Doing proper Due Diligence on a web site can be daunting. Don’t despair! The more you do this, the quicker and better you get at it. There are tools all over the internet that can drill into where traffic comes from and what the site has been up to.
The main question we are trying to ask is: “Is the seller properly representing this business, and is this something I want to own and manage”. There are always going to be problems, you have to determine if your level of problem-solving and knowledge matches up with the business you are looking at. If not, can you easily outsource those missing parts? Many times a seller has custom programmed a business from scratch, and they say it’s easily taken over by someone else. That is rarely true, many are not good at documentation, so taking over someone else’s code is time consuming and expensive.
Before digging into the business, thoroughly review what the seller has provided, so you can match it up with what you find and ask pertinent questions.
Let’s start with the “location” part of a web business:
- What software is the site built with or written in? Are you familiar with this type of programming?
- You can use web browser tools such as Built With to find out information about a site.
- Who is the hosting provider?
- Can this be transferred over easily or is it shared with their other websites?
- Is this a completely managed provider, or does the seller run part of the server? VPS?
- Do you have to maintain a server? Do you know how to do that? Might be extra costs if not.
- Do you understand Windows server architecture vs. Unix/Linux?
- How many servers does it run on and what are the costs for this?
- We are looking to see if the server’s are not sized properly for the application which might increase costs down the road.
- Where is the domain stored?
- Verify this with whois information (http://whois.domaintools.com/)
- Who is the registrar for the actual domain name?
- Can they hand the account holding the domain over, or do you have to initiate a transfer process since they own multiple domains (typical and takes time)?
- What does history say about the domain itself?
- If you have a membership to domaintools.com, run a domain history and see where it’s been
- Another free alternative is http://whoisrequest.com/history/
- Check out archive.org to see how long the site has really been around in it’s current state, and what it looked like in the past.
- Did the seller only add content in the last year?
- Was it a spam site before then?
- Was it something that company web filters are going to catch and limit your user base?
- We are looking for the true site age, if it’s really only a year old then the numbers are probably misleading. This may be due to a PBN (private blog network) providing traffic.
- When was the business last sold or when did the seller pick it up?
- What did they pay for it if you can find that out. Many auction sites list old auctions to see this.
- In this regard, how many times has the site been sold or tried to sell?
- What things did they add to the business? Did they add value or just sit on the property?
- If they state they have not added anything, and traffic is going up significantly, then something is likely amiss.
- Check is the website blacklisted, or spammy content inside the site itself. You can also check the domain name against mail black lists to see if they have sent spam with the domain name. This could give issues down the road if you want to email customers: https://www.dnswatch.info/dns/rbl-lookup
- Also check legality of the site, does it infringe on copyrights?
- Does the domain name itself infringe? Do they have permission to use it?
- Are they licensed for the software or plugins they are using?
Here we need to dive into their analytics report(s), typically start with screen captures that are provided and we can verify these numbers in the Live Screen Share portion. Sellers are able to inflate some of these numbers with scripting so trust but verify.
Metrics that matter:
- What is the bounce rate (this is people who only see 1 page and leave)
- Average time on site / session duration (depends on the site, should be more for apps)
- Pages per visit (do they only see 1 page and leave)
- Unique visitors per month vs. returning (we want unique but also a healthy number of returning)
- Are they capturing any unique events and getting custom data? This is great if so, we can see if people are clicking on certain items, if they are using e-commerce goals, or have some sort of funnel.
- Only from organic? Did they ever test out a paid search strategy? A single traffic source can cause issues especially if it’s only from Google. What happens if the algorithm changes?
- Preferably less than 60% organic, and the rest a mix of referral, social and paid.
- If there is paid, how much do they spend on it? Is this managed by them or a service?
- Unique content? Try some copyscape.com searches and see if anything comes up as a duplicate.
- Check the referral sites, these should be mixed and less than 50% of traffic. If a majority are from one or two links, that could end at any point so take this into consideration.
- Are the referral sites relevant or somewhat spammy?
- Check the keywords the site ranks for, you can do this with tools from Moz, ahrefs, semrush
- Are these keywords relevant?
- Are they high value or high competition?
- Are there others you can easily add and rank for?
- This research should also include competitors, and what you can learn from them.
- Are there easy wins to add value if you purchase the site?
Note: Google analytics can be changed with imported data, so it’s not a 100% reliable source. Have the seller add you to their analytics account to verify the numbers, but take it with a grain of salt. Also see if the seller has a webmaster tools/search console account setup, and see what the main keywords they rank for are. If they don’t, this could be an easy way to increase the business traffic if you choose to buy it (add a sitemap, write content to the string keywords, etc).
This is the fun part, see what the numbers are and make sure you can correlate where the revenue came from.
- What are the sources? ads, Amazon, affiliates, direct advertising, services, products, etc
- Are they seasonable or temporary?
- Will this impact your ability to own the business?
- How easy can they be replaced?
- Are there other sources you can swap out if one goes south?
- Can you transfer the revenue source account or do you need to open a new one? What is the approval process for that?
- Adsense accounts typically can’t switch so you need to change the Adsense ID on every page, is this script-able?
- Many affiliate accounts need approval before you can become a seller, what is this process?
- Which country are the affiliates in? Are you allowed to even be part of their program?
- Is the revenue from recurring billing? Can this account be transferred or does that need to be setup again for every client?
- If it can’t be transferred, be prepared to lose many clients who won’t re-add their information
- Paypal cannot be transferred unless purchasing the LLC, which brings up more issues of outstanding debts. Consult an attorney if you are considering an LLC purchase instead of an asset only purchase.
- What is the repeat customer percent? Is there high churn or do people keep coming back? This of course depends on the type of business.
Live Screen Share
If we have made it this far, then we are very serious about the business. We are going to coordinate with the seller and see a live screen share of their processes and revenue sources. We are looking at their accounts, whether it be Paypal, Commission Junction, Square, etc to see if the revenue numbers match up. This is also the best time to ask detailed questions about what we have found in our due diligence. Does the seller know the answers quickly?
- Check the local DNS / hosts file on the shared computer to make sure it’s going to the internet and not their local “fake” servers
- Watch how they login to the revenue accounts
- You click and run the revenue reports (so take control)
- Check period snapshots - 4 months, 1 year, 2 years for the various revenue sources
- Paypal - use caution, you cannot see what site the sales are coming from, it just goes into the account
- Do they pay for Paypal? For awhile you were able to get the merchant accounts for no monthly fee, make sure to take the fees into account if you need a new account. There is also an approval process that can take time.
- Check country origin of transactions, are they all foreign or the same country as the business.
Competition - internal and external
- What sites exist that are competitors, does the seller know of them?
- Check keywords and ads your competitors place with the SEO tools above
- See the backlink profile on their sites, where does the traffic come from?
- Can you find other similar sites and get similar links?
- It’s often a waste of time to try and get the exact same links, instead find other sites that you can work with that have similar audiences
- What other domains or websites does the seller own that could be competition now or down the road?
- Are there any that have been neglected that could be re-purposed? Make sure they include those in the sale.
PBN - Private Blog Network
Does the seller use a PBN? They can be hard to detect, if there are backlinks from random sites that don’t seem to be relevant, this might be the case.
There are many arguments on either side of why they can be good strategies, from our perspective if too much referral traffic is coming from these sites, it’s a no go. It only takes one Google update to wipe out all of the PBN sites and your main traffic sources.
So does this sound like a lot to check? It is! We can help, contact us and we can take care of the technical due diligence for you.