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WES S02E05: Initial Website Evaluation

Justin Cooke April 12, 2016

Subscribe to our VIP LISTContinuing along with our Season 2 buyer series, we’re following up on last week’s episode regarding where to find websites to purchase with the next step in the process – a way to quickly determine whether a site is right for you or not.

Instead of putting a ton of hours into due diligence up-front, it’s better to create a framework that allows you to quickly and easily determine whether a business is a “go” or “no-go” right from the beginning.

We dig into our process for the initial website evaluation in this episode with the hope that you’ll walk away with some tips that will help you build out your own framework.

 

Just a reminder – if you’re liking this show please make sure to stop by iTunes and leave us a review! We’d really appreciate it and will give you a shout out on an upcoming episode!

Listen To The Full Interview:

What You’ll Learn From This Episode:

  • Looking At The Seller
  • How Do You Consider The Niche?
  • A Quick Dig Into The Website
  • Digging For Discrepencies

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Featured On The Show:

 

Ace Chapman:                   This is that initial evaluation just to decide is this worth taking my time to dig in further?

Speaker 1:                           Buying and selling businesses just got a lot easier. Welcome to the Web Equity Show, where thousands of successful entrepreneurs go to learn about buying, growing, and selling online businesses. Your hosts Justin Cooke and Ace Chapman share their real-life advice, examples, and expert interviews to help you build and grow your own online portfolio. Now to your hosts, Justin and Ace.

Justin Cooke:                     Welcome to the Web Equity Show, I’m your host Justin Cooke, and my co-host Ace Chapman will be on with us a little bit later as we get into the episode. This episode we’re talking about initial website evaluations. Now in the last episode we went over the different marketplaces you can use, and the different methods you can use, for finding sites. Where you can go to find them, how you can find them, that sort of thing. Today we’re gonna start taking a look at those sites.

                                                Now, you would think maybe the next step is due diligence. Start digging into the listing, and the guts of the deal that’s for sale. But that’s actually not what this is about. The idea here is to quickly scan to determine whether or not a listing might be a good fit or a bad fit for you. With this process we really want you to be skeptical. You’re looking for reasons to say no to deals, and you’re looking for reasons and ways to say no to deals quickly. Now, if you spent all of your time just jumping right into due diligence here, once you found a listing that seemed okay, the problem is you spent hours and hours on doing due diligence on sites that probably aren’t a good purchase for you. What we want you to do is to put some processes in place that help you determine, a quick scan, a quick look, at whether these are even worth it. Ultimately you want to find a way to quickly say no to a deal and be able to move on.

                                                Now, every once in a while, when you’re doing this process, you’re gonna skip a site, you’re gonna skip another listing, skip another business, and you’re gonna find one that you want to start digging deeper in, and that’ll be when we get into due diligence. We’ve got a great episode coming up on due diligence that you’re absolutely not gonna wanna miss. But this is just to give you an initial website evaluation just to find the targets that are worthy of due diligence. Once you do this, you go through 10, 15 sites, you find one or two that make sense, and you can actually start your due diligence process. The goal of this episode is to show you some fundamentals and principles that you can use to scan and review these websites for sale, in the hopes that it’ll help you find something that you can actually dig into and sink your teeth into. We’re gonna get into that in just a minute.

                                                Alright as we mentioned at the top of the show we’re looking at initial website evaluations. We’re really looking at this through four different sections. We’re looking at it through the seller, through the niche, through the site, and then the listing documentation, all the documents that are included with the listing. I think the best way to consider this is this is kind of your pre due diligence step. You’re not in due diligence yet, and you need a way to sort and sift the deals that are both legitimate, and the deals that are a good fit for you for potentially purchasing. Like specifically for your needs. We have methodology that we think we can share with you that will help you funnel those deals down. Now, if you spent hours looking at every deal, all the documents on every deal that came across or that you found, it would take you forever. You’d never get a deal done, right Ace?

Ace Chapman:                   Yeah, the thing with the going through an initial evaluation is you wanna be able to do it in massive numbers. The mistake that a lot of buyers make is trying to do due diligence at the very beginning stage, and it’s not really the time to be doing due diligence. We’re gonna get into that later. This is that initial evaluation just to decide is this worth taking my time to dig in further?

