10 Questions to Ask BEFORE You Buy an Online Business

One of the most common questions I get asked by buyers looking at a business for potential acquisition is, “What are the things I should be looking at or asking about as I’m looking at an online business?”

Well, of course, the complete answer is going to be different for each business depending on the niche, history and model. But, there are some basics that, with maybe a few slight adaptations, should be asked about any business, online or offline, when you’re considering buying.

This list is just the headlines and is by no means meant to be comprehensive, but it’s a good place to start or it can also be used as a catalyst to brainstorm a more comprehensive list once you’ve got the basics answered and decided it’s worth your time to dig deeper.

1. Segment/Niche

Knowing and understanding the segment or niche a business operates in is important for many obvious reasons but not least of all, so you can quickly identify avenues for growth and expansion.

2. Products/Services

The products or services offered by a business are often seen as simply “this or that” but look at the business a little differently to see if there are opportunities to “stretch” the boundaries by expanding the range.

3. Competition

If a seller say’s there’s no real competition, and you can’t find or identify any either, be very, very careful, in fact you may even want to drop this one and keep looking – no competition usually just means no interest or if there is, then no one is buying.

4. Financial History

The financial history of a business will help you identify trends and cycles as the business has grown and developed. By analyzing sales by month in relation to traffic history you should be able to identify any seasonal cycles but may even be able to identify specific results based on marketing events or campaigns.

5. Verification Methods for Revenue & Expenses

Ask most accountants or bankers and they will say you absolutely must see the Tax Returns for a business in order to verify revenue and expenses. I always ask for tax returns but mostly just to see what I’ll get back; it can be a good indicator of who you are working with and how they have their accounting systems organized. You can look at alternative methods of verification from 3^rd parties such as merchant statements.

6. Delivery Methods

There can often be multiple delivery options depending on the product or service being offered, each has its own pro’s and con’s but the trick is to find the right balance to maximize sales and minimize returns or the dreaded chargeback.

7. Inventory Management

Managing inventory is an area where people often get into trouble. They start off small and it’s not too much effort to stay on top of things, but if your marketing is effective and your sales start to grow quickly, (as most of us hope they will) it can often take too much time to stop and implement a good inventory tracking system in retrospect.

8. Traffic History

Sales drives any business and traffic drives sales we all know that, but the beautiful thing about an online business is that you can “see” the quantity and from that often the quality of traffic to a site. By analyzing this information you can learn where the traffic arrives from, which pages it goes to and where it converts (to a sale) within the site.

9. Keywords/Phrases

Keywords and phrases are the “sign-posts” that direct traffic to a website. These are the words and phrases people use when they key in a search for something that brings them to your website, as opposed (hopefully) to your competitors.

10. Marketing

Marketing encompasses all attempts and methods a business employs to reach its target user or customer. Sometimes combining two or more methods within one campaign can be highly effective – maybe it starts with a video on the website, which invites a customer to receive further information by email.

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Of course, this is meant to be an initial list and there are lots of other really good questions that you absolutely can and should ask when buying a website or considering a business for acquisition. I’m curious though do you have any standard, or even not so standard questions, beyond these? Comment below and we'll update the post and credit you when we use your question.

Cheers,

Tags: Buy a Business, Buyer Questions, featured, online business, web business

Category: Buy a Business, Featured, Online Business