The first year after launching a new website usually involves a lot of work with very little financial reward. Buying an existing site with established traffic and revenue allows you to skip the grueling work of growing the site from scratch.
While the opportunities are exciting, buying a website, like any other investment, requires thorough due diligence. An effective due diligence process can help you identify potential risks and choose the best site for your specific situation.
This article guides you through the critical questions and considerations to address before purchasing an existing website or online business. Understanding these factors allows you to make an informed decision that drastically increases your chances of success.
An Investors Club premium membership helps buyers by providing access to in-depth due diligence reports and seller interviews. These documents provide you with much of the information you’ll need to answer these questions. And when you want to contact the seller, we facilitate that communication.
1. What is the goal or purpose of the acquisition?
First, you should have a clear understanding of how you want to benefit from the acquisition. Do you want to buy a website that you can grow and sell for a higher price? Do you want a stable site you can simply maintain and add to your portfolio? Do you want a site that complements your other projects or businesses?
There are many different reasons why you might want to acquire a website or ways you want to benefit from it. Knowing your goal or purpose will help you narrow down your search and focus on the right types of sites that align with your objectives.
2. Why does the owner want to sell?
As you start to evaluate specific sites for sale, it’s essential to understand why the owner is trying to sell. Of course, there are many potential reasons. They may have lost interest in the topic or niche, want to focus on other projects, or simply need cash for personal reasons.
However, some sellers might try to offload a site with underlying issues that they know about but aren’t disclosing. The rest of the questions covered here can help you to uncover issues that the seller may not be quick to point out.
3. How does the website make money?
Are there multiple streams of income, or does the majority of the money come from one source? If the site is monetized with affiliate programs, is the revenue spread across several different affiliate programs, or is it highly dependent on a single program?
For e-commerce sites, you’ll want to know how much revenue different products generate. Is it heavily dependent on one product, or are the sales from many different products?
Of course, a website that has multiple streams of income (including a wide range of products or several different affiliate programs) offers better safety than a site with just one income stream. Sites that rely on a single income source are more vulnerable to sudden changes.
4. How much traffic does the site get, and what are the leading sources?
Traffic is another essential metric to consider. However, it’s important to recognize that some websites can earn excellent income even with low traffic. Also, some niches offer better traffic potential than others. Understanding the current traffic level as it relates to revenue helps you to know how much traffic you’ll need if you want to increase revenue by a certain amount.
Take your time to understand where the traffic is coming from and whether it’s sustainable. Does the site get almost all of its traffic from one source, or does it have a diverse mix of traffic sources?
If there’s a sudden spike or drop in traffic recently, find the cause. It could be due to a Google algorithm change or other external factors. Understanding traffic trends and patterns can help you gauge the risk involved in the acquisition.
5. What do the financials look like?
Next, dive into the financials of the site. This includes not only revenue but also expenses and profit margins. Is the site generating a consistent and stable income, or are there significant fluctuations? Are revenue and profit increasing or decreasing?
It’s important to consider seasonal impact. For example, many e-commerce websites experience higher sales in November and December due to holiday shopping. If you notice a drop in January and February, that’s probably not a cause for concern.
Likewise, some sites have content or products that experience greater demand at certain times of the year. A content site that focuses on camping is likely to have much higher traffic in the summer than winter.
Looking at year-over-year trends can help to maintain perspective with seasonal websites and businesses. Compare how the site performed this January compared to last January instead of comparing January to December.
6. What is the growth potential?
Most buyers aim to increase the site’s profitability after an acquisition, which also increases the site’s value for a future exit. As a result, you should consider the site’s growth potential and existing opportunities.
For example, a site that isn’t optimized for SEO or focused on social media marketing could offer significant opportunities to increase traffic and revenue. Understanding the site’s current strengths and weaknesses can help you identify areas where you can improve to drive further growth.
Additionally, consider the current monetization methods and other possibilities you could explore. Are there new products or services the site could offer? Are there potential partnerships or collaborations that could bring in additional revenue streams?
7. Has the website experienced significant changes in the past?
It’s also crucial to understand the site’s history and any significant changes that have occurred. Of course, every website will change and evolve over time, but the purpose here is to identify if there have been changes in the site’s topic or if anything in the past that could be harmful.
