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Are you interested in owning a money making website? Congratulations – you’re in for an exciting business journey.
When you first start out, you have two basic options: you can build an affiliate website yourself or you can buy an existing one.
We’ll talk more about building your own site another time, but if you’re thinking about buying a site, we want to emphasize the importance of proper due diligence.
In this post, we’re going to dive deep into what good due diligence looks like and why it’s so crucial.
When it comes to buying a website or online business, the due diligence process is basically like an appraisal. As a prospective buyer, you need to understand the website’s assets and liabilities in order to decide if it’s worth your time and money to buy it.
Fortunately, the founders of Motion Invest – Jon, Kelley, and Spencer – have years of combined experience buying and selling websites, so they have created their own due diligence systems to make sure Motion Invest only buys the highest quality sites. See the websites for sale here.
Now, here’s a look at some of the different factors – both qualitative and quantitative – that go into due diligence for a website purchase decision.
Right off the bat, income is the most important factor in whether you buy a site. As with any business purchase, the reason you’re buying a website is for its income – either the site’s current income or its potential income.
Of course, even if you’re primarily buying with the intent to sell it at a profit later, you still want to make sure the income is real so you can cover all your bills in the meantime. That’s why you have to verify revenue, and ideally, see that it is on an upward trajectory from month to month (or year to year in a seasonal venture).
Now, there’s one big caveat here: you can find great websites for sale that aren’t currently profitable. Maybe the owner neglected the site recently, or maybe they run a quality site that’s not monetized to its full potential. Profitability isn’t as important as verifying that the income numbers are truly accurate.
One way to prove revenue for an affiliate site is to check on tracking IDs for affiliate links. Don’t just look at an Excel spreadsheet someone slapped together – make sure you see snapshots of the actual source of income, such as with Amazon Associates, Shopify, and AdSense.
Similarly, you need to know how much money is going out every month for web hosting, software tools, content production, link building, and other marketing activities. Some businesses try to seem more profitable than they are by downplaying their actual expenses.
For proper due diligence, this means requesting credit card and PayPal statements. You need to match up what they say they’re spending with what the records say.
Traffic may be the lifeblood of a website, but there are plenty of other metrics that reveal the health of an online business.
It may not be possible to get the most detailed numbers without transparent access to a site’s analytics (which is why you should ask for view-only access to their Google Analytics for due diligence), but SEO programs like SEMRush or Ahrefs can give you a surprising amount of data on any website you’re looking at.
In terms of analytics, focus on things like:
Taken together, these factors provide you with a really good sense of the site’s quality. Once the seller shares their numbers with you, it’s easy enough to cross-reference their data with what you find independently to verify that they’re roughly the same.
Lastly, there’s one key point about analytics: you can see how risky the venture is based on traffic sources. If most of the traffic is coming from just one or two pages through organic search – or from referral traffic from a certain website, or any other single category – then you want to proceed with caution.
To be safe, you want the website to have a fairly good balance of traffic sources over a sustained period of time.
On the more qualitative side, how do you feel about the quality of content on the website?
Try checking out the five most popular posts on the site and see how you like them. As a thought experiment, put yourself in the place of a typical user who’s randomly searching for keywords related to your potential niche. Would you be satisfied with the content you find?
Great content is informative first, but has some personality. If the content is generic, poorly written, not well researched, or lacking in any way, it’s not an automatic deal breaker – but you may have to factor in the cost of polishing the content when you make your offer.
You should also run at least a few of the articles through Copyscape’s plagiarism checker. The last thing you want is to buy a website full of content that’s not even original!
It’s hard to put a price tag on engagement, but that doesn’t make it any less valuable. Engaged readers are likely to be return visitors and customers.
If you have access to the analytics, you can always divide a site’s return visitors by the total number of visitors to see how loyal the website audience is. This is a fantastic metric to check.
But you should also look at the total number of comments on blog posts and the amount of activity on social, if the affiliate site has a presence on social media. Many small affiliate sites don’t, but what you want to watch out for are red flags like fake followers that might be evidence of fraud or foul play.
In addition to analyzing these website-focused areas, it’s crucial that you review legal and operational aspects of the seller’s business as well.
For one thing, you can look up the character of the owner to see if they’ve been convicted of fraud or engaged in civil lawsuits, or if there’s a lien against them. Verify any trademarks with a trademark search, check that they are posting images with permission, and make sure they have valid licenses for all of the software and plugins they’re using.
Another area to consider is business structure itself. You can find out if their corporate entity is in good standing with the state’s corporate registrar. Is everything by the book in terms of taxes and employment?
Lastly, carefully review any major contracts the affiliate site has with other parties, such as sponsors and advertisers. You want to confirm that these contracts will remain in place after the website changes hands.
I know that’s a lot to wrap your head around, but thorough due diligence accomplishes two key things:
1) It gives you a sense of what the business is actually doing, so you can start to weigh how you might change things to improve profitability.
2) It helps validate that the website owner is acting in good faith. As President Reagan once said, “Trust, but verify.” Many business owners aren’t perfect record keepers, but if you see repeated warning signs during the due diligence process, you can still back out of the deal before it’s too late.
Ultimately, due diligence gives you all the information you need to make smart business decisions once you take control of a new website, while also saving you from the pain of a bad purchase.
Without due diligence, the most common scenario is that you pay someone thousands of dollars and take ownership of a website with numbers that are drastically different from what was promised. At best, you have an asset that you paid way too much for – and at worst, you have a worthless website that you can’t even justify spending more time and money to salvage.
Nobody wants to invest in a website and find out after the fact that the numbers are off, or that they’re artificially inflated by shady tactics like spam links. With the right due diligence, you ensure you’ll only buy a website that’s truly worth it.
There’s more to know about due diligence than we could possibly cover in one post, but hopefully this helps you understand why the due diligence process is important when buying a site.
So, if that’s true, why don’t more business owners do it?
The biggest issue is that most of us don’t know what we don’t know. There are countless steps required to verify a website before purchase – but unless you’ve bought and sold a number of websites before, you may skip some of them completely.
If you’d like to buy a website without having to manage the due diligence process on your own, Motion Invest conducts professional due diligence on every website we purchase, you can even look at our due diligence checklist here in section 2.32.
Want to learn more? Look at websites for sale here or contact us today!