10 Step Guide to Website Due Diligence

In 2023, the global ecommerce market totaled $6.3 trillion. People are spending more money online now than ever before.

If you don’t own a website, it’s time to invest. The online business sales marketplace has slowed down after 2022 and a it’s great way to diversify your investments.

Trouble is, websites aren’t the easiest thing in the world to understand, which can leading to costly missteps on your venture.

This article is a website due diligence checklist, which you can easily follow and sidestep common traps on your journey to becoming a website owner.

Website Due Diligence – Table of Contents

Why is Due Diligence Essential for Website Acquisition?
Step 1: Immediate Dealbreakers
Step 2: Technical Due Diligence
Step 3: Content Analysis
Step 4: Website Traffic and SEO Analysis
Step 5: Financial Due Diligence
Step 6: The Day-to-Day Operations
Step 7: Legal Due Diligence
Step 8: Market and Competitive Analysis
Step 9: Social Media and Brand Presence Checkup
Step 10: Growth Strategies and Expansion Ideas
Bonus: Common Pitfalls When Purchasing a Website and How to Avoid Them

Why is Due Diligence Essential for Website Acquisition?

Imagine buying a car without checking under the hood or taking it for a test drive. Sounds risky, right? The same goes for websites.

Website due diligence helps you:

Verify Claims: Sellers might claim a certain amount of monthly traffic or revenue. It’s your job to ensure these numbers are legit.
Spot Red Flags: Maybe there’s a sudden drop in traffic or a looming Google penalty. These are things you’d want to know before handing over your cash.
Understand the Business: Beyond the numbers, you’ll get a feel for the site’s audience, content, and overall vibe. This insight is invaluable for future growth.
Determine Fair Value: By understanding the site’s strengths and weaknesses, you can negotiate a price that reflects its true value.

Like Elliott Holland says, the easiest way to avoid buyer’s remorse is with meticulous due diligence.

Now for the due diligence checklist. Most of these steps can be done just with free tools most entrepreneurs should be using anyway, Google searches and speaking to the current owner. But I recommend a tool like Ahrefs to be able to get more accurate statistics, link profiles, keyword rankings etc.

Step 1: Immediate Dealbreakers

The world of online business acquisition is a bit like Tinder. You swipe on an interesting prospect, and if it’s a match, you start the due diligence process to see if it’s worth your time to say hello.

The preliminary assessment is where you get a feel for the website, its vibe, and its potential deal-breakers.

Website Impressions and User Experience

Just like you wouldn’t wear pajamas to a first date (or would you?), a website’s design says a lot about its professionalism and the owner’s attention to detail. Here’s what to look out for:

Design Quality: Does it look modern and clean, or does it scream Web 1.0?
Navigation: Can users easily find what they’re looking for? A confusing menu can be a major turn-off.
Mobile Responsiveness: How does the site look on your mobile devices? With up to 70 percent of web traffic coming from mobile devices, a responsive website is a must.

Initial Traffic and Revenue Analysis

Ask the website owner for access to Google Analytics to see these statistics. If that’s not possible, use a tool like Ahrefs to do a bit of spying. You’re looking for:

Consistency: Are traffic and revenue steady, or are there wild fluctuations?
Traffic Sources: Where is the traffic coming from? Organic search traffic, paid ads, social media?
Monetization: How does the site make money? Ads, affiliate marketing, product sales?

Recognizing Red Flags Early

Online business sales is a huge market and, unfortunately, attracts plenty of scammers. Here are some red flags to help you spot a scam or just a bad deal right off the bat.

Too Good to Be True: If the revenue numbers seem sky-high with little to no work, tread carefully.
Lack of Transparency: If the seller is hesitant to share essential data or dodges questions, it might be a sign they’re hiding something.
Recent Changes: A sudden spike in traffic or revenue just before the sale can be suspicious. It’s worth digging deeper to understand the cause.

The preliminary assessment is your first deep dive into understanding a website’s potential and whether it’s worth pursuing further. Remember, trust your gut, but back it up with data.

Step 2: Technical Due Diligence

The next step in the due diligence process is technical due diligence.

Let’s break down what you need to keep an eye on.

Domain History and Ownership Verification

The domain is the website’s address and its home on the web. Here’s what to check:

History: Has the domain switched hands often? Frequent changes might be a red flag.
Ownership: Ensure the seller genuinely owns the domain. Sounds basic, but you’d be surprised.
Penalties: Check if the domain has any penalties from search engines. This can seriously hamper future growth.

Content Management System (CMS) Review

What platform or content management system is the website using?

