for sale, was it making the actual amount of profit as described? Or are there deficiencies that need an additional explanation?
Has the company started losing its customers, or there aren’t enough prospects?
Such questions should pop into your mind to help you understand the product you’re about to purchase.
Now, these questions can mess-up your brain because they don’t surface systematically in anyone’s mind. But that’s fine because a due diligence checklist can help you organize your thoughts and help you make a better decision for your new website.
What’s Due Diligence?
In simple words, due diligence is an organized form of investigation and audit. It’s the questions that you ask before making a purchase. It’s just like buying a car when you ask friends or family for advice.
When it comes to acquiring a business, the questions that you ask are simply more organized and critical to make sure that you know the essential elements of your potential website.
Your due diligence questions should also be carefully crafted based on your goals. Would you like to acquire a blog that generates passive income? Or do you want a growth software play?
For example, mergers and acquisitions of any business should always have a due diligence check. Moreover, two types of due diligence are worth talking about.
Soft Due Diligence Questions
In soft due diligence, you focus on the abstract or non-tangible things like the company environment, type of management, connections among employees, job satisfaction, etc.
Soft diligence cannot trick because you observe things on your own. In buying a website, soft diligence can be somewhat tricky because you may not necessarily have an office setup. However, you can always count on factors like a response to calls and ownership of tasks, etc.
Hard Due Diligence Questions
Hard diligence is all about numbers and stats. We talk about profit margins, turnovers, benefits, costs, assets, liabilities, etc., to understand our growth chances. It is data-driven, but it can sometimes be misleading because it’s easier to manipulate numbers.
In hard diligence, the buyer will always highlight the big numbers. After all, they want to sell it. So, you need to read between the lines to get a clearer picture.
Flippa actually offers a comprehensive due diligence service for those who don’t want to ask their own questions or prefer a more thorough look at a business.
But, to start things off…
Questions to Ask Before a Website Purchase
It’s time to look at some critical due diligence questions you must ask for buying a website.
1. Who’s the Real Owner?
First up, you must verify the actual owner of the website. There are a couple of things to focus on. Firstly, look up the domain’s legal owner on any domain checking tool. It’s just to confirm the identity, and owners won’t lie to you there.
More importantly, you must look up the previous transactions and reputation of the company in the market. This requires a bit of research, but it’s worth the effort.
2. Why Are You Selling the Business?
When you’re okay with the business owner’s identity, ask them why they want to sell the business. If everything is good, and the business seems progressive, then what’s the need for selling.
The answer should lead you towards deciding a roadmap for the website and how you want to take it forward.
3. What’s the Degree of Complexity?
Thanks to online tools, modern business models are relatively straightforward. However, there are always a few geeky owners who love complicated structures.
Researching the model complexity will allow you to make a comprehensive gap analysis. So, you can hire the right people for the job later.
4. What’s the Domain Value?
Domain value gives excellent insights into website performance. Check if the domain had an unusually high value among global website ranking platforms.
5. Was There an Attempt to Sell the Website Before?
This is a critical question. Look into the past deals for the same website. Understand why the earlier deals didn’t work if there were any.
It helps in understanding the business models and enlightens the pros and cons of buying the website.
6. How Do You Deal with Antivirus and Spam Sites?
It’s common to land on websites with viruses and spam content. Therefore, ask the owner about their reputation with such sites in the past. Since online reputation plays a significant role in business success, you cannot avoid this question at any cost.
7. When Did You Launch the Website?
A new website generally struggles with online traffic, buyers, and global rankings. So, it’s unfair to judge a new webpage on these parameters.
Therefore, ask the owner about the launching time to get a better picture. Generally, it can take about a year or two for any website to establish itself.
8. What’s the Nature of Your Previous Web Content?
Imagine buying an online store for posting blogs and news. Ridiculous! Isn’t it? You must know the type of content the website posted earlier.
For instance, it could be a reading blog that previously had many readers. If you’re planning to post videos, you may not engage the same traffic.
9. Where Does the Traffic Come From?
Many online platforms, such as Alexa, Google Page Ranks, etc., can give you a detailed online traffic origin analysis. It’s important to understand where your traffic comes from. It indicates whether your product will be suitable for the region or not.
10. What are the Numbers?
As an investor, you need to know the financial details of your prospective website. Check the online banking portals and verify the details provided to you. Moreover, it’s a good idea to access the website’s backend.
Also, follow the trails to all the debts, liabilities, and loans. If the company’s going downhill, it’s not worth it. Lastly, check the taxation details, whether the website adheres to the legal issues, so you don’t have to suffer later.
11. Do you Have Competitors?
Unless your buyer is a rocket scientist with a unique business model, their website will always have some competitors. So, it is essential to know who you are competing with.
A strong competitor is often intimidating, especially for new owners, so you must know who you will be up against after buying the website.
12. Is it Easy to Enter the Market?
If the website is related to your field, then it’s cool. If you don’t relate to the website’s nature, newcomers can find it tough to understand the business dynamics. It’s essential to know the basics of the current business and what obstacles you can face.
13. Will There be a Non-compete Agreement?
It’s pointless to buy a website and have the same owner to create a similar business model with another domain. So, it’s critical not to compromise on a non-compete agreement. The seller must agree on not creating a new company with the same business model.
If the seller doesn’t get into a non-compete agreement, never buy their website.
14. What’s the Tech Requirement?
If you know the website’s current technological tools, you can make a better decision whether to upgrade or continue with the current ones. For a start, you can focus on programming tools, software dependency, and third-party hosting, etc.
15. What are the Current Products or Services?
When you buy an eCommerce site, you must know the nitty-gritty of the products and services on sale. Go through the catalogs, and compare the pricing with other businesses. It will help improve the quality of the current services and how you can uplift the less selling products.
16. Are There Any Existing Contracts?
Go through the documentation to see if there are any running contracts with other businesses. For instance, eCommerce sites have a chain of suppliers and contractors, etc. So, you can then decide whether to continue or make new deals.
17. Are Any Employees Willing to Work Under New Management?
If the seller has an impressive team, there is no harm in retaining some of their members. Of course, you would want your team in charge, but experienced members can help you maintain the website, especially in the initial days.
18. What’s the Customer Base Like?
You can verify registered customer details through calls or Skype. It’s useful to know your customer base because you will understand your target audience better. Compare your website’s traffic with your competitor’s. You will find valuable answers there.
19. How is Customer Support?
Check if the customer support is adequate. Are there any unattended emails or tickets that you might have to deal with? It gives a heads up on how your customers will react to changes in the website.
20. Are There any Legal Issues?
Last but extremely important, make sure that your website adheres to the legal guidelines. You can search for the legal history to ensure that you’re stepping into the right spot.
If you’re not sure, consult a legal expert but never sign the deal without confirming the legality issues.
20 Questions to Ask When Buying a Website