Justin Cooke:                     Yeah, and I think taking a skeptical look across all these four main issues will give you a great reason to decline to dig any further. That’s really your goal here, and that sounds … maybe I sound a little negative, or a little not-so-positive here, but that’s the idea, is you want to dismiss sites. So you’re looking for reasons that it doesn’t fit your model, and the profile of the type of sites you should be looking at. Let’s talk about the first one man, and the first one I love, and I’ve learned this through other business experiences I’ve had, is to look at the seller. There are three main points I want to make here.

                                                The first one being is the seller a real person? Do they have a real name? Do they have a real identity? Are they a real person? Do they have a longer standing email, or is it justincooke9865@yahoomail.com, you know what I mean? Do I seem like a legit person? Do I have real social media with real friends and people commenting on my stuff? Am I legit? I’ve found this is a good requirement in doing business with anyone. With my outsourcing company, previous companies I’ve either worked at or owned, if I can’t verify the other person’s identity, whether it’s a partner or potential partner, or anything, then I have to chop it off. The reason is, every time I’ve gone down that rabbit hole with someone who I can’t identify, or who is not willing to give me more information about who they are, it’s always a waste of time.

Ace Chapman:                   Yeah. Part of it is the fact that you’re doing the due diligence check, and you wanna just make sure hey, this is a real person, it’s a real identity. It’s not somebody who’s like sitting behind a screen behind a username, that you don’t have any idea who they are. The other side of this is you’re able to build a relationship with that person. When you’ve got their LinkedIn, and you connect with them there. You can connect with them on Facebook. It’s a powerful thing just to be able to be friends with that person, so that they’re more willing to help you once you buy the business. It’s a due diligence check, and then it’s just helpful when it comes to running the business.

Justin Cooke:                     Yeah, I think ultimately that’s become a lot more important, especially as you get further down and start to make offers, and start to work out a deal. Those things become critically important in some cases. So yeah, first thing is just are they real, can you verify them? I think the second thing is is this person reasonable? Obviously this is somewhat subjective right, but do you think you could work with this person on the turnover of the business? Would they be a decent person, if there was some kind of dispute or problem that arose? What does their character look like? That can be difficult in a 15-minute intro call, but one of the ways you can do it is look at their emails, look at how they wrote the listing up. If it’s on Flippa or something like that, look at the comments they’ve made to other people, or other things they’ve written or said about the business. I think that can be really helpful in determining if it’s someone that you do want to work with, because there is gonna be some amount of work that you’re gonna have to do. Some businesses require quite a bit of work. It may be months that you’re dealing with this person. Do they seem like someone that’s reasonable that you can work with?

Ace Chapman:                   Yeah, and this one really ties in with the third one, which is doing that gut check. Is it someone you want to work with? When you’re determining whether they’re reasonable or not, that’s a very subjective thing. Part of it is do you guys both see eye to eye? There are some people that really don’t mind dealing with somebody that I might consider to be unreasonable. So that gut check is really important. You’re gonna have to work with these people. There’s no such thing as just doing a transaction and never talking to them again. You’re gonna have to interact. You want to do that gut check and just decide is this somebody that I want to do this deal with?

Justin Cooke:                     Yeah, so if you’re looking for kinda the 80/20 here, because you could go … in terms of deep diving on how real they are, you could spend hours on that. That’s not the idea here. In terms of 80/20, are they using a real name? Do they have a real email? Do they have some level of social media presence? It can be a quick check. Are they reasonable in their comments? Are they reasonable in the initial phone call? Then your gut check, like does this seem like someone you think you could work with.

                                                Alright man, moving on to the second point, and this is really important. I think it’s really important to consider the niche. The first question you should ask yourself is am I comfortable with this niche? What I mean by comfortable, is this something I would like or enjoy to be in business doing? I mean ultimately this isn’t, generally, a completely, totally passive thing. It’s not like you’re putting your money in, and a few years later you’re pulling your money out, you’re gonna be involved in this business to some varying degree or another. So it should be something, I think, that you like or have some interest in.

                                                It should also be something that you don’t have a moral or ethical issue with. Let’s say it’s some like fat loss pill or something, that you think has questionable viability, or you’re like pretty anti second amendment, and you’re selling bullets for guns. That might not be something you’d be comfortable with. Or, something that’s not pornographic, but is skimpy kinda outfits, and you’re like ah I don’t want to work on this site with my kids playing in the background, like it’d just be uncomfortable. You need to think about these moral and ethical things, and I think that’s a good check for you to push it through.

