Investing in websites has been a great journey for me and with any good journey you learn so many great things. However of the many things that I have realized throughout my success, is that there are 3 website due diligence steps most website investors fail to do correctly.
Which means when people are investing in websites, these due diligence steps tend to be looked over. And that is a crucial mistake that separates the rookies from the pros.
You see, whilst first time investors look over these 3 important due diligence steps, professional investors ‘look into’ them and there is a huge difference that can mean the success or failure of your investment if not done correctly.
Let me explain why and how you should be ‘looking into’ these key website due diligence steps instead of ‘looking over’ them to save yourself from future failure like so many before us.
I always tell people that unless they are spending a decent amount of time understanding where the traffic is coming from, why and how. Then they won’t understand why the traffic is trending either upwards, downwards or sideways and then what that can mean for the business also.You see there may be a good reason the traffic is trending down and still not affecting the business, for example the business could be seasonal. Or there may even be no explainable reason why the traffic is trending down other than the website had been penalized by the search engines. Which is something you as a website investor should know how to check.Sometimes a website which violates the rules of Google will be penalized and bumped down in the search engine rankings. Causing a decline of traffic meaning less sales and profits made by the website owner.
You too want to make sure that the traffic is not going from only one source, say for example just facebook, or just instagram. If something were to happen to either of these channels (which has happened before with myspace), that means most of your traffic is gone, along with most of your sales. Or should I say most of your business . . . so be sure the check the traffic out correctly.
- Proof Of Ownership
Quite often this step isn’t something that is even one of the website due diligence steps people know to make. I mean how crazy is that right!How are you to know if the seller actually owns the business without seeing proof of ownership? For all you know you could be buying a website from someone who doesn’t even own it, what a mistake that would be.So please guys, ensure you add this as one of your website due diligence steps because it is something so simple that can protect you from something that could be so fatal to you as an investor.
Just by doing a simple background check of the website and domain or even asking the seller for proof of ownership is all it takes. One little question can save you from a world of disaster.
In my opinion, checking the real financials of an online business is the most important of ALL the website due diligence steps you need to take. This is because checking and getting proof of the financials is going to allow you to know for sure exactly what the business is worth.Once you have seen real proof of the finances, you can then take those numbers, being the income and expenses and calculate the real worth of the business. By knowing this it allows you to understand if the seller is asking too much for the business or not.Oh and one important thing about checking the proof of financials is to never put your trust in screenshots of bank accounts and profit and loss statements, or any screenshot for that matter. We all know that screenshots can be butchered and edited right, so why should we trust them? Instead do a real live time screen share for evidence the seller is receiving the money from the business, or get a video sent to you at least from the seller showing you the finances coming in and out of their accounts.
Now I hope in this post I was able to shed some valuable information for you on those important website due diligence steps that we should pay close attention to when investing in online businesses.