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Thread: Very first questions to ask when buying a site? First considerations?

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    Very first questions to ask when buying a site? First considerations?

    I've begun to look thru 'websites for sale' listings for a possible site to buy.
    I find there are quite a few that look at least a bit interesting, worth at least an initial request for more information.

    I want to cut down as much as possible though spending more time than needed on analyzing websites that I ultimately won't buy. I'd like to find out any deal breakers as early in the process as possible.

    Thus, I was wondering what some of the favorite/ best starting questions to the site sellers are? The ones that one might send in an initial email and whose response could help quickly filter the possibles from the forget its.

    I've seen many good due diligence checklists on this forum and understand that extensive analysis/ research will need to be done for the site that one gets seriously interested in buying. Having though an initial quick checklist prior to that phase, would help cut down quickly on the number of candidates.

    Any help much appreciated!

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    Quote Originally Posted by mark2000 View Post
    I've begun to look thru 'websites for sale' listings for a possible site to buy.
    I find there are quite a few that look at least a bit interesting, worth at least an initial request for more information.

    I want to cut down as much as possible though spending more time than needed on analyzing websites that I ultimately won't buy. I'd like to find out any deal breakers as early in the process as possible.
    After you have spent some time analyzing websites for sale, you will begin to notice similar wording and descriptions that will trigger caution. Sites for sale that do not have earnings, newly registered sites that show earnings out-of-line, sellers that suggest potential instead of detailing site attributes, are all potential problems that will require further investigation. You will not develop any sense for what to avoid until the ability to internalise an understanding from experience occurs.

    For example, I taught investing techniques for a while, but stopped. I only taught that which I knew would work. It was frustrating, because while I was telling people exactly how to make money in the markets, they could not follow the instructions due to lacking the same background I had for recognising opportunity and problems. They wanted answers to how to profitably trade the markets, but lacked the background to apply the methods.

    There is no substitute for experience. That will take time, reading, interactive discussion, internalisation of the various processes. There are two schools of thought for this: One is to start and learn as you go. This is valid, because no sane person would never start a business if they took the time to detail everything required The other is to research and learn everything possible to prevent problems. This is valid, because educated decisions prevent unnecessary risk.

    As for your question on site attributes, the education available here and across the web can be approached from two directions. Learning how to buy and how to build yield different education, but can result in benefits to each process. When you learn the attributes a site builder uses to make their website more profitable, you then know what to look for when buying a site. When you learn the DD needed to avoid buying problem sites, you also learn how to build sites without problems.

    As for which questions to ask of sellers, the best way I can suggest to start learning that is to look at listings of sites for sale. Sellers will highlight what they believe to be the most important characteristics of their sites. After a while, you will see similarities that suggest a standard list of site metrics.

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    Ken, I hear and know very well where you're coming from. In my own fields -- real estate development/ hospitality -- the same 'develop intuition through lots and lots of research, trial and error, etc' applies as well, as probably it does in almost all pursuits of this type.
    And I too had a frustrating experience trying to teach two restaurant partners, new to that type of business, about the ins and outs, and especially What items should be the priority ones amongst the always 100 things to do or act on. Despite one being a CPA and a lawyer, and the other having managed larger enterprises, and despite truly wanting to do a good job, the learning curve was still a long and painful one.
    As you intimated, hard persistent patient work is what is almost always the prescription for whatever any business search challenges out there.

    I still though wonder what would be the 'top ten initial questions' or 'top ten criteria' etc. that one would use to cull out as quickly as possible the losers? Assume that 100 website owners contacted you wanting to sell, and you needed some way of quickly pruning them down. What questionnaire would you have them fill out?

    Angel investor clubs often have this on their websites for companies seeking angel/ initial investment. They get so many enquiries, 95% or more that don't meet their requirements in some way to research further. For example, some questions that they would ask for brief responses would be:
    1. What track record do the founders have starting previous successful companies?
    2. Describe your management team and their relevant experience.
    3. What initial funding have you already received?
    4. How much investment in funds have the founders invested?
    Etc.
    Each of the above questions are easy to answer fairly quickly and whose responses will quickly either tally with what the Angel club/ early investor is looking for, or it won't. For example, if the answer to question #1 is: No experience with previous successful foundlings... than that would be an automatic reject.

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    There's an old example of a Quality Control problem - how to assess the quality of trees for their suitability as telegraph poles.

    The man that sorted it out into a procedure had to acknowledge a few things -
    1) an absolutely perfect pole is a great rarity, almost all trees have faults;
    2) there are a few major faults that cannot be forgiven, if a tree is to be useful as a pole;
    3) there are a multitude of minor faults to be considered - if the number of minor faults is low enough, the tree can be used as a pole.

    Once the man had realised that the critical factors were the number of major faults and the number of minor faults, he was able to write a procedure to allow assessing the suitability of trees for use as telegraph poles without needing the "skilled advice" of an experienced pole inspector. After that, he only needed the existing inspectors to train other people to spot the faults, and was able to train far more inspectors to do the job.

