Thinking of buying a website? Hold up! As we know, precaution is better than cure. So, you must do proper due diligence before. By thoroughly checking out a website before you buy, you can avoid nasty surprises and make sure you’re getting your money’s worth. And we’ve got you covered with a simple 10-step website due diligence checklist.
What is Website Due Diligence and Why it is Important?
Imagine buying a second-hand car without checking how it runs, what’s the remaining warranty and are the components working properly or not. Well, the same principle applies when buying an existing website.
You are buying the website so that it can become your new online business. Most people buy websites for their new passive income source. As Warren Buffet famously said, “Rule number 1: Never lose money. Rule number 2: Don’t forget rule number 1.” This wisdom rings especially true in the world of online business acquisitions.
Due diligence allows you to get in-depth knowledge about the website and see if it will be a good investment or not.
During the due diligence process, you might stumble upon aspects of the business that could be improved. These weak spots aren’t necessarily deal-breakers but are opportunities to boost the website’s profitability after acquisition. It will also you at the negotiation table. You’ll be able to confidently discuss the website’s strengths and weaknesses, backed by solid facts.
Remember, once the deal is done and the money has changed hands, any issues with the website become your problem.
By thoroughly examining the company and its operations, you set yourself up for a smoother transition when you take over. You’ll have a clear picture of what you’re stepping into, allowing you to hit the ground running from day one.
10-Step Checklist for Website Due Diligence
Now you know what it is, let’s learn how to do it. You can just follow this simple checklist given below for doing due diligence before buying a website:
1) Verify Domain Ownership
Start your website due diligence by confirming domain ownership and history. Use tools like WHOIS to check the domain’s age and registration details. You don’t want to find out later that the website is registered under some other person’s name.
Also, check how long has been the domain owned. A longer domain history often indicates more credibility. You must also see website archives (using Wayback Machine) to see if the domain name had any other type of business going on before.
For example, you might be buying an e-commerce business, but you later find out that some 10 years ago, the domain was run by a shady business. There is very little chance of this happening, but it’s always better to check it yourself before.
2) Content Audit
If you especially buying a content website, maybe a news or blog site, or even an e-commerce website which has a blog section, you must do a content audit first. You have to evaluate two things: Content Quality and Originality,
Read through various articles, both recent and older ones, to see how well they are written. Check for plagiarism and ensure the content is original. Evaluate whether the content offers a unique perspective and adds value to the target audience.
3) Analyze Traffic Sources
Analyze the website’s traffic sources to see where most of the visitors are coming from. Is the traffic coming from Search Engines, or Newsletters or Social Media? Maybe the website gets a lot of visitors, but you later find out that the source is mostly through the owner’s social media, which not be under your control.
Then, Analyze their demographics thoroughly. Verifying what the owner has told you about the audience is correct or not.
At last, check engagement metrics like average time on page, bounce rate, and pages per session. Sometimes, a website might have millions of visitors, but most of the traffic doesn’t convert into customers, or they don’t bother to read the articles.
4) Analyze SEO and Keyword Rankings
Even if the website is getting 1% of the traffic from the SEO, you must conduct a comprehensive SEO analysis. Evaluate the website’s on-page optimization, including meta tags, headers, and content structure. See if they need some “Optimization” later. Maybe the on-page SEO is bad today but with a little tinkering, you can boost the traffic from search engines.
Then, check the website’s rankings for target keywords. The mistake that most owners make it that think if the website is getting good traffic via search, it must be ranking on the first page of the target keywords. However, you might be wrong and the traffic might be coming from some unrelated articles posted on the website to manipulate traffic numbers.
Avoiding mistakes today will save you a lot of time in the future.
5) Backlink Profile
After on-page SEO, let’s go off-page. Examine the website’s backlink profile using tools like Ahrefs. While many focus on the quantity, we recommend to assess the quality of backlinks. First, Make sure not a big chunk of it is spam. Then, focus on referring domains: do they have high authority? and are they in the related niche or not?
For future modifications, compare the backlink profile with competitors to identify opportunities for improvement.
6) Check Technical Factors
While it seems the very basic thing to do, you must first see if the website is mobile-responsive or not. Many old websites might look good on Desktop, but horrendous on mobile. And when most people are browsing with their mobile devices, that will not provide a good user experience.
Talking about user experience, you must analyze the loading speed of the website. It is not only an important factor for SEO but also important for your visitors. If the website is slow, all the effort put into writing content or listing your products will go to waste, because people will immediately skip and check someone’s website.
Finally, see where the website is hosted, how’s the service of the hosting company, what’s the Content Management System (CMS) of the website, how easy is to use it, and any plugins or third-party tools used.
7) Monetization Methods, Operating Costs and Profit Margins
While this is a thing you have already checked when considering an online business to buy it or not, it’s better to do it again to verify the information.
Review the website’s current monetization strategies, such as advertising, affiliate marketing, or e-commerce. Analyze the effectiveness of these methods and explore potential opportunities for improvement.
Examine the operating costs associated with running the website, including hosting, content creation, and marketing expenses. Calculate the profit margins to ensure the website’s financial viability.
8) Intellectual Property Rights
Verify that the website has proper ownership and rights to all content, including text, images, and other media. Check for any licensing agreements or permissions for third-party content. You need to get access to all those things included with the overall website rights to not get into big trouble later.
9) Reason for Selling
When meeting the seller, this is one of the most important to ask when buying an online business: Why are you selling it?
Understanding the reasons behind the sale can provide valuable insights into potential challenges or opportunities. Be cautious of any red flags that might indicate underlying issues with the website or its business model.
10) Growth Potential and Post-Sale Support
Assess the website’s growth potential by analyzing market trends, competition, and expansion opportunities. Consider the scalability of the current business model and identify areas for improvement.
Also, if possible, ask the seller if they can help you get into the business even after they sell it. The post-sale support or transition assistance for one or two months can ensure a smooth handover of the website.
By following this 10-step checklist, you have the essential website due diligence.
Additional Tips for E-commerce Website Due Diligence
When you’re eyeing an e-commerce business, there’s a whole new set of factors to consider. So, here are some additional tips you can follow:
- Look at how the business gets its customers: Are they coming from paid channels like web search and social media, or as organic traffic?
- Estimate the overall CAC, including the costs of each channel. Also, check out how well the company converts new visits into paying customers.
- Examine Customer Retention. A thriving e-commerce business should have growing repeat orders over the long term.
- Check the hosting platform. If it is Shopify or WooCommerce, then it is easy to manage them. But if the website is custom-made, get some professional assessment, so that you don’t face any tech issues later.
- Read product reviews on the website, but also on the e-commerce marketplaces, other review websites, YouTube and social media platforms like X or Instagram.
Conclusion
Overall, Website due diligence is a crucial step when looking to invest in an online business. By following the comprehensive 10-step checklist outlined here, you’ll be well-equipped to make an informed decision.