Ace Chapman:                   Yeah, when it comes to the niche itself, one aspect of it is your own issues. Like if you’ve got moral or ethical issues. Also, is it something that you’re gonna want to work on, that you’re not gonna have to like pull yourself out of bed to spend time on your site? The other side is is it a good niche? Is it something that’s gonna last? Is it a fad? Is the seasonality in income gonna put you in a crunch trying to manage and run the business? When I’m looking at a niche I wanna just know that it’s something where there’s a lot of money floating around on the internet in that niche, it’s something that’s gonna be around for a long time to come, and you’ve got multiple income … not streams, but multiple ways to monetize the website. If you’re in a niche where there’s only one way to make money, it’s from one affiliate network let’s say, that can be a very dangerous thing as well. I like to just have a niche that, to put it in a word, is robust.

Justin Cooke:                     Yeah let’s talk about that Ace, and get a little more specific. I think there are some clear examples we can talk about right now. The hoverboards, right, we were talking about this right before we got on the show. Hoverboards, and it probably depends on when someone’s listening to this, but hoverboards, those are those little things you can hop on, they have two wheels, and they cart you around, scoot you around. They were getting really, really popular, up until just recently, where there were some problems with them catching fire, blowing up, that kind of thing. Not all of them, but some of them, definitely. There’s been kind of the question, in terms of like how strong that niche is. It’s been growing like crazy, there’s a whole bunch of people making money in the space, but is that gonna last? Just recently, Amazon shut down your ability to sell hoverboards on their platform. That’s, I’d say, a big mark against the niche, the industry. So if you’re looking to buy a site like that, that concerns you, that’s not something you want to get involved in, and you take a look at that. At least potentially take the multiple down on a niche that may have problems.

                                                Another one might be, and we were talking about this, e-cigarettes. There have been some problems with e-cigarettes and some legal issues. I think marijuana is probably another good example of that. Do you want to get in that space? Both moral or ethical reasons, but I think even another reason is the legality of it. Where’s the law gonna go? It’s just a riskier space, so you need to at least know that niche is risky, and you’re getting into it. I wanna ask you a question Ace, going back really quick, are there any niches or industries that you’re on the bubble on? Like that are questionable to you in terms of a moral or ethical issue?

Ace Chapman:                   One of the deals that we’ve been considering is that whole e-cig space, and vapor space, and obviously it’s a little bit on the edge. I’m not a big fan of just cigarettes, personally, or even nicotine, and just all of those things. That’s one of those where there is a ton of competition in the space, but there’s definitely a lot of money being spent. That’s one where we’ve kinda been on the edge. It’s not something where there’s a clear, concise, like no I’m against this because of this, or no there’s so much competition in this space that it doesn’t make sense. I know guys that are even starting right now, and scaling up in that space. So some things are easier than others. I mean you talk about the hoverboard. My biggest problem with the hoverboard, Justin, was the fact that it didn’t hover.

Justin Cooke:                     Yeah, you’re expecting that Back to the Future board, you’re like what kinda crap is this?

Ace Chapman:                   Yeah this isn’t a hoverboard.

Justin Cooke:                     It’s not even close. This isn’t what they promised me.

Ace Chapman:                   [inaudible 00:13:06].

Justin Cooke:                     Yeah for sure man. I have some issues, I was thinking about this, I have some issues with some of the stuff in the medical space, that makes claims that might be a bit aggressive, or that my BS detector looks at and starts ringing. I’m like yeah, no, not so great. If you’re like that as a buyer, then kind of staying away from those niches, or if it’s on the bubble, digging into it a bit more to see if it’s something that would be accessible to you. Maybe it’s on the bubble and you look at the content and the way it’s described, in terms of the product that they’re selling, and that’s acceptable to you, versus maybe it’s not. That’s something you can look at.

