Would you like to know the secret to being more thorough and efficient with your due diligence when buying websites? It’s to drill down on the most important assets of a website. In order to explain this better, let’s first define what “assets” and “drill down” mean.
The assets of a website are generally closely tied to the reason you’re buying the site. Most assets of a site fall into one of the following categories:
- Automation – e.g. Outsourced relationships, software
- Scaling – e.g. SEO potential, systems
- Diversity – e.g. Multiple sources of traffic, revenue
- Monetization – e.g. Adsense income, member sales
- Relationships – e.g. Email lists, rss readers, followers
- Traffic – e.g. Organic traffic, referrals
- Buzz – e.g. Links, Press
- Intellectual Property – e.g. Products, content
I’ll talk more about these in a future post, but once you’ve identified which assets of a site are most important to you in your buying decision, then it’s time to drill down.
Here’s an example. Let’s assume you’re buying a website for its Adsense income. In order to drill down, we need to ask ourselves the question, “What causes this?”. Here’s how it would go with this example.
Question: What causes the Adsense Income?
Answer: The organic traffic the site gets.
Question: What causes the organic traffic?
Answer: The SEO of the site.
Question: What causes the SEO?
Answer: The backlinks and content.
Question: What causes the backlinks and content?
Answer: Hiring content writers and link builders.
Can you see how we drilled down to find the real source or cause of the Adsense revenue? In this case, it’s the content writers and link builders. At first glance, you might have assumed just looking at screenshots of the Adsense revenue would be all the due diligence you’d need to do. In reality, you also need to perform due diligence on the organic traffic, the SEO, the backlinks, the content, the content writers and the link builders. If you want to really take a shortcut, you could simply perform due diligence on the content writers and link builders because they caused everything else.
Can you see how important this concept is? Can you see how it can save you time and reduce your risk of being scammed when buying a site?
I know it works for me. I have a checklist of about 500 different due diligence items I can potentially check before buying a site, but I might not check 250 of them because they aren’t relevant to the assets that are important to me.
If you’d be interested in hearing more about those 500 due diligence items, let me know by commenting below. If there is enough interest, I’ll share some of them with you.