Like Sisyphus’s incessant attempts to roll a rock to the top of a mountain, any search for “the best CMS” is doomed.

-Anna Fitzgerald, Hubspot

Many online businesses run on a simple WordPress-setup, while ecommerce sites might use a platform specifically designed for shopping like Magento. Some sites are built on an entirely custom-built framework. Check the following:

Skillset: Make sure the platform matches your (team’s) skillset. If you can’t maintain it, it’s useless.
Scalability: Make sure the platform has room for growth. While most modern platforms can maintain large websites, some do it less painfully than others.
Support: Check that the platform is quick, mobile friendly and has an existing community or support base.

Website Speed and Performance Testing

Do not underestimate the need for speed. A lightning fast site will always outperform a slow one with a fancy design.

Load Times: Slow-loading sites can turn visitors away and hurt search rankings.
Optimization: Check for uncompressed images, unused plugins, or clunky code that might be slowing things down.
Mobile Performance: With so many users browsing on phones, a site that’s slow on mobile is a no-go.

Step 3: Content Analysis

The content is the heart and soul of an online business website. It’s what draws visitors in and keeps them engaged. More often than not, it’s also the main revenue driver.

A huge part of website due diligence is understanding the quantity and quality of the content included in the deal. Let’s see what that looks like.

Plagiarism Checks and Content Quality

With AI content on the rise, you’ll want to check for two things.

Plagiarism: Run the site’s content through plagiarism checkers to ensure it’s original. Duplicate content can harm SEO and the site’s reputation.
Quality: Is the content well-researched, well-written, and valuable to readers? Or is it just spammy garbage generated by your friendly neighborhood GPT?

Content Strategy and Future Potential

Make a cursory assessment about where you could expand the content.

Content Gaps: Are there topics or areas the current site hasn’t covered? These could be opportunities for growth.
Monetization: If the site’s content is primarily informational, could there be potential for affiliate marketing, e-books, or courses?
Engagement: Check comments, shares, and other engagement metrics. Are readers interacting with the content?

Remember, while design and tech are crucial, content is often the main reason visitors come to a website. It’s the voice, the personality, and the value proposition all rolled into one.

Take your time with this step.

Understand the content’s current value and its potential, and you’ll be well on your way to making an informed purchase decision.

Step 4: Website Traffic and SEO Analysis

Traffic is the lifeblood of any online venture. No visitors? No sales. Simple as that.

That’s why the next step of website due diligence is understanding where traffic comes from and how it interacts with your site.

While Google Analytics can help, for this section, you need Ahrefs or a similar tool. If you don’t have it, hire a freelancer to gather this report for you.

Let’s break down the essentials of traffic and SEO analysis.

Traffic Sources and User Demographics

Knowing where your visitors come from can offer insights into potential growth areas:

Direct vs. Organic vs. Referral: Are most visitors typing in the site directly, coming from search engines, or being referred from other sites?
Geography: Where are your visitors located? This can influence content strategy, especially if there’s a strong international audience.
Devices: Are users primarily on desktop, mobile, or tablet? This can impact design and user experience decisions.

Backlink Profile Review

Backlinks are like votes of confidence from other sites. A backlink profile is like the unwritten resume of a website.

Any serious SEO knows that backlinks are Google’s number one ranking factor. The main thing that’ll make or break your campaign. That’s exactly what we’ve specialized in for the last ten years.

-Travis Jamison, Smash Digital

Quality over Quantity: 100 links from shady sites aren’t as valuable as 10 from reputable ones. Also if the website is part of a private blog network or shady link building practices (we only recommend the best link building services) it might cause problems in the future.
Anchor Text: This is the clickable text in a backlink. It’s worth checking to ensure it’s relevant and not overly optimized (which can be a red flag for search engines).
Diversity: Are backlinks coming from a diverse range of domains, or is there an over-reliance on one or two sites?

Keyword Rankings and Organic Visibility

Understanding what terms the site ranks for can guide future content and SEO strategies:

Top Keywords: What terms is the site currently ranking for? Are they relevant and valuable?
Opportunities: Are there related keywords the site could potentially rank for with some effort?
Competitive Landscape: Who are the main competitors for these keywords, and how does the site stack up?

Potential for SEO Growth

Lastly, look to the future:

Untapped Niches: Are there areas the site hasn’t explored that could be lucrative?
Technical SEO: Are there improvements that could be made to the site’s structure, speed, or other technical aspects to boost rankings?
Content Expansion: Based on keyword opportunities, what new content could be introduced?

