Many website buyers complete their due diligence and wonder if they have checked everything. This causes many buyers, especially inexperienced buyers, to freeze up, and hold off on moving forward to close the website purchase. Indecision can kill great investment opportunities. There’s a time for due diligence and there’s a time to close a deal.
Every website is different but they all have similar items that a buyer must verify during the due diligence process. The list below is not an exhaustive list because a website may have additional items that need verifying. But, at the very minimum, it is mandatory that a buyer verify these items below.
I have outlined a checklist of 13 items that every novice website buyer or experienced website buyer must verify before acquiring a website. The research tools included tell the buyer where to go to research and verify these items.
Check the ownership information publicly available on the domain name. It’s important to start by establishing that the seller legally owns the domain name and website that he’s selling.
This may sound obvious but, as a buyer, this is where you must begin your due diligence. Don’t just assume that the seller is the legal owner of the website. Verify it. If the Whois data is private, then have the seller send you emails from the specific domain name to prove that he owns it.
You can use DomainTools.com for this research.
Whois will also provide you with extra details such as when the domain name was registered or acquired by the website seller. This should match the seller’s claims regarding how long he has owned and operated the website business. You can also verify the website’s history using Archive.org which we’ll discuss below.
It’s important to understand how long the website has been online and what it looked like in the past. Enter the website URL in Archive.org’s search engine to pull up its historical records.
Archive.org crawls and stores snapshots of web pages. This will tell you when the website was actually launched, which is often different from the registration date of the domain name. And you will be able to see what the website looked like in the past.
This will give you a good sense of the history and growth of the website. The information you glean here should match any claims made by the website seller regarding the history of the website.
Check traffic numbers for the website by requesting read-only user access to the website’s traffic account. The seller will add your email address to its traffic account such as Google Analytics. You may view data but you will not have the Administrator’s ability to edit any settings.
In this way, you can log in, click around, and dig through the data to verify that it matches the traffic claims made by the seller.
Just as with Traffic, you must verify the financials of the website. The method of verification will depend on how the website earns and receives its money as well as how comfortable the seller is in giving you direct access to his financial data.
If the website makes money by Google AdSense, as with Analytics, the seller can give you limited user access to the data. You can log in and verify it. If the website receives PayPal payments, a similar user access method can be used. Most online payment systems have comparable user access features that a buyer can use to verify financial data.
In other cases, you may need to verify credit card statements, bank accounts, tax statements, or audited financials. In some cases, a seller can send you records directly from his financial institution.
Some sellers prefer to use video conferencing or shared computer screens (via Skype or GoToMeeting) to log in to their accounts themselves and show buyers all the data that the buyer wishes to see. In this way, the seller doesn’t give the buyer direct access to his financial accounts but the buyer can still see and verify the data.
It’s also important to find out what other website assets are owned by a website seller. A buyer should find out if the seller owns other similar websites that could compete with the website being sold to the buyer.
SpyOnWeb.com’s research tool provides data on other online assets that belong to the same owner. A user simply has to enter the URL of the website he wants to research.
More often than not, sellers will own other websites. It’s important that the buyer uncovers whether all these websites share costs such as website hosting. Or whether all the websites’ revenues are combined and reported in the same financial account such as having one AdSense account for multiple websites.
In this way, the buyer can clearly separate these revenues and costs from the website that he’s interested in and get a clear picture of its independent financials.
Backlinks tell a buyer how popular the website is online. The higher the number of backlinks, the higher the website ranks with search engines, and generally, the higher the traffic.
Unfortunately, there are numerous backlink verification tools and they all deliver different results. So it’s best to use all of them to understand the entire portfolio of backlinks that are pointing to the website.
A buyer can use Majestic SEO, Open Site Explorer (Moz), Alexa, and Google Webmaster Tools to verify backlinks. The results from each resource will be very different. The buyer can click on backlinks to find out which websites linked to the website for sale. Backlinks from high authority websites are very valuable.
The last thing any website buyer wants is to acquire a website and its domain name and discover that the domain is involved in some uncomfortable legal situation.
The reason why buyers acquire website assets and not registered businesses (such as partnerships or corporations) is in order to avoid inheriting any business liabilities. Similarly, a website asset buyer doesn’t want to acquire legal problems that a domain name may be involved in.
A quick UDRP search will tell a buyer if there are any past or current legal issues pending related to the domain name.
8. Patents & Trademarks
A website sale may involve the purchase of registered patents or trademarks owned by the seller. If the buyer will be acquiring this intellectual property in the website package, he should verify the status of these registrations.
Where these patents and trademarks were registered will determine where the buyer performs his research. The largest public databases are United States Patent and Trademark Office (United States), Canadian Intellectual Property Office (Canada), and Office for Harmonization in the Internal Market (European Union). Other countries have their own intellectual property databases.
A buyer should verify that the website seller is the legal registrant of the patents or trademarks by searching these databases.
When acquiring websites that are article-driven, due to the high level of content theft online, it’s always a good idea to perform Copyscape research.
This will establish whether the website has unique content or whether the content was plagiarized from another website.
10. Domain Name Appraisal
If the website for sale was built on a premium domain name, it’s important to establish what the domain name alone is worth. A domain name appraisal may be necessary.
Both buyer and seller may opt for a formal in-depth appraisal report as provided by Sedo or Moniker. Or they could perform a quick automated appraisal using online services such as Estibot and DomainIndex.com. Automated appraisals tend to be less accurate than formal appraisals but they can sometimes provide a reasonable price range for the domain name.
If the domain name had changed hands in a previous sale, knowing the past sale price is ideal to perform a domain appraisal. This price could be uncovered from historical records available at NameBio, Estibot, Sedo, or DNJournal.
11. Google Penalty
Due to the huge importance of Google’s search engine traffic to most websites, it’s a good idea to verify that the website has not been penalized or deindexed by Google’s search engine.
There are numerous free online research tools that can verify this including Pixel Groove’s Sandbox and Penalty Checker.
12. Registered Users and Subscribers
Most websites have a list of email subscribers or registered members. It’s important to check these email marketing accounts to verify the number of members claimed by the seller.
Most email marketing services such as MailChimp and Constant Contact have features that allow an Administrator to add users with limited access. A buyer can be added as a user to log in and verify the data. Or a seller can use video conferencing to show and prove these numbers to the buyer.
13. Check Forums
Most website owners and website users are registered members of forums related to the website’s niche. Visiting forums is a great way to understand what people “on the street” think about the website and its products or services.
A simple Google search of the website URL will normally bring up any forum pages where the website has been discussed in the past. What’s great about forums is that a buyer also gets to see the dates when the forum comments were posted. It tells a buyer what the world out there thinks about the website, good or bad, over time.
These are 13 items that every website buyer must verify during due diligence and these are the tools to use to perform these due diligence tasks. Combine these with a little commonsense and any buyer can, and will, perform proper due diligence quickly on any website.