It’s no secret that buying a website is a complicated and often risky process. Sellers want to position their website in the best possible light to attract buyers, which can lead to the inflation of information for maximum profit.
If you want to get the full picture of a website (including the good, bad, and ugly) before you commit to a sale, then website due diligence is a must. You’ll minimize potential risk, vet websites that don’t live up to what they appear, and eventually make an informed decision about a website you’ll be confident about purchasing.
In this article, we’ll cover:
Website due diligence is the process of checking whether the website is as good as it seems on the surface, or as indicated by the seller.
No one likes to show the negative aspects of their online business or website, which is why website due diligence is so important. This process allows you to examine various aspects about a website to get an idea of its overall financial and operational status.
Website due diligence usually involves two-parts, requesting and reviewing.
1. You request specific information from the seller. Sellers are aware that potential buyers undergo website due diligence, so they should already have the information prepared beforehand.
2. You review the information and verify them with access to official documentation, dashboards, and website analytics.
For example, if you want to verify the monthly revenue based on the seller’s claims, then getting access to the website’s Stripe or Paypal dashboard allows you to verify this. Or, if you want to verify the organic traffic stated on the listing description, then access to Google Search Console or Google Analytics can confirm this.
Ultimately, due diligence protects website buyers from potential scams and being lied to or taken advantage of. Even if you trust the seller or buy a website through a reputable marketplace or broker, there’s always a slight chance that the website isn’t as profitable as expected.
Website due diligence also:
No website is perfect, and you’ll likely come across aspects of the website that aren’t as ideal as you would expect. However, if you have a concrete list of non-negotiables and a clear vision of what you’re willing to compromise or work on, then this should help make the process easier.
Remember — due diligence doesn’t tell you whether or not you should buy a website, but it does offer detailed information to help you eventually make a decision.
We get it, it can be confusing to navigate all the different aspects of website due diligence, especially if you don’t know where to begin. This checklist covers the areas you should examine and some questions you can ask the seller.
While this list isn’t exhaustive, it’s a good starting point. Depending on the type of website of interest (SaaS, blogs, e-commerce) and the reason you are buying it, there may be other areas you need to look into.
What is the current traffic volume for the website, and where is it coming from?
Website traffic isn’t the only indication of a flourishing or growing website, but it’s certainly a good one. Have a look at not only the total traffic volume, but also how it compares to competitors in a similar niche.
Healthy traffic distribution is well-distributed (e.g across search, referrals, direct, and others) and not just limited to paid traffic from a single channel. While high paid traffic isn’t necessarily a bad thing, you’ll also want to see steady growth in organic traffic over time indicating a good user base and relationship with Google.
Tools like Ahrefs and Google Analytics can help you examine this.
What is the financial situation of the website, and are there any financial liabilities?
If you’re looking to buy a website to make profit, then finding out about the financial situation is crucial. Despite popular belief, you do have the right to view the financial documentation of the website you’re looking to purchase. This includes bank statements and tax returns to see revenue over time, with a particular focus on the past 12-24 months.
You can also enquire about potential financial liabilities, including bank overdrafts, any type of loan, or debts. In some cases, you may need to get the help of a financial expert, like an accountant, to verify the information.
What are the current website metrics?
Website traffic is just one part of the equation when it comes to website metrics. Analytic reports give a full view of the health of the website and whether future profit is possible. By using Google Analytics or other analytic platforms local to the website, you can examine:
How much does the website earn and cost monthly?
You’ll likely cover this while examining the financial documentation, but if not, now is a good time to inquire about the monthly income statements and costs. Examining this can help highlight trends in revenue over the year, and give you an idea about potential dips and peaks.
What are the monetization sources?
When examining the monetization sources, it’s also good to determine how sustainable these sources are and whether they are of interest to you. These include:
What type of content is displayed on the website?
Good content is the bread and butter of a great website. Take away all the frills and designs, and ultimately, high-quality content is what makes a website rank higher and remain popular online.
Read through several landing pages or articles and decide whether the content is engaging, informative, accurate, and improving the credibility of the website. Remember, it’s easier to buy a website with a strong foundation of good content than revamp the whole website from scratch.
Are all contracts, licenses, and legalities up to date?
Unless you’re well-versed in legal documentation, you’ll want to get the assistance of a lawyer or business broker advisor to help you through this step. Together, you should verify:
What is the business model of the website?
From dropshipping and Amazon FBA, to SaaS and affiliate marketing, finding out the business model of the website you’re looking to buy is crucial. It can provide an idea of future profits, the type of employees you need to get or retain to maintain the website, and whether there is potential to pivot to a different business model if necessary.
Who is the target audience and is there a strong community?
Having a strong audience community may not be as important for some types of websites, but for others (like blogs or e-commerce stores), building connections with the audience is crucial.
In some cases, websites may have a big enough following to come with additional assets, like social media platforms. This is also a great time to research the overall reputation of the website, by browsing through review sites like Trustpilot.
What is the website’s USP (unique selling point) and current position in the marketplace?
Whether the website is incredibly niche or in a saturated industry, you’ll want to find out where it’s positioned amongst their competitors. Enquire about the USP and examine its advantages and disadvantages compared to similar websites.
Also, have a look at whether the niche it’s currently in is scalable or dying off, which can indicate future profitability. For example, if the website is capitalizing on a current social media trend and website traffic has been slowly dying off, this may not be a good investment long-term.
Before you buy an online business, you should always do due diligence to ensure you get the most out of your deal and you don’t end up with any surprises post-purchase.
While it’s completely possible to undergo website due diligence on your own, sometimes extra help is needed. Professional business brokers can make the process easier and more streamlined, and while they do take a commission of the final sale, they can guide you through every step with expert advice and recommendations.
Empire Flippers is a leading online business marketplace and business broker that helps first-time and experienced buyers confidently purchase websites.
Empire Flippers streamlines the due diligence process for buyers by providing detailed listings for each website, vetting websites before they are listed, interviewing sellers, providing access to due diligence documents, third-party verification, and post-purchase support.
These steps help minimize risk when buying an online business and make the due diligence process more manageable for buyers.