4 Points of Due Diligence When Buying a Web Based Business

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Internet businesses propose a unique opportunity for business buyers.
Frequently people who buy a web based or internet business envision a lifestyle of sitting behind a computer all day in your underwear counting large amounts of cash.
Regretfully this image creates a lot of problems for business buyers.
Speaking with one website buyer he was promised an income of "$97,652 annually working from the comfort of your home.
" After 6 months of difficult lessons he lost his down payment on the business of $35,000 and the website reverted to the previous owner.
Here are a few key factors to remember when buying a web based business.
1.
Web based businesses have many similarities to "sticks and bricks" businesses - Websites are usually a more efficient way of selling a product or service that can be sold face to face.
A service based business that sells it's services through the internet is still a service based business.
A manufacturing company that creates a proprietary product is still a manufacturing company with a website to sell it's products.
You need to understand how the business works as well as the website commerce.
How much of the revenues come from the website? How much come from direct sales? What's the cost of delivering goods? Is the industry or sector volatile? Is the consumer seasonal in purchasing? Are the financials audited or are they self prepared? Has the industry recently had some major changes? Are the revenues recurring or one time? 2.
Web based businesses have distinctive differences from "sticks and bricks" businesses - Due to the nature of the business there will be distinct differences from a web based business to a normal businesses.
You will probably not have a consumer arriving at your house to buy your product.
Other factors to consider are how many hits, and dollars converted are really important to web based businesses? What expenses are in Pay Per Click to convert a sale? What's the real value of page placement to you? Is the website subject to back sales taxes from a local jurisdiction? What is the real value of the web development? Revenues for websites usually come from third parties who process payments.
Luckily this information is difficult to forge if you are given direct access to the third party vendor.
3.
What information can consumers find about the website you're going to buy? The internet makes customer dissatisfaction very apparent.
Are there disgruntled customers, if so why? Does the customer dissatisfaction significantly detract from sales? 4.
A web based business is still a business - The seller has made a representation based on past performance.
That seller should still be invested in your success going forward.
Never buy a web based business with all cash.
Make sure the person selling the website is actually the owner, and verify the income in the same way you would any other business.
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