Traffic and SEO are intertwined, and understanding both is key to a site’s success. By diving deep into these metrics and strategies, you’ll be better equipped to gauge a website’s potential and chart a course for future growth. Don’t hesitate to contact a reputable SEO expert for a consultation on your target site’s SEO health.

Step 5: Financial Due Diligence

If the website is worth buying, it makes money. And if it makes money, it should have detailed financial records available for study.

The financials are arguably the most critical aspect of website due diligence because it’s where you can avoid massive financial harm. A case study from Centurica shows how recognizing fake financials saved a client from a potentially catastrophic website acquisition deal.

Verifying Revenue Streams

How does the existing business make its money? Can you verify past financial statements?

Diversification: Does the site rely on a single revenue stream, or are there multiple income sources? Diversification can reduce risk.
Stability: Are the revenue streams consistent, or are there wild fluctuations month-to-month?
Passive vs. Active: How hands-on are these revenue streams? Some might require daily management, while others could be more hands-off.

Expense Analysis and Profit Margins

Revenue is one thing. What about the expenses?

Fixed vs. Variable Costs: Fixed costs remain the same regardless of traffic (like hosting), while variable costs might increase with more visitors (like pay-per-click advertising).
Operational Expenses: Think tools, plugins, content creation, and any other costs associated with running the site.
Net Profit: Once you’ve tallied up the revenue and subtracted the expenses, what’s left? Net profit is the most obvious indicator of a site’s profitability.

Historical Financial Trends

Looking back can often provide insights into the future:

Year-over-Year Growth: Is the site’s revenue and profit growing, stagnant, or declining over the years?
Seasonal Fluctuations: Some niches might see spikes during certain times of the year (like e-commerce sites during the holidays).
Major Changes: Were there any significant dips or spikes in the past? Understanding why can be enlightening.

Future Revenue Projections

While no one has a crystal ball, making educated guesses about future earnings is part of the game:

Growth Potential: Based on historical data and the current market, what’s the site’s growth trajectory?
Risks: Are there potential threats on the horizon? Maybe search engine algorithm changes, or new competitors entering the market?
Opportunities: Conversely, are there untapped revenue streams or strategies that could boost earnings?

Financial due diligence is all about ensuring you’re making a sound investment. It’s about understanding the past, present, and potential future of a website’s earnings. So, take your time, crunch those numbers, and make sure your investment is set on a solid financial foundation.

Step 6: The Day-to-Day Operations

Beyond the numbers and the tech, there’s the day-to-day grind of running a website.

Operational assessment is all about understanding that dance, so let’s break down this part of the due diligence checklist.

Understanding Day-to-Day Operations

Every website has its rhythm:

Daily Tasks: What needs to be done every day? Maybe it’s moderating comments, updating content, or managing ads.
Weekly/Monthly Routines: Are there regular content schedules, backup protocols, or marketing campaigns to be aware of?
Automation: What processes are automated? Automation can be a lifesaver, but it’s also essential to know how it works and how to troubleshoot if things go awry.

Reviewing Operational Costs

Beyond the obvious expenses, running a site can have hidden costs:

Software & Tools: Maybe there’s a premium SEO tool, a paid email marketing platform, or other essential tools in the mix.
Outsourcing: Does the site rely on freelancers for content, design, or marketing? If so, what are those costs?
Maintenance: Websites aren’t set-it-and-forget-it. Regular updates, security checks, and other maintenance can have associated costs.

Identifying Key Personnel and Roles

Who’s behind the curtain?

Current Team: If there’s a team in place, who are they, and what are their roles? Understanding this can help with a smooth transition.
Vital Skills: What skills are essential to run the site? If you’re buying, do you have these skills, or will you need to hire or outsource?
Training & Handover: Will the current owner or team provide training? A smooth handover can be invaluable for continued success.

Automation and Scalability Potential

Looking to the future, how can operations be streamlined or expanded?

Efficiency Improvements: Are there tasks that could be automated to save time and money?
Growth Opportunities: If you’re looking to scale, what operational changes might be needed? Perhaps a larger team, new tools, or expanded marketing efforts.

By getting a clear picture of how things run, you’ll be better equipped to step in and take the reins, ensuring the show goes on.

Step 7: Legal Due Diligence

Legal due diligence ensures you’re not stepping into a minefield of potential lawsuits or infringements.

Time for the legalities-part of the due diligence process.

Intellectual Property Rights

Websites are all about intellectual property. How is this one protected?

Domain: Ensure the domain is legally owned and there are no disputes around it.
Trademarks: Does the site have any registered trademarks? Are they at risk of infringing on others?
Copyrights: Ensure content, images, and other assets aren’t lifted from other sources without permission.