Use the Wayback Machine to view archived versions of the site and see how it has changed over time. If you notice that the site used to be focused on a completely different topic or if it ever included unethical or illegal content, that’s a red flag.
8. Was the website ever sold in the past?
Did the current owner start the site from scratch or purchase it from someone else? A history with multiple owners and acquisitions isn’t necessarily bad, but knowing when and why the site changed hands is helpful. If the current owner acquired it recently, why are they already selling it?
If the current owner bought the site from someone else, you may be able to find out how much they paid for it. You can ask them directly and they may tell you, or you may have to do some digging. By researching, you may find a listing from the previous sale, or maybe there’s an article or social media post that mentions the price.
In some cases, sites that have changed hands multiple times may have slightly more complexities. With sites that have never changed hands, the current owner should be familiar with the site’s entire history and the transfer may be cleaner, but that’s not always the case.
9. How old is the website?
The website’s age may be an important consideration. Older websites with sustained profitability have a stronger track record of success than new sites that haven’t yet proven themselves over the long term.
Additionally, older sites may benefit from stronger authority in Google’s eyes or established branding and a strong reputation.
Of course, this is just one of the many factors to consider. An older website isn’t always better than a newer site, but age can present some advantages.
10. What knowledge or experience is required to run the site?
Do you have the expertise to run the site, or will you need to hire someone with specific skills? Consider the type of site, its niche or industry, and the tasks involved in running it.
For example, if you’re evaluating an e-commerce website, do you have experience with product sourcing, fulfillment, and customer service? If not, are you willing to learn or hire someone to handle these aspects?
If the site requires specialized knowledge or skills that you don’t have, it’s important to factor in the time and resources needed to acquire them. These could include learning new software or tools, understanding a particular industry or market, or building relationships with suppliers and partners.
11. Is the seller replaceable?
What will happen to the site without the current owner’s involvement? Some websites depend heavily on the owner’s skills, expertise, or personal brand. In these cases, it may be challenging to transfer ownership without a decrease in revenue or traffic.
Is the site successful only because of the owner? Are its followers interested in the brand or the person currently behind the brand? Can a new owner realistically expect to maintain or grow the site at its current trajectory?
Also consider whether the change in ownership will negatively impact customers, followers, or website visitors. If so, you may need to adjust your expectations and projections accordingly.
12. How much time is needed to run the site?
Underestimating the time needed to maintain a website is a common mistake. If you don’t have enough time to do the work yourself or the budget to hire others, traffic, revenue, and profit are likely to decline in the long run.
Start by determining how much time the current owner dedicates to the site each week and specifically what they do with that time. Then, consider if you have the same experience and skills to handle those tasks. If not, how long will it take to learn or outsource?
Also consider potential changes you’ll make to the site. Will they increase or decrease the time commitment? You might be able to automate, outsource, or eliminate certain tasks with no negative impact.
13. Who will maintain the site?
Do you plan to do most of the work yourself, or will you hire others? If you plan to hire, consider the added costs and complexity of managing a team.
Will the current employees, contractors, or freelancers stay on board after the acquisition? Keeping existing team members in place usually helps with continuity, leading to a smoother transition.
Alternatively, if you plan to do most of the work yourself, make sure you have the necessary time and skills to handle it.
14. What is the quality of the content or products?
If you’re buying a content website, evaluating the quality of existing content is essential. And if you’re buying an e-commerce site, reviewing the product quality is equally critical.
Poor-quality content or products could lead to negative reviews, decreased customer satisfaction, or a damaged reputation. These consequences could affect the site’s traffic, revenue, and future growth potential. Of course, quality can be improved, but it may take more time and money.
On the other hand, a site with excellent content or products may allow for faster growth or improved stability.
15. How is the business’s online reputation?
Research the website’s online reviews and see what people are saying on social media, blogs, and forums. Are there negative reviews or complaints? If so, how are they handled? This is especially important for e-commerce websites or those that sell services.
Of course, negative reviews and comments are natural. No company has perfect reviews (unless there are only a few reviews). However, it’s essential to understand the overall sentiment and how the current owner manages negative feedback.