    Ken's problem with his trainee investors stem from them being unable to assess a situation properly - they hadn't learned to "assess a pole".

    With websites, you have the problem of people not being trained to spot the faults in conjunction with no guidelines to say what faults could be acceptable.

    Net result, it is very hard to write a procedure for assessing a website.

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    Great example of a qc problem.

    My question and quest though would be to only the first, most basic part of that assessment. Eg Is the pole between x and y feet high? Is the pole between x and y inches wide? Is it the right species? Are the number of knots on it less than 40? "No" answers to any of these would disqualify the pole at the outset and only the poles that pass this initial test would be reviewed minutely by more trained assesors.

    I'm wondering what might be some basic questions/criteria along the lines of the initial pole assessment that could be used to more quickly eliminate poor candidate websites.

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    Edit:

    Well most of those type of questions are answered for you in the listing. What is the asking price? How does it make profit and how much? How much labor is required? What are the expenses? How much traffic does it get? How does it get that traffic? What type of site is it and is it in a niche that you're ok with?
    Last edited by ClaytonL; 25 January 2012 at 8:24 pm.

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    Quote Originally Posted by mark2000 View Post
    Angel investor clubs often have this on their websites for companies seeking angel/ initial investment. They get so many enquiries, 95% or more that don't meet their requirements in some way to research further. For example, some questions that they would ask for brief responses would be:
    1. What track record do the founders have starting previous successful companies?
    2. Describe your management team and their relevant experience.
    3. What initial funding have you already received?
    4. How much investment in funds have the founders invested?
    Etc.
    Each of the above questions are easy to answer fairly quickly and whose responses will quickly either tally with what the Angel club/ early investor is looking for, or it won't. For example, if the answer to question #1 is: No experience with previous successful foundlings... than that would be an automatic reject.
    ...and your list is also valid for analysis of websites For the web, the first question I need to have answered is whether the site is a real business that actually makes money. Next is a history of the earnings. Business on the web is no different from business in the physical world, except technology is applied to assist with the various processes. Just as out in the physical world, the virtual world has a lot of people that do not understand how to operate a profitable business long term. It's not always easy. Any questions that enable the ability to see through incompetence or deception are valid.

    Questions will vary based upon whether a webmaster is offering the site for sale, or whether you are approaching them when a site is not for sale. I want to verify it is a real business with real customers. Revenue stability over a decent period of time is expected, but this is different from B&M businesses only due to the fact the Internet is new. I still want to see customer goodwill and return visitors. Finding a decent B&M with stable earnings over ten years is far more likely than finding a web business stable over five.

    Standard business analytics would apply to purchase of a web business. Define the product or service. Analyze viability into the future. Look at the history of the business. Determine costs in time and money. Parts and pieces of a web site correspond to similar characteristics in B&M businesses. A customer base online is the same as offline. Readers online are the same as subscribers offline. Find out why they are selling the business, how long it has been established, how much time they spend on it, how much money it makes, total sales versus expenses, is the seller the original owner, all the typical DD. Traffic analysis is the same online as off.

    The primary service, with the greatest level of competition, on the net was publishing (but this continues to evolve). Even today though, everyone wants to be a publisher, sell advertising or promote (products or services) to make money (because for some unknown reason people believe the business to be easy), so the competition is fierce. I don't earn as much publishing, but that remains a goal (to increase its contribution to the bottom line). Over the past years, I have found it easier to sell products for myself and others (drop ship) than to provide services. Services are an intangible, so sales in a virtual environ (online) often require more of a visible physical presence at this point in the evolution.

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    Very first question from me is usually "how much if I buy today"

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    Before we get into this - remember that I don't buy sites, I've never bought one on the open market.

    I do have over twenty years of experience in devising systems designed to safeguard against cock-ups, and writing procedures that people can follow without having to think about the "what-ifs" and principles. I'm trying to use that knowledge to help everybody. What we are talking about here is an audit - not a pure accounting audit, a QA audit.
    From the above, you're getting the hang of it - but you need to derive information from the available data, ask questions, then classify the responses to those questions as to whether they are "satisfactory" or "present a problem". For an individual, the answers might be just yes/no or yaay!/fekdat! - but for general use, we need to classify and ask some what-ifs.

    It is easier to present the points as considerations, about which we ask questions, then draw classifiable conclusions.

    In crude terms, these are the ways that QA defines problems:
    A critical fault is one which is about to cause a system to fail without immediate attention.
    A major fault is something that will become a critical fault if it is left unattended for a matter of weeks.
    A minor fault is a problem that can be seen, but does not materially affect the function of the system.
    If there is no problem, the matter under consideration is satisfactory.

    Starting at the top. First consideration - "Is the asking price in the budget range?"
    That is a yes/no which has to be satisfactory before doing more work - if it is not, the site has a critical or major fault.
    If you can see ways of finding funding to purchase the site, the problem may diminish to minor - eg, you might be able to finance the purchase but be forced to use the revenue to pay off a loan for a few months.
    Concluding question - "might it be worth doing more work investigating this site?"

