Proper due diligence isn’t just good business, it’s also crucial to protect yourself from being duped. While many content startups are a good acquisition opportunity, there are also many doctored earnings and traffic reports from unscrupulous sellers.
Below are seven questions I always ask before acquiring a content business. I hope they help you filter out the bad eggs and find a great content startup to Acquire!
1. Does the Website Use a Common CMS (e.g. WordPress)?
Most content websites should use a common content management system like WordPress. Such CMS systems are easier to code, include a broad range of plugins, and have certain in-built defences against malicious code.
If the website isn’t on a common CMS, are new pages easily created? How easy is it to customize? Even if the site is profitable and there’s nothing nefarious going on, are you prepared to write everything in HTML?
Not using a common CMS is a major red flag that is often an immediate deal killer (for me).
2. Is the Niche a Fad or Evergreen?
You can balance seasonal niches. For example, if you own a winter sports website, you can always Acquire a summer sports website to stabilize your income. Evergreen niches are the best as demand is consistent all year round.
Be careful if Google Trends suggests that the content niche is a fad. Fidget spinners and Beanie Babies aren’t big money makers anymore. Niches on topics like pets, home repairs, or weight loss are always going to be around.
As an example, check out the trend over the past 5 years for “fidget spinners”:
This is clearly a temporary fad that boomed and bottomed. As a counter-example, check out the term “dog”:
This is a stable trend and a niche that has long-term potential.
That’s not to say that fads don’t work well; they do. Just be aware that it might be temporary and your acquisition might hold lower value over the long term.
3. Is the Content Well-Written?
Poorly written content is a huge red flag. It tells you the traffic numbers might be fake or the seller managed to game the Google algorithm, like toxic links from black-hat SEO.
That also means it’s only a matter of time until the site loses those rankings from a manual or algorithmic Google penalty. If you’re unsure of how to assess writing or content quality, ask a friend or colleague interested in that niche to review the content for you.
4. Is the Domain Infringing on Trademarks?
Trademark infringement is an automatic no-go. It’s not hard to look up public trademarks or search Google for other companies that have trademarked the name.
Another way to check is to use the UPSTO Trademark search. Enter variants of your domain name in question and see if any trademarks exist.
5. Are There Any Toxic Backlinks Pointing to the Website?
Toxic backlinks come in many forms. These could be backlinks from adult entertainment, gambling, or other sites Google doesn’t like. Are there links from obvious private blog networks or spammy sites that are farming out links?
While sometimes these can work in the short term for rankings, they will always disappear. Toxic backlinks are always bad over the long term. There are many good tools for checking backlinks, both free and paid, but my favorite is AHREFs Site Explorer, where you plug in a URL and get a synopsis of backlinks pointing to the website.
A toxic backlink profile is not something to take a chance on.
6. Is Revenue Verifiable via Screenshots, Logins, or Video Recordings?
Anyone can make up a number. While difficult, you can doctor screenshots and videos to show whatever you want. The more screenshots and video recordings of earnings, the better.
Double-check revenue against traffic tools. Do the numbers make sense? Is the site attracting the right amount of traffic, or are the sales numbers wildly higher than they should be?
Look for any red flags and don’t be afraid to ask questions while doing due diligence. Asking for another video recording of earnings isn’t unreasonable and if the numbers shown are radically different from what’s being reported, it’s a serious concern.
7. Is Traffic Trending Positive or Stable?
Trends matter. High website traffic six months ago isn’t a good thing if the numbers have cratered since. A long record of stable traffic or many months of growth makes the site much more attractive as a long-term investment.
If traffic is declining, that requires some serious investigation to see what happened and if the risk is worth it or not. The difference between a seasonal shift, a penalized site, or a fad losing steam is the difference between buying or walking away.
Most first-time buyers of online businesses should stay away from declining websites. You might not know what’s causing the decline and it’s difficult to “catch a falling knife”, as they say. It’s best to start with something more stable or trending upwards.
Good website due diligence involves many steps, including technical due diligence, and each step brings a different challenge to the table. Keeping your emotions in check when analyzing deals is critical and having a proper step-by-step framework to follow helps with that.