THINKING OF BUYING A WEBSITE?
Get The Author’s Complete Overview on How to Buy an Online Business Now!
How to buy a website? That is a question that some people have asked themselves. You might be tired of trying in the local industry as it has been very competitive and want to try an online business.
As an entrepreneurial-minded individual, you can start from scratch and build an online business from the ground up.
You can figure out your niche, find a product/market fit, build a website, create content, start marketing to consumers and slowly build your sales.
But it will take months and more likely years for your business to become profitable, and that’s assuming your new venture is viable in the first place. That’s not meant to discourage you, it’s just a fact. Far more startups fail than succeed.
That’s why many savvy investors and entrepreneurs are buying established online businesses. They’ve realized that you can get a better ROI from acquiring a profitable business instead of bootstrapping a new venture.
But if you are going to buy an online business, you need to do your research first.
A lot of research.
You don’t want to throw your money away by investing in a website with a point of failure that you haven’t accounted for.
You can do this research yourself, or you can work with experienced professionals who can guide you through the entire process of finding, diligence, and buying a website.
If you want to work with the professionals, we highly recommend working with the team at Kingmakers. They have several years of industry experience and are excited to help you on your business buying journey. Schedule a FREE consultation call with them today.
If you decide to go it alone, below are some of the main things that you want to pay attention to during your process of purchasing a website. Make sure to get adequate answers to these questions before you spend your money!
Website General Information
You need to make sure you understand and verify some general information about the website, such as it’s history, who owns it, what it does at a high level, and where it stacks up against similar websites.
Ideally, you will get in touch with the seller of the website and ask them several questions, and then use a variety of tools to verify their answers.
It’s also important to note that if you are looking at websites for sale through some sort of broker, you may need to sign a non-circumvention agreement before you can connect with the seller to ask these questions.
1. How Old Is The Website?
You want to make sure the website has a solid and verifiable history. For instance, it would be a shame to buy a family safe content site, only to discover that in the past it hosted NSFW content. A tool such as WayBack Machine is fantastic for this.
You also want to make sure that the owner of the website is legitimate, and that the website hasn’t been stolen or have a shady transaction history. Use Domain History to look at the ownership history of the site and make sure there isn’t anything strange going on.
Get answers to questions like:
- When was the business first launched?
- What is the name, address, and entity type of the business?
- Describe the high level history of the website’s evolution from launch until today.
2. What Skills Are Required To Operate The Website?
How is the business structured internally and what are the day-to-day operations like? This is important to understand so that you can make adequate plans to manage the business after you buy it. You don’t want to get into a situation where you step into a business that takes much more of your time to run than you expected, or a business that is build on a platform that you are completely unfamiliar with.
Make sure to ask the seller these types of questions:
- How much time do you devote to the business and what exactly do you do?
- Please describe the staff; how many people, how many hours per week?
- How much training can you provide a new owner post-acquisition?
- What platform is the website built on and what other types of tools or platforms does the website use on a regular basis?
3. What Does The Website Do?
What is the high level business model of the website? Who are it’s customers and how does it make money? There are several different online business models out there, so it’s important to understand what your target site actually does so that you can make plans to grow it post-acquisition.
Get answer to questions like:
- What products/services does the business sell?
- Are the products/services seasonal?
- Who are the business’s customers?
- Are they recurring or one time customers?
4. How Is The Website Positioned In The Market?
It’s very important for you to understand how this website stacks up against similar websites that offer the same product/service. You want to make sure you aren’t buying something that is already experience a downward impact from competitors. Ideally, the website you are looking at has a competitive advantage that you can capitalize on once you buy it. For instance, maybe the website is generating content for a significantly underserved market with only a couple other major competitors in the space. You might find that although your major competitors are generating tons of valuable content, none of them are offering a physical product to their audience. This could be an opportunity for you to offer an ecommerce product that solves your customer’s challenges in addition to content generation and capture a good portion of the market.
Ask the seller questions like:
- Who are you major competitors?
- How do the products/services offered compare to those by these competitors?
- If you were going to continue to grow this business, what would be your roadmap?
How the website attracts visitors, where they come from, and how they interact with the website are crucial things to understand. Without visitors, a website is worth basically nothing, so it’s important to have a good handle on the business’s traffic profile before you purchase it.