    Second consideration - "The niche".
    Does the site niche fit in with your other sites? Will it compliment your other sites? Will you need to set up a "bridging site" to supply links from your own network?
    If you need to pay for links, you have to add that into your cost estimations.
    Concluding question - "Is the site niche satisfactory, or acceptable (ie it has minor problems)?"

    Third consideration - the "site type".
    Are you familiar with operating a site of this type? Are you confident that you could learn to do it quickly?
    If you have to pay someone to do it for you, that has to go into your cost estimations.
    Concluding question - "Is the site type satisfactory, or acceptable (ie it has minor problems)?"

    That's your starter set of thoughts. One thing you learn in QA is that every auditor has his own company assessment sheets for auditing, and there is usually something you can learn from someone else's sheets.
    There's a heap more questions to ask - obvious parameters to consider are the ratio of buyers to traffic, and if you might be able to see ways improve the revenue rapidly. You need to know where the traffic is coming from - if all the links in are indirect, going to domains which are 301'ed to the site, that could get switched off so easily.

    You can add more questions to the list, following my concepts - or you can improve those concepts. This is only a guideline example, I'm always open to constructive criticism.

    The final concept has to be whether you consider the site worth buying, taking into account the financial aspects revealed by your questions. Remember that what you consider a problem may be trivial to someone else with a skill set appropriate to the site, so don't be surprised if someone bids past your "value guess". Might be time to reconsider your evaluation, though ...

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    I am just blown away by the inherent giving, and quality, of your responses!

    Just for others sake who may be reading this post, I've tried to list out roughly some initial things to take into consideration based on the posts so far. I've done this by copying quotes piece meal given above, so some may be out of context. Read the post itself to get the full gist.

    These are full and partial quotes.

    From KenW3:
    -- For the web, the first question I need to have answered is whether the site is a real business that actually makes money.
    -- Next is a history of the earnings. Business on the web is no different from business in the physical world, except technology is applied to assist with the various processes.
    -- I want to verify it is a real business with real customers. Revenue stability over a decent period of time is expected, but this is different from B&M businesses only due to the fact the Internet is new. I still want to see customer goodwill and return visitors.
    -- Define the product or service.
    -- Analyze viability into the future.
    -- Look at the history of the business.
    -- Determine costs in time and money.
    -- Find out why they are selling the business,
    -- how long it has been established,
    -- how much time they spend on it,
    -- how much money it makes,
    -- total sales versus expenses,
    -- is the seller the original owner,

    From crab foot
    [Strongly suggest reviewing his method of prioritizing responses]
    Starting at the top. First consideration - "Is the asking price in the budget range?"
    That is a yes/no which has to be satisfactory before doing more work - if it is not, the site has a critical or major fault.
    If you can see ways of finding funding to purchase the site, the problem may diminish to minor - eg, you might be able to finance the purchase but be forced to use the revenue to pay off a loan for a few months.
    Concluding question - "might it be worth doing more work investigating this site?"

    Second consideration - "The niche".
    Does the site niche fit in with your other sites? Will it compliment your other sites? Will you need to set up a "bridging site" to supply links from your own network?
    If you need to pay for links, you have to add that into your cost estimations.
    Concluding question - "Is the site niche satisfactory, or acceptable (ie it has minor problems)?"

    Third consideration - the "site type".
    Are you familiar with operating a site of this type? Are you confident that you could learn to do it quickly?
    If you have to pay someone to do it for you, that has to go into your cost estimations.
    Concluding question - "Is the site type satisfactory, or acceptable (ie it has minor problems)?"

    That's your starter set of thoughts. One thing you learn in QA is that every auditor has his own company assessment sheets for auditing, and there is usually something you can learn from someone else's sheets.
    There's a heap more questions to ask - obvious parameters to consider are the ratio of buyers to traffic, and if you might be able to see ways improve the revenue rapidly. You need to know where the traffic is coming from - if all the links in are indirect, going to domains which are 301'ed to the site, that could get switched off so easily.

    You can add more questions to the list, following my concepts - or you can improve those concepts. This is only a guideline example, I'm always open to constructive criticism.

    The final concept has to be whether you consider the site worth buying, taking into account the financial aspects revealed by your questions. Remember that what you consider a problem may be trivial to someone else with a skill set appropriate to the site, so don't be surprised if someone bids past your "value guess". Might be time to reconsider your evaluation, though ...

    dschall
    How much if I buy today?

    This post has been very helpful to me in one, making me more aware of the great list of criteria/ questions to ask, and the complexity/ depth of possible responses, but also for convincing me that I need to LEARN a lot before going forward. Thus, will start by reading thru the course recommended by Clinton, Richard Parker's 'how to buy websites' course.

    Off to Disney for the weekend, all the best.

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