So, this is just going to be a quick update, heaps to fill you in on in the coming month including a woe to go step by step on creating an e-commerce store which began making profits in days!
But I have to post this up as it’s a topic that I’ve been asked about at least 20 times in the past week alone.
“How do I know I’m buying a legitimate website?”
First off, I’ll double down on one of my golden rules here: There are NO short cuts.
That means that to buy a successful website you have two options.
1) Buy an existing, SUCCESSFUL website, be it operating on autopilot or with a tried and proven formula. This requires due diligence, objectivity, potentially a wait until you see any real ROI, and hard work to get you to the point where you have the capital to invest. Such a site generally won’t come cheap.
2) Buy an existing MODEL, that is a starter site, a concept, a web page with little revenue etc. These websites can come cheap – and often with lots of promises.
Exceptions always exist, people may have legitimate reasons for offloading profitable assets at fire sale prices; but we’ll focus on the norms.
The questions you should ask when buying an existing business, particularly a web business are generally the same in either scenario above. But the sales pitch tends to be more elaborate and set to pray on the un-initiated in the latter instance. So whilst the below focuses on a level of skepticism, they are certainly things to keep in mind when buying ANY web based business.
My Top Ten questions:
1. How does the Website generate MONEY? What is the product? What are the profit margins? What are the costs? What are the risks? What is the exposure? Who sells the product? Is there stock? Copyright? Does the product exist at all? Is the product quality?
2. How does the Website Generate Traffic? How many backlinks are there? Which are genuine? Does it rely on paid traffic? If so what is the budget? Are social media likes and followers genuine (tip: Check to see if cheap likes have been bought – typically if a seller claims to focus in say the US but all of its followers are in Asia, it is a red flag). Are any metrics available eg Google Analytics? What is the Bounce rate? I.E. how many of those users stick around and how many are bots / people that fail to get captivated?
3. How long has it been around? Do the records match any claims? Search for blocks of text on google, find out if the website has simply been duplicated from other websites. Do the social media histories align? Is there a history of engagement on them? If a recent site, does the facebook go back longer than the claimed website Start date? A sign of using false traffic or an obsolete page to drive traffic.
4. What is the sales/traffic history? Look at the trends. Are there dips? Peaks? Correlations between the two? If so Why. Be wary of sharp rises and drops which suggest increases in add expenditure or penalties or outages. If revenue drops off steeply, was there a supply issue?
5. What is the Profit, Revenue and actually quite critically although often overlooked – units of sales? It’s all well and good seeing that a website made $500 in its first month, but is that through 1 sale or 100? if the latter, is the amount of money that they pumped into advertising actually true? If the former, was it a high-ticket item that was seasonal? Or perhaps the supplier no longer exists?
6. Are the sales genuine? Don’t just ask for figures, ask for a live screen share of the sales. Any purchase should be open book, so ‘we’re protecting out customers and not sharing their info’ might not be a good enough answer here. Are the sales legitimate, Different, genuine sounding names and addresses with email addresses and phone numbers? Look for a variety of geographical locations and be wary of any dodgy looking patterns. You can even propose that you call one of the buyers of a high ticket item in the presence of the seller as a courtesy to ‘check how we performed’. Most won’t mind if they have spent say $500 on a product.
7. Do you take over CONTROL? Never accept that an asset will continue to be stored on someone else’s server. Taking over a hosting account isn’t as risky but my preference is always to simply move it over. Be sure to change any cpanel or other server based access passwords, including the FTP accounts – you’d be amazed how many don’t do this.
8. How are orders fulfilled? Are the suppliers legitimate? Are they simply Alibaba based sellers? (as a rule of thumb, the main concerns in this instance would be speed of fulfillment
8. What Technology is involved? Is the Website built on plugins that may become obsolete? Is it secure? Is it reliable? Can you get someone to fix the site if it goes down? If so how much will it cost?
9. Why are they selling?
10. What is the state of handover? Are there un-fulfilled purchases? Existing complaints? Purchases that have taken a while to turn up and are still at large? What does the seller know that you won’t find out until after spending your money? Are suppliers known? Are they about to dissapear? Has there been penalties for Black-Hat (read: Dodgy) Optimisation techniques?
Several of these market paces are awash with ”web developers” ”e-commerce specialists” and ”business developers” who claim to build businesses so they can sell them. Often with a month or two’s revenue that people will get excited about, expecting it to continue. The below is just such a sales pitch, and I have commented against each section to give you an insight in to the sort of questions I generally ask when reading them.
Truth be told that if a site features the buzzwords ”easy”, ”get rich”, ”retire early”, ”autopilot” to name a few, yet a starting price of pennies, you’re right to be cautious.