5. Is The Website Traffic Increasing?
There are a few different ways for a website to generate traffic, including paid, and organic. An example of paid traffic would be a business paying to advertise their product on Facebook. When Facebook users click the ad, they get sent to the business’s website. This method can be very effective if done right, but if done wrong, you can end up wasting a lot of money on ads with no clicks.
By far, one of the best methods for getting website visitors is to generate organic traffic from search engines like Google. That’s why you want to thoroughly understand the business’s search engine optimization (SEO) profile. To do this, use a tool like SEMrush to find out what keywords the website is ranking for, what backlinks it has and what other SEO details might be missing or lacking.
You want to look for obvious red flags. For instance, if the website is ranking on the front page of Google for a great keyword but it only has two back links, then something strange is going on. Those back links might be faked, somehow, or you at least you run the risk of losing your ranking and thus a large portion of traffic if those links suddenly vanish.
Some questions to ask the seller are:
- Do you run paid traffic? What is the strategy, cost, and results?
- How has traffic evolved since the launch of the website and what is it’s main source?
- How did you obtain any referrals or back links?
- Do you think your main traffic source is sustainable?
- Do you think the website would benefit from additional SEO?
6. How Does Traffic Interact With The Website?
Something else pay attention to is where visitors land first on the website and what they do after that. Google Analytics is the best tool for analyzing traffic and how visitors interact with a website. Ideally, you will want to get read-only access to the seller’s Google Analytics account for the target website so you can spend some time understanding the traffic profile.
Make sure to get answers to questions like:
- How many visitors hit the website per week/month?
- Are they any significant increases or decreases in traffic due to seasonality?
- How long to visitors stay on the website?
- What the ratio of new visitors to returning visitors?
Last but not least, you want to understand how the business makes money and you want to verify that income. After all, the only reason you are investing money upfront is so you can get a healthy return back! You want to get an understanding of the potential revenue decreasing risks, as well as a firm grasp on the “easy win” opportunities to grow revenue post-acquisition.
7. How Much Does the Website Earn Per Month and How Much Does the Website Cost Per Month?
Gathering P&Ls, tax returns, and other financial data from the seller will reveal much of this information. Beyond that, you may want to do more research on the specific product or service being sold to identify any potential downward trajectory in the market and make sure it’s realistic to keep expecting that income if the website’s traffic remains steady.
Besides what you will find inside standard financial documents, you may want to ask the seller questions like:
- How many active paying customers do you have currently? Please split this by product/service and price within each.
- What is your customer retention rate? What specific actions have you taken to increase this?
- What are the most common reasons for customers not buying your product/service or cancelling their subscription?
- What is your cost of acquisition per client?
BONUS: If you want to learn the newest method to communicate and retain customers and users you might want to learn more about ChatBots.
8. How Can The Website Earn More Money Post-Acquisition?
It’s important to have a plan to increase revenues post-acquisition. This can be done by driving more traffic to website and/or adding additional products/services. Something else you may want to do is research the buying trends of the specific demographics of your website visitors and also within your specific niche. This could reveal hidden opportunities for additional products/services to add. A great tool to use for this is Google Trends.
More “bags of tricks” for growing your website include”
- Retargeting old customers of the business to see if they want to come back and buy something else.
- Perhaps the business has a mailing list that they have never effectively marketed to.
- Doing some price testing and possibly increasing your prices by a certain percentage.
- Negotiating higher commission rates from affiliate partners, or similarly seeing if you can lower your cost of goods.
Some questions you can ask the seller in regards to this are:
- How much do you invest on a regular basis into new products/services?
- Based on your knowledge and experience in this industry, if you had to add additional products/services or generate more revenue, what would that look like?
- How do you market with past / non-purchasing clients (mailing list, etc.)?
- Have you recently tried to re-negotiate higher rates, lower costs etc?
Paying attention to all these details and getting answers to these questions will give you an increased chance of success after you acquire an online business. When in doubt, remember to stay conservative in your approach, plan for the worst, and hope for the best!
THINKING OF BUYING A WEBSITE?
Get The Author’s Complete Overview on How to Buy an Online Business Now!