Licensing and Permits

Depending on the niche, some sites might need specific licenses:

Content Licenses: If the site uses third-party content, are the proper licenses in place?
Software Licenses: Ensure all plugins, themes, and tools are legally used.
Industry-Specific: Some niches, like gambling or health, might require special permits or licenses.

Compliance with Data Protection and Privacy Laws

In today’s digital age, data protection is a hot topic:

GDPR & CCPA: Ensure the site complies with global data protection regulations, especially if it caters to an international audience.
Privacy Policy & Terms of Service: These should be up-to-date and transparent about how user data is handled.

Potential Legal Liabilities

Forewarned is forearmed:

Pending Lawsuits: Are there any ongoing or threatened legal actions against the site?
Past Issues: Has the site faced legal challenges in the past? Understanding these can help gauge future risks.
Regulatory Changes: Especially relevant for certain niches, are there upcoming legal or regulatory changes that could impact the site?

Legal due diligence might not be the flashiest part of the website due diligence process, but it could be the most important.

It’s about ensuring you’re buying a site that’s on the up-and-up, and not one step away from a legal nightmare.

Step 8: Market and Competitive Analysis

Now let’s talk big picture. Beyond the site itself, there’s a whole world out there.

This part of the due diligence process is about market and competitive analysis.

Understanding the Target Market

Who’s the audience, and what’s the potential?

Demographics: Age, gender, location, interests – who’s the core audience?
Market Size: How big is the potential audience? Is it a niche market or a broad one?
Trends: What’s hot and what’s not? Are there emerging trends the site could tap into?

Competitive Landscape

Use a service like SimilarWeb to find who are the big players, and where does your site fit in?

Direct Competitors: These are sites offering the same or very similar products/services. How does the site stack up against them?
Indirect Competitors: These might not be identical but serve the same audience. What can you learn from them?
Market Share: Roughly, how much of the pie does the site currently have? And how much could it potentially grab?

Unique Selling Proposition (USP) Analysis

What makes the site stand out?

Differentiators: What does the site offer that others don’t? This could be content, products, user experience, or something else.
Value Proposition: Why should visitors choose this site over others? What’s the core value it offers?
Brand Strength: Is the site’s brand well-known and trusted in its market?

Growth Opportunities in the Market

Where’s the untapped potential?

Emerging Niches: Are there sub-niches or new areas the site could explore?
Market Expansion: Could the site cater to a new demographic or geographic area?
New Monetization Avenues: Based on market trends, are there new ways the site could earn?

Threats and Challenges

Every market has its hurdles:

Market Saturation: Is it a crowded market? If so, how can the site differentiate itself?
Regulatory Changes: Especially relevant for certain niches, are there upcoming legal or market regulations that could pose challenges?
Technological Disruptions: Is there a new tech on the horizon that could change the game?

Market and competitive analysis is about understanding the ecosystem the site operates in, and where it could go in the future. By getting a grip on the market and the competition, you’ll be better equipped to steer the site towards success.

Step 9: Social Media and Brand Presence Checkup

In today’s digital age, a website isn’t an island. It’s part of a broader online ecosystem, interconnected with social media, influencers, and online communities.

Let’s dive into the world of social media and brand presence.

Social Media Footprint

How active and influential is the site on social platforms?

Platform Presence: Which social media platforms is the site active on? Think Facebook, Instagram, Twitter, Pinterest, LinkedIn, and others.
Engagement Metrics: It’s not just about follower count. How engaged is the audience? Look for likes, shares, comments, and other interactions.
Consistency: Is content posted regularly, or is the last post from 2017? Regular activity can be a sign of an engaged audience.

Brand Reputation and Sentiment

What’s the word on the digital street?

Reviews and Ratings: If the site sells products or services, what are customers saying? Platforms like Trustpilot, Google Reviews, or industry-specific sites can offer insights.
Social Media Sentiment: Beyond likes and shares, what’s the tone of comments and mentions? Are they positive, negative, or neutral?
Influencer Partnerships: Has the site collaborated with online influencers or bloggers? These partnerships can boost credibility and reach.

Content Sharing and Virality

Has the site’s content made waves online?

Viral Content: Has any content from the site gone viral? This could be a blog post, a video, a meme, or even a tweet.
Content Shares: Beyond virality, is the site’s content regularly shared on social platforms? This can be a sign of value and engagement.
Backlinks from Social Media: Are other sites and blogs linking back to the site’s content via social media? This can boost both traffic and SEO.

