There are many articles elsewhere, especially from website brokers focusing on the selling side and what to prepare when selling. This is focused on the buying side of the equation. The focus is on the smaller to perhaps mid size of the market, not million or multi-million dollar deals (though some of the same principles do apply, at the bigger scale you’re less likely to be doing quite so much on your own).
What to Look For
The first part of acquiring a website is probably the trickiest: finding the right one to acquire. This process is a bit of an art and a bit of a science. The “right one” depends in part on your personality and skills as a potential buyer, the seller, and of course the site itself. It’s wise to look for sites that you can bring some advantage to. This could be something like a technical site that you have the technical skills to manage but other potentially competitive bidders don’t. It could be a site that’s in an area you have domain expertise in, for example if you’re a car buff a forum site focused on a particular brand of cars may be attractive. The goal is to find a site that you can run better than it was being run before you took it over in some way. It’s very likely that you have a different set of skills than the current owner of a site and hopefully you can bring these skills and fresh perspective to the site. If you can grow the site beyond it’s current earnings, you can get your investment back faster.
Keep time commitment in mind. You either need to be available for enough time to run the site, or, need to budget to pay someone for enough time to run the site. Neither your time, or your potential employee/contractor’s time are free. Some sites are far more passive than others; they may demand higher multiples because of this. Some sites that are more active can be transitioned to be more passive through business process automation, better tooling, or outsourcing. A site that earns 20,000 USD a year looks far more attractive if it requires 2 hours of work a week than it does if it requires 40 hours a week.
In the segment of the market we’re talking about sites usually go for a multiple of somewhere between 2-3 years worth of net profit (excluding owner salary, accounting expenses, taxes, etc which are generally harder to calculate and vary by person/corporation/region enough that it’s easier to compare between listings without considering them). So, if you’re hoping to get a site that will earn you 100,000 USD/year, you should expect to spend somewhere between 200,000-300,000 USD. There are exceptions to this rule such as sites that are growing rapidly, sites that have a longer than usual stable history or sites that have significant value beyond what you would typically find. On eCommerce sites, inventory is typically not included in this valuation but does typically get added to the final price.
Watch Out For
There are outright scams. Learn to spot and avoid them. Some of these patterns become very obvious within a few weeks of reading many listings. Others are better disguised. Some sites are template sites with no existing revenue that don’t really provide much value compared to simply setting up a WordPress installation yourself on your own domain name and starting from scratch. Some people make sites to flip, this is likely not what you’re looking for if you want a stable business (and, if it is what you’re looking for, make sure the seller doesn’t just copy and paste all their details from previous listings).
Among website brokers, some vet listings far more carefully than others. Some brokers don’t really vet listings at all. Some auction sites vet some listings but not others. You will find the quality of listing varies significantly depending on the source; but, there are diamonds in the rough even at the brokerages/auctions with less vetting. As the buyer, you should be doing your own due diligence and investigation, even if you think the broker vets things. In general, brokers disclaim liability for accuracy of statements they make or continued performance after the sale of the site. There are no guarantees.
Learn how escrow works and when/why you need it. People can get paranoid where money is involved, especially meaningfully large numbers.
You Think You’ve Found “The One”, Now What?
Do your due diligence. You want to look into financials, if you have them, you want to ask about trends if you see any. Some businesses are seasonal, others are not. If you only have a year worth of data you may not be able to spot longer term trends or seasonality. You can ask questions about this to the seller.
Look at technical evaluations of the site. You want an idea of what technologies it was built with, whether or not it has technical errors such as missing pages, slow page loading, incompatibility with mobile devices, etc. These are things you should look into fixing. Look for trends when available from third party data such as Alexa and SEMrush, but, be aware that these sites are incomplete and may not be as insightful as Google Analytics can be.
Consider getting a third party opinion of you believe it will be beneficial. Again, you can’t 100% trust third parties, it’s not their money on the line but they can help you catch what could be blind spots. Centurica is a name that comes up often.
You Can’t (and Won’t) Know Everything
You can reduce, but not eliminate risk. Google could release an update to their ranking algorithm that reduces (or increases) traffic to the site you’re looking at. Advertising campaigns could become more expensive or less effective. You will probably miss something, no matter how much due diligence you do; but, hopefully it will be small. Past performance does not guarantee future success (but, oftentimes it’s the best we’ve got).
There’s a lot to be said for the art of negotiating. Be careful of negotiating too hard on price alone, you want to have a good relationship with the seller. Brokers are likely to have negotiated more deals than you have; individual sellers may not have, and, can sometimes have unrealistic expectations of the price for their “darling” of a site.
Come up with a plan for transition. Get standard processes documented so that you can follow them, especially the most frequent ones. Expect to spend dramatically more time in the first couple of months after acquiring a site than you would normally. Let things sit unchanged for a bit before changing many processes to be “better”; sometimes things are why they are for a reason that you don’t yet understand (but will soon enough). If you see quick wins for improvements, try them. Test thoroughly. Make backups. Make backups. (Yes, it it’s important enough to say twice).
If you’re dealing with physical products have a plan for things like returns, restocking fees, label generation, etc. If you’re sending things out yourself, great, if you need a third party logistics provider (3PL) search for one and try to get personal recommendations if possible. Figure out when it makes sense to require a return of damaged/defective items and when it’s cheaper/easier/more efficient to refund without requiring a return (sometimes a picture of the problem may be enough, and, it’s something that many, but not all, people can provide you with pretty easily).
Sound too complicated and error prone?
It helps if you’ve done it before. We have. We also know where to look to find sites; though there’s certainly a hidden market as well. If you’re looking for help with a potential acquisition, we should talk. Doubly so if you have the funding worked out but not all the technical aspects.