                                                The other thing is … so you talked about will that niche or the industry last, and I think there are some questions there. The other thing to look at, is the niche expanding? Or is it in a bit of a decline? I think you can take this into account by, again, you might bake it into your multiple in terms of evaluations. To give you an example of a niche I think that is expanding, that looks really promising, is all the baby boomers are getting older, and so there are a lot of retirement homes, retirement communities. I think that whole industry is gonna do really, really well, at least for the next 10, 20, 30 years. I think there’s gonna be a lot of money in that. I think if you did review sites, or there were some like lead-gen sites in that space, I’m bullish on that industry. It’s something I’m really interested in. I think the nursing space, the nursing education space, I think is really … I’m bullish on too.

                                                So yeah, I mean I think taking into account whether it’s expanding or declining might help you make a quick decision on whether you’re in on that site or you’re out. That’s really what we’re looking for here right?

Ace Chapman:                   Yeah, and one of the things that it allows you to do is give the seller a really great deal. We’ve had a deal that’s in that exact space with nursing and healthcare, and helping them get education and jobs and all of that, and saw just huge explosion. It was on a really high growth trend when we bought it. That continued. We were able to double it and sell it, and we gave the seller an amazing deal. They were really happy with the deal. Then it turned out to be a great deal for us. When you’re looking at these deals, and it is expanding, those are great opportunities. We’ve talked about, like the example with the hoverboards. In a deal like that, you have to get it at an amazing price, with incredible terms, and all of that, to be safe in the deal, not be at a huge risk, and also just make it work monetarily. When you’re buying a business that’s in one of these spaces that’s expanding like crazy, you have the opportunity to give the seller what they want, and still turn it into an incredible deal for yourself.

Justin Cooke:                     Ace, give me an example of a niche or an industry that you think is declining, that you would probably avoid, or want a heavy discount on if you got into it?

Ace Chapman:                   One of the deals that we’re looking at is … it’s not so much industries as much as just spaces where … Actually you know one of the things that I think is gonna decline just because of the competition, is just T-shirts and things that are being promoted like crazy on Facebook right now. Those businesses are getting tougher and tougher. You’ve gotta look at it from the perspective of is the industry as a whole just gonna go down? Then the other side is is there so much competition, and it’s becoming so aggressive, that you have to stay at the cutting edge or it’s gonna just decline for you because everybody is doing it? Which, you know, it declines because it decreases the margin, it increases the amount you have to pay for marketing, all those things. So we’re looking at a deal, we take that into consideration as well.

Justin Cooke:                     I think it’s especially important Ace, in terms of competition and how saturated the market is, when you’re looking at paid traffic strategies. It’s definitely important in SEO too, if there’s a lot of competition it’d be hard to get on the first page, so that’s challenging. But with paid traffic as well, because that’s gonna cost you, it’s gonna cost you more to get less deals, where you’re gonna make less money, ’cause there’s just so much competition out there. That can be challenging, that’s a race to the bottom sometimes.

                                                I’m gonna put a caveat in there though Ace, ’cause you said if there are other people in there, if the market is saturated, that can be dangerous. I think though that a lot of first-time buyers or entrepreneurs sometimes see anyone else in the space, and they’re like ah, someone’s already done it. And like ah, someone’s already making money there, I missed my opportunity, I want to find that magical unicorn niche, where there’s no one there. Do you know what I mean? Here’s the thing, if there’s a couple people in the space, and they’re making money, that’s a good sign. You’re not saying that’s a bad idea Ace, that’s a good sign. You’re only saying when there are so many people in there that it is crowded. Let’s say your traffic strategy, the one that you know very, very well, let’s say SEO or whatever, it’d be virtually impossible for you, with your skills, to get on the first page. That might be something you’d avoid.

Ace Chapman:                   Yes. I think that is a very entrepreneurial-type thing, where it’s like I’m gonna come up with an idea that nobody else is doing. But you’re exactly right, there’s that balance. You want other people out there doing it, and quite honestly there have been deals that I’m scared to do because there isn’t anybody else out there doing it. It’s like, what’s going on? Why is nobody else making money from this? I love when there’s some really good competition. If I can buy a deal, it’s making money, it’s doing well, and then I see competition that’s like just doing really, really amazing things with their business, and how they’re marketing it, it maybe upsells, all that. Quite honestly that gives me a blueprint for the things that I can do to improve my deal. I’m not trying to come up with Tesla, or get to the moon, like I want to get a really great ROI on my investment.

Justin Cooke:                     What’s the matter with you Ace? You’re thinking too small man, you need to be thinking like Elon Musk. No dude, that’s-

Ace Chapman:                   I’m not Elon man, I am willing to admit that I ain’t got nothing on Elon.

