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First step. Looking through the business listings.
If you spend your time searching endlessly for a website you'll probably give up with no results. This is a common reason why 90% of the people who begin the search to buy a website never complete a transaction. If you want to participate in the tremendous wealth being generated by the internet, then you need to make the transition from "looker" to "buyer".
Communicating with the seller is critical to the business buying process. It is the best way to gain focus and clarity on the right business for you. Starting today, when you look at a listing, I want you to do the following:
Contact the seller or intermediary Sign the necessary confidentiality agreements Ask your key questions when they contact you If satisfied, immediately arrange a phone call with the seller Make it your goal to communicate with at least five websites over the next 30 days. I can assure you that by doing so you will feel completely rejuvenated about the buying process.
From these exchanges of information you will be able to either eliminate or pursue each business. As you communicate with more sellers, you will become clearer about what you want and don't want in a website. With this clarity, when that right website presents itself you'll be able to pounce right on it and get a deal in place.
What are the key motivators for people to buy a website?
Before making a decision to purchase a website, a buyer should understand his or her objectives to make sure those objectives can be met by purchasing a particular website. Surveys of people purchasing websites reveal similar responses. Surprisingly, making money is not at the top of the list. Here is a list of the typical answers, in their order of importance:
I want to control my own destiny.
I would be happier if I worked for myself.
My current work does not take advantage of my skills and abilities.
I want to make a lot of money.
Should I start my own website or buy an existing website?
An existing website has a historical track record (good or bad) which can be used to evaluate the website. An existing website has usually shown there is demand for its products or services, and it should have, among other things, detailed financial records. Sometimes, a seller of a website will agree to help to train a new owner. These are important factors because many websites tend to fail during the early stage of their development. On the other hand, there can also be disadvantages to buying an existing website. A buyer will be assuming an established website culture and infrastructure which may make implementing changes more difficult. Also buyers will generally have to pay a premium for an existing website.
What should I be looking for in a website?
A buyer should only consider a website he or she will feel comfortable owning and operating. The time and effort which will be required is an important consideration as is how much the buyer can afford to pay for the website. The amount of cash the buyer needs to regularly take out of the website is very important, especially if the website is to be the buyer's only source of income. Because many experts believe you should not purchase a website unless you can make it better, it is helpful if a buyer has some definite ideas on how to improve the purchased website.
Can I obtain financing to help me buy a website?
The availability of outside financing will depend upon the asset base of the website, its operating history, collateral availability and projected cash flow - the same issues considered in all business lending.
How is the asking price of the website determined?
Sometimes the seller will simply make up an inflated asking price to determine if there is any interest in his website at the inflated price. Other times, the seller will obtain a professional valuation of the website.
Should I hire an attorney?
The answer to this question depends a great deal upon your appetite for risk. If the purchase price represents a significant amount of money to you, then it is a good idea to retain an attorney to review the necessary legal documents. It is important that the attorney you hire be familiar with business acquisitions to be as effective as possible during the process.
Why is confidentiality so important to the website seller?
Typically, confidentiality is very important to a seller. It can be damaging to a website if it is known that it is for sale. Customers may not be interested in buying from a website that is up for sale and competitors could use the information to their advantage.
What is due diligence?
Due diligence is a systematic process for acquiring and analyzing information to help a buyer or seller to determine whether or not to proceed with a proposed business transaction. The information obtained relates to all aspects of the website to be purchased. Due diligence should include both quantitative information, such as sales and other financial data, and qualitative information, such as an assessment of the existing website, security systems, existing relationships with suppliers and customers and other matters. Sometimes the information to be reviewed can be quite technical or industry specific. It is important that the person doing due diligence have a complete understanding of the information being reviewed.
During the due diligence process, there are some significant warning signals. Be wary of the following:
The seller has imposed an unrealistic time frame for the transaction.
The seller has withheld key information.
The explanation for selling the website is not logical.
The financial statements seem “to good to be true”.
The seller has presented any information that is significantly misleading.
The seller is not willing to be available after the sale.
What are the main reasons for the failure of a website after it's bought?
The price paid for the website was significantly over market value.
The due diligence procedures were not adequate.
A previously dependent asset was unable to survive without support (i.e. sales to related parties or below market debt financing)
A change in business environment created unexpected problems.
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