16. What is the tech stack?
A website’s tech stack includes all the technologies used to build and run it. Most, but not all, blogs and content websites use WordPress. Shopify is the leading e-commerce platform, but others like WooCommerce and BigCommerce are also popular. Make sure you’re familiar with the site’s platform, or take the time to learn it.
Aside from the content management system (CMS) or e-commerce platform, consider other details like hosting, plugins, and integrations. Are there potential issues or limitations with the current setup that could impact future growth?
Understanding the tech stack is essential to maintain and improve the website effectively. Non-technical website owners can usually handle sites with relatively simple tech stacks, but more complex solutions may require a developer.
17. Did the owner purchase backlinks?
Links from other websites are an essential factor in search engine rankings, but paying for links violates Google’s guidelines. Buying links may help a site to get more organic search traffic, but it increases the chances of a Google penalty that could decimate search traffic.
Ask the owner if they’ve paid for links, and if so, which ones. You can also use tools like Ahrefs or Semrush to analyze the website’s backlink profile and look for suspicious patterns or paid links. Ahrefs has a helpful guide showing how to do a backlink audit.
18. Was a private blog network (PBN) used for link building?
A PBN is a network of websites owned by the same person or entity that links to each other. Manipulating search rankings through artificial link building is the purpose. Using a PBN is against Google’s guidelines and can result in severe penalties. If the owner used a PBN, buying the site involves an increased risk.
Ask the owner if they’ve used PBNs for link building. Checking backlink profiles in Ahrefs or Semrush is also helpful, but properly set up PBNs are often difficult to detect. Buying a site through a platform like Investors Club provides a level of protection because each listing shows if the seller claims to have used PBNs.
19. Has the site suffered from significant traffic drops in the past?
Check Google Analytics to see if the site has experienced major traffic drops. The site may have lost a lot of traffic from a Google Algorithm update or changes by a social platform like Facebook or Pinterest.
Most sites that have been around for at least a few years have experienced some ups and downs. A drop in traffic shouldn’t necessarily eliminate a site from consideration, but it may require investigation to determine the cause. Ask the owner about any significant traffic drops in the past and what caused them.
20. Who are the main competitors?
Knowing the main competitors in the site’s niche or industry is essential for understanding its potential growth and challenges. Research the top competitors, their strengths and weaknesses, and how they compare to the site you’re considering.
Consider factors like market share, brand reputation, customer base, pricing strategy, and marketing tactics. You can improve the site’s position in its niche or industry, but knowing what obstacles you’ll face is important.
Additionally, analyzing competitors may help to identify areas where the site excels and ways to build on existing strengths.
21. Does the domain name have any value?
Sometimes, the domain name itself will factor into the decision. A unique, memorable, or brandable domain name could have more value than a generic one.
You can use a tool like GoDaddy’s domain appraisal tool to gauge the value, but be aware the stated value is often optimistic and may not represent what someone would actually pay for it. Still, the tool can help you to identify which domains may be more valuable than others.
22. What trends may impact the website?
Consider the current and projected trends in the website’s niche or industry. For example, are there significant changes happening in technology, consumer behavior, or government regulations that could impact the site?
Trends can either positively or negatively impact a site. Avoid those that rely on current trends or fads that won’t last.
23. Do potential legal issues exist?
Does the site have content, products, or branding that could potentially violate copyright or trademark laws?
One of the most common issues involves trademarked names within the website’s URL. For example, a review site shouldn’t use a domain like “iphonereviews.com” without permission from Apple. Websites that use trademarked names within the URL could be forced to change the URL or face a lawsuit.
If you’re evaluating an e-commerce site, check to ensure the products don’t use feature other companies’ intellectual property without proper licensing.
You should also ask the seller if they’re aware of any lawsuits or threats of lawsuits.
Achieve Faster Due Diligence with Investors Club
Investors Club’s premium membership provides buyers with valuable resources that save countless hours of due diligence. Of course, it’s important to always conduct your own due diligence, but our in-depth reports and seller interviews provide much of the information you’ll need to answer the questions covered in this article. Create your account today for instant access.
Online Business Builder & Content Strategist
Marc has been building websites and online businesses since 2007. He’s built successful businesses in several industries, including web/graphic design, photography, travel, and personal finance. Marc is the founder of Flip My Site, where he writes about buying and selling websites.
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