————- HUGE ADVANTAGE BENEFITS TO SAVE & JUST PROFIT —————-
Free SSL Certificate
Free Hosting – For the year
Free WhoisGuard Protection
Free – Migration Service, Process Quick & easy!
Free – Auto Sync Stock Control (No Monthly Costs)
Huge Inventory Database – Over 1000k More Products To List (2 Clicks – New Product Loaded)
3 Created Custom Emails (Optional)
Mobile Responsive (62% of smartphone users have made a purchase online using their mobile device in the last 6 months)
The above is intended to add value. If there is an intrinsic value in the business then why the sales spiel?
The above also tells you that this individual or business markets these “opportunities” regular. This will be a templated pasted into all of their auctions or advertisements.
Always ask what platform. You don’t have to dig too deep to find out if a website is using word press as a platform. Not a problem at all – but it leads you into more questions. Chances are the website is simply duplicated for each sale that the seller makes.
Free hosting means that it is probably on a shared server – could this throttle your growth? Do they own the server?
Free SSL Certificate – the website in this instance did not have one active. I.E. the URL did not start with Https://. Why? If it is an up and running business, would this not have been implemented already if they were in any way serious?
Free Autostock Sync Control – This could be fancy-talk for ‘this website feeds of alibaba.’ which comes with a host of complications.
A business built to profit INSTANTLY on AUTOPILOT no further setups, inventory needed or products loaded – Just MARKET, SELL & PROFIT
What is included in the sale?
· Domain Name
· SSL Certificate
· Quality Design Website
· Drop Ship Supplier
· Marketing Material
· Supplier Product Range
· 14 Day Support
· Secure Website Code
· Advanced Features
· Drag and Drop Website Builder
· Content Management System CMS
· Seamless transfer of website using Wishflip
· Super Fast Website
Again – how much of this is actually value?
What details are there for the supplier – what KPIs such as return rates, fulfillment turnaround times, quality control and so on exist. Are they simply an Alibaba seller? How long have they been established? What is their rating? How much feedback is available on them?
Everything else on this list, put simply is fluff. The website might perform, but if on a shared platform isn’t likely to be”Super Fast”.
They propose to use a proprietary service to transfer. Does this mean you can’t take the website elsewhere? Who owns the service? Are they always going to be around?
What is required to keep the business operational?
· Wish flip Hosting Account ( Between $6-$12p/m)
· Namecheap Account or equivalent domain registrar account
· Basic understanding of how the internet works
· Website cannot be transferred to other hosting providers
How can the future owner improve the business?
· Adding More Products & Posts
· Post To Social Platforms
· Create & Offer Specials
· Promote Sales On Newsletters
· Use Third Party Marketers Google Adwords, Facebook, Youtube etc
All valid suggestions, but be familiar with the cost and effort required in the above if you’re not aware. Also query that, since the site is reported to have been making a small amount of profit from the last few months – what efforts were used to do so.
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SIMPLICITY IS THE KEY TO SUCCESS
1. Receive orders on ecommerce backend
2. Validate Payments Before Drop shipping
3. Place order with supplier and checkout
4. Supplier sends the product via drop ship
5. Job done, Order Sent & Profit Made
Be familiar with what is involved with the above. It appears that fulfillment is not automated; that means that if Alibaba based, you will have a bit of a process of transferring addresses and making payment. Not a problem if there’s a few orders. If it’s a hundred orders – it can be very time consuming.
Ask for examples of other sales they have made. If using a platform such as flippa, then the links to the other auctions will show you prices and importantly previous questions. Notice trends in responses, inconsistencies in answers and so forth.
An Escrow service can be a good additional safeguard, if the right acceptance terms are agreed.
The golden rule if you haven’t picked it up above is simply that you must practice due diligence at all times.
Hold yourself accountable to do the legwork – an acquisition can be a game changer, no matter how small (on the zentrepreneur course, you can even follow steps I took to turn a $100 purchase into a store making around $3000 in around 3 weeks time.) But you have to be prepared for a few late nights, a few difficult questions and above all, to walk away if things don’t add up.
An apt way for me to picture it is buying a used car. Be the discerning buyer that wants to buy a mint condition classic. If you’re spending say $30k on a 45 year old car, you don’t want to cut corners or buy the first example you see because you didn’t take the time to dig below the surface.
No, you’d check the paint for damage, make sure all the kms add up on paperwork, whether the seats look like they have the kms claimed or if it looks like the odometer has been wound back, the number of previous owners, what other cars in similar condition are selling for, you’d ask to see service history, why they were selling, how long ago they bought it, all in the quest of buying the machine that does what you hope it will.