Bryan O'Neil from Centurica explains the 7 most common mistakes made when conducting due diligence on websites and online businesses being bought.

1. 7 Most Common
Website Due Diligence
Mistakes
Bryan O’Neil
Website Acquisitions Consultant

2. Agenda
 Mistake #1 - Not understanding the differences between traditional and
online due diligence
 Mistake #2 - Not knowing what to look out for
 Mistake #3 - Not paying attention to external factors
 Mistake #4 - Taking information at face value
 Mistake #5 - Ignoring minor red flags and not looking at the big picture
 Mistake #6 - Overlooking seller's other business ventures
 Mistake #7 - Failing to Ensure Revenue Streams are Transferable

3. Mistake #1 - Not understanding the
differences between traditional and online
due diligence
 Main focus needs to be on traffic, rather than the internal workings of the
business.
 In the online world, traffic sources are often unstable and unsustainable
 Especially true in cases where the website relies on organic traffic
 Lack of audited books - 9 times out of 10
 In many cases, online businesses are sold as assets, rather than companies
 Often the seller is a private individual
 Maintenance burden: online businesses are often owner operated
 Sellers tend not to account with their time spent running the business

4. Mistake #2 - Not knowing what to look
out for
 Having expert knowledge is crucial
 Educational Resources and Tools:
 FlipFilter – http://flipfilter.com/
 Flippa.com Blog – http://flippa.com/blog/
 My own publications – http://bryanoneil.com/

5. Mistake #3 - Not paying attention to
external factors
 Link Profile Analysis
 For websites that rely on search engine traffic, the quality of its link profile
determines the sustainability of this traffic.
 Website present in Spam Black Lists
 Often not obvious but can pose a major threat to the website in the future,
especially for sites that utilise e-mail lists for selling their products/services.
 Unsustainable sources providing traffic / clients
 Majority of the website’s traffic is referred by a single site
 Website depends on “free” traffic that can stop any day

6. Mistake #4 - Taking information at face
value
 The industry is extremely prone to fraud
 Especially true in cases where the transaction value is small (<$20k) and the
parties never meet in person.
 Deals are often international, making contracts extremely difficult to enforce.
 Some sellers misrepresent unintentionally
 Sellers are often missing important details, especially when the business is owner-
ran and was started as a hobby.
 Important to verify information live
 Revenue proof screenshots can easily be tampered with.
 Everything should be verified through live screen sharing or in person.

7. Mistake #5 - Ignoring minor red flags
and not looking at the big picture
 Each property has at least some red flags
 There are seldom websites that pass all DD checks
 Most red flags are insignificant in nature and easy to counter
 Often there are a number of red flags that alone aren't significant, but as a
collection pose a great risk
 Important to look at the DD results as a whole
 Categorise shortcomings into those that can be fixed/countered within 1 month
from the acquisition and those that can’t

8. Mistake #6 - Overlooking seller's other
business ventures
 It is extremely common online for one person/company to have many
competing websites
 When working with organic traffic, having more than one website offering the
same product/service is often beneficial
 These different websites often share elements of their infrastructure and benefit
from volume discounts
 In many cases, only one website of the bundle is sold
 Identifying these websites can take some time and effort
 It is often not obvious which other sites the seller owns
 Non-compete contracts not easily enforceable, especially in cases of
international transactions

9. Mistake #7 - Failing to Ensure Revenue
Streams are Transferable
 Most common situation: PayPal Subscriptions
 Subscriptions are not transferrable
 Asking customers to re-subscribe typically results in losing 35%+ subscribers
 Many advertiser contracts are not transferrable from one individual to
another
 New contract is an option, but may involve downtime
 Approval processes differ from advertiser to advertiser. Buyer needs to make sure
they are eligible for working with the advertisers beforehand.
 Transferring accounts partially often results in the loss of special
arrangements and/or volume discounts

10. Thank you!
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More information:
Bryan O’Neil
Website Acquistions Consultant
E-mail: bryan@bryanoneil.com
Web: http://BryanONeil.com/