Step 10: Growth Strategies and Expansion Ideas

Alright, so you’ve got a grip on the current state of the website. But what’s next on the website due diligence checklist?

A major part of due diligence in the website business model is exploring future growth opportunities, expansion ideas and potential for adding value. After all, why would you purchase an online business at its peak potential?

Content Expansion and Diversification

Content is king, but variety is the spice of life:

New Content Formats: If the site’s been blog-heavy, consider introducing videos, podcasts, or infographics.
Guest Posting: Collaborate with industry influencers or bloggers to create guest posts. It’s a win-win for exposure.
Trending Topics: Stay updated with industry trends and produce content that taps into what’s hot right now.

Optimizing Monetization Strategies

There’s always room to boost that bottom line:

Affiliate Partnerships: If not already in play, consider partnering with brands or services for affiliate marketing.
Subscription Models: For content-rich sites, think about introducing premium content for subscribers.
Ecommerce Integration: If relevant, introduce or expand an online store or merchandise section.

Leveraging Email Marketing

The power of the inbox shouldn’t be underestimated:

Newsletter Optimization: If there’s an existing newsletter, optimize its content and frequency for better engagement.
Segmentation: Tailor email content based on user behavior or preferences for a more personalized touch.
Automated Campaigns: Introduce drip campaigns or automated sequences for new subscribers, abandoned carts, or other triggers.

Exploring New Traffic Channels

Diversify where the visitors come from:

Paid Advertising: Experiment with PPC campaigns on platforms like Google Ads or social media ads.
Partnerships and Collaborations: Team up with complementary brands or influencers for joint campaigns or promotions.
SEO Expansion: Target new keywords or improve existing content to rank higher and pull in more organic traffic.

Engaging with the Community

Building a loyal community can be a game-changer:

User-Generated Content: Encourage users to share their content, reviews, or experiences related to the site.
Forums and Discussions: Introduce or nurture spaces where users can interact, ask questions, and share insights.
Feedback Loops: Regularly solicit feedback and make users feel their voice matters.

Technical Improvements for User Experience

A smooth-running site can significantly boost growth:

Site Speed: Optimize for faster loading times, ensuring users don’t bounce off due to impatience.
Mobile Optimization: Ensure the site offers a seamless experience for mobile users.
Intuitive Navigation: Make it easy for users to find what they’re looking for with a clear, user-friendly layout.

Growth and expansion are all about thinking outside the box, experimenting, and iterating. It’s about taking what works and doubling down, while also being open to new avenues and opportunities.

With the right strategies and a dash of creativity, the sky’s the limit.

Bonus: Common Pitfalls When Purchasing a Website and How to Avoid Them

Every journey has its bumps and detours. When it comes to acquiring and growing a website, there are common pitfalls that many fall into.

Let’s dive into some of these pitfalls and how to dodge them.

Overvaluing Potential Over Performance

The Trap: Buying a site based on what it could do, rather than what it’s currently achieving.

The Solution: While potential is essential, base your valuation on current performance metrics and treat potential as a bonus.

Neglecting Post-Acquisition Integration

The Trap: Assuming the site will run itself post-purchase without a clear transition plan.

The Solution: Plan for a smooth handover, including training, documentation, and understanding all operational aspects.

Underestimating Operational Costs

The Trap: Overlooking ongoing costs like content creation, marketing, or software subscriptions.

The Solution: Do a thorough review of all operational expenses and factor them into your financial projections.

Ignoring Mobile Users

The Trap: Over-focusing on desktop users and neglecting the mobile experience.

The Solution: Regularly test and optimize the site for mobile devices to ensure a seamless user experience.

Over-reliance on a Single Traffic Source

The Trap: Depending heavily on one traffic source, like organic search, which can be volatile.

The Solution: Diversify traffic sources, incorporating paid ads, social media, email marketing, and more.

Skipping Regular Backups and Security Checks

The Trap: Neglecting regular site backups or not prioritizing security.

The Solution: Schedule regular backups and invest in security measures to protect against hacks and data breaches.

Your Turn

You now have everything you need for thorough website due diligence. When you find a good potential acquisition, run through this checklist step by step to make sure it’s as good as it seems.

Keep in mind though, that the website due diligence process can be slow and requires a lot of work even at the best of times. And if you’re not an SEO-minded or marketer person, “backlink profiles” and the endless Ahrefs-graphs can be quite overwhelming. Don’t hesitate to contact Centurica or another great due diligence service specializing in online business purchases to help.

Good luck with your investment.

Business, Websites

Last Updated on July 13, 2024

by Jay

Author Bio