• Buying a website? STOP! Read our Guide to Website Due Diligence first

    So you want to buy a website. Maybe you're fed up with the humdrum nine-to-five (or longer!) slog of working your backside off to make someone else rich and feel it's time to branch out on your own. Or perhaps you've done all that and are looking forward to a well-deserved retirement, but want a little something to keep you busy and keep a few extra pennies coming in.

    There are all sorts of good reasons why you might want to set up in business for yourself online. We bet you can't wait to get started. That's cool. Far be it from us to pour cold water on your ambitions - after all, we've done it ourselves.

    What's NOT cool is that there are people out there ready to take your ambition, turn it around, and sell you a dream instead.

    Some people make a living from building and selling websites. Not websites that have been commissioned by existing businesses to meet their needs. Websites that they churn out by the dozen, with no history and no customer base, but that they then present to unsuspecting newcomers as surefire earners. Just like the dodgy used car dealer, they have all sorts of tricks to dress up their wares and make them look slick. They can even dupe buyers who've been doing business for a while sometimes. The newbie is easy meat.

    Of course, not everyone who's selling a website is out to part fools from their money. But even good-faith sellers can unintentionally mislead prospective buyers.

    For instance, a website may have been bringing in good money over several months or even years. But the owner may have forgotten to take account of all the time and money that had to be spent on maintaining and promoting the site.

    No-one wants to buy a pig in a poke. But if you blindly accept what the seller tells you about their website, you're doing just that.

    This is where due diligence comes in. Due diligence is the process of investigating and evaluating a business opportunity's true value, by digging below the surface of the data presented by the seller and examining and verifying those data, making use of information from other sources where available.

    There's plenty of information about due diligence (DD) on the Experienced People forum. In fact, we've even got a whole forum dedicated to the subject! But, with well over 200 threads and nearly ten times as many posts, it could take you some time to distil all the information. So we've done the job for you - and added a lot of extra research - to produce the Experienced People Forum Guide to Website Due Diligence.

    Who is the Guide for?

    If you’ve ever considered buying a website but were afraid of being scammed, or if you feel you need a helping hand through the DD process, then the Guide is for you.

    Even if you have previously been involved with mergers and acquisitions (M&A) and conducted DD for “bricks and mortar” (B&M) businesses, there are some differences when conducting DD for an online business. The Guide is for you too.

    What's covered?

    The Guide focuses squarely on the process of due diligence: in other words, the process of gathering all the data you need to make an informed decision whether or not to buy a particular website.

    We look at how to go about planning and conducting the DD process. This involves assessment of available resources, estimation of risk, opportunities, obstacles to achieving success, and also the consequences of failure. To do your due diligence, you need to understand what information is required, why it’s needed and how to collect it.

    Before embarking on the DD process, you need to establish clear objectives of what you expect to achieve, so that you know where you’re going. Be realistic – what resources do you have to achieve your objectives in terms of time and money? What level of risk are you willing to accept? There is always some risk involved in the purchase of any business, but you should carefully assess the level of risk and design the scope of your DD accordingly.

    It would be impossible to find out everything about a business. Historical and current information can be useful to give you an idea of a business’s potential, but can’t be relied on to predict future performance with certainty. And even in cases where events and transactions have been rigorously documented, inevitably there will still be some knowledge about the business locked in the previous owner’s head.

    Depending on the size of the intended acquisition, DD can be done by an individual or by a team. Sometimes the purchaser will do their own due diligence, perhaps with a bit of advice from a lawyer, accountant, or a DD consultant. At the lower end of the market, buying in help is unlikely to be cost-effective – unless you opt for some lower quality, semi-automated option which can be had relatively cheaply – so you’ll have to go it alone. You, the investor, must decide.

    Constructing a checklist of essential information and documents required will help you to keep on track, and make sure you don’t overlook or forget anything. You can tailor your own checklist according to what industry or niche your proposed purchase is in. The Guide contains a checklist which you can use as a starting point.

    Due diligence is necessary for a thorough analysis of any online business, regardless of where in the world it is. You should be aware of the legal aspects involved. Laws vary between countries – taxes, legislation, and business activities in general. You may require professional help in these areas, especially if you need country-specific advice.

    If you buy a website without doing proper due diligence, the responsibility for any subsequent failure lies with you. But you can protect yourself from some of the risks of buying a business by at least doing some simple checks, even if you don’t plan to go through the Full Monty of the DD process.

    The Guide will help you to make these judgments for yourself, and give you pointers for what to look for if you do decide you'd like to do your own DD. Even if you decide you'd prefer to entrust the process to someone else, the Guide will give you the background knowledge you need to understand what your DD agent is telling you.

    How much does the Guide cost?

    The Guide is free of charge to our Premium Members.

    Put another way, you can pay $99 and get both the Guide and a year's Premium Membership. This gives you access to the private Premium Lounge, where you can discuss matters in private without the whole world knowing (including bots and spiders). It also enables you to advertise your goods and services (both real-world and cyberspace), and gives you other benefits including a substantially bigger Private Messaging facility and a bigger signature.

    $99 could wind up saving you a lot more in money spent on just one dud website.

    Praise for The Experienced People Forum Guide to Website Due Diligence

    I don't normally recommend things, they have to be exceptional for me to say even a small good word about them. But I highly recommend you read this if you have any interest in buying websites. For years I've been warning against scams, writing about due diligence and exposing the numerous and innovative ways site sellers have developed to pull the wool over buyers' eyes (often complicit with the marketplaces that make their money from these sellers). This book is a good summary of all that work, includes advice garnered from the experiences that have been shared on these forums and is presented in an easy to read style that's accessible to all.

    I make no money out of this recommendation and derive no other benefit. I recommend it simply because you'll get a lot more useful advice out of it than by spending hundreds on the top siteflipping books out there (many of which I've read and wouldn't use even as toilet paper). Some of those are actually written by the same people out to con buyers and the authors have been sponsored/assisted in some way by the corrupt marketplace/s that screw buyers over.

    Do yourself a favour.

    Clinton Lee
    Sign up for Premium Membership now and receive your FREE copy of The Experienced People Forum Guide to Website Due Diligence!

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    This article was originally published in forum thread: Buying a website? STOP! Read our Guide to Website Due Diligence first started by Kay View original post