Justin Cooke:                     That’s all crazy talk, I’ve seen people do that, whatever man. We’re doing real businesses here. Yes, his is a real business obviously, clearly, but that’s just fantasy land for most people. “I wanna be on my Facebook, but it’s gonna be business-y like LinkedIn, it’s gonna be part Twitter.” Okay dude. Good luck with that.

                                                Alright man, the third point we’re gonna look at is actually looking at the site. Again, with all these things, you wanna do as little as possible. Look at the broader, easier to find things, and see if you can discount it right away. Then you can kind of deep dive a little further. We’re gonna do the same thing when we’re looking at the site. This isn’t full on due diligence, this is just my initial kicking the tires look.

                                                The first one, it kinda depends on the type of site, ’cause there’s so many different monetization methods and types, that this is gonna be a little different depending on the site. But one of the things I would look at is would a normal or reasonable person find the content on the site valuable? If it’s an AdSense or Amazon site, it’s gonna be the written content. If it offers, let’s say, an info product or something, is it helpful, is it enticing? Is there good copywriting? Is it legit? Could I find someone reasonable who would like it? I think it’s important to separate out it’s not just whether you would like it, ’cause maybe you’re not that interested in the product, so you’re reading it and you’re like ah I don’t really care, that doesn’t really sell to me. But does it sell to an average, reasonable person that is interested in that? I think that’s important to look at. This is, again, initial inspection, this is kind of a gut check. You’re just looking for a reasonable amount of value. You’ll see some sites where you just look at the content and you’re like this isn’t even close to being valuable to anyone. It’s barely readable, it’s just not good. You know what I mean?

Ace Chapman:                   Yeah. Part of it is when the person comes in, does everything make sense? Is the content valuable? Does it make sense? Then are there places to improve? Then the other place that you’re able to improve is the process. What is the monetization strategy and how easy is it for a customer to come to your site and do what it takes for you to make money? So if that’s-

Justin Cooke:                     Yeah, when you talk about customer process, I mean that has to work. So if this site makes money, and it makes money however it is, whether it’s AdSense clicks, or Amazon affiliate links where people purchase, or there’s an e-commerce site where you can go through and actually buy and have the product shipped to you. Whatever it is, however it makes money, can a customer go end to end, through the process, and get the person paid? Are the ads displaying? Is a good example for an AdSense site. Are the affiliate links working? If I click on the link does it take me to Amazon or does it take me to some 404 page? Does the checkout process work? As a potential buyer just go act like you’re gonna buy something, put it in the cart, go all the way through the process and see if it actually works. In fact, if it’s a small item, buy it. Buy it and see, if it works it’s probably worthwhile.

                                                If you’re gonna buy that site, I mean this might be a little early if it’s expensive, but if you were considering buying the site you could probably just have the seller refund you, it’s not gonna be a problem, but you can actually check and make sure that it works. Can a customer ultimately go start to finish to get you paid? We’ve come across sites where that didn’t work. The seller is claiming that it’s making a certain amount of money. We go through the process just, you know, as a normal customer would or whatever, and we find out that the links were broken, that the cart wasn’t even working or attached, and we’re like that’s curious. That’s interesting. How is anyone giving you money for this site right now?

Ace Chapman:                   Yeah. Either one or two things happened. Either they’re not making as much money as they could, you know we saw a deal just the other day where we clicked on one of the products … there were only three products that they were selling, and one of the products, when you clicked it, it didn’t add to cart, like it just didn’t work. Either they’re not making as much money as they could, or it’s a scam, and they’re faking everything.

Justin Cooke:                     Well see that’s a really good point too, like let’s say they have three products. One of them doesn’t work. So make a note of that. That doesn’t mean it’s necessarily, like you’re out, if one product didn’t work or whatever, like it’s out of stock or whatever. But if you get to due diligence and you find that they’re saying that product accounts for X percentage of sales, or you see in the listing documents that product leads to X percentage of sales, and it doesn’t look like it’s usable, it maybe hasn’t been usable for a while, you found an inconsistency that is hard to look past, right?

Ace Chapman:                   Yes.

Justin Cooke:                     Cool man, and-

Ace Chapman:                   That’s a big part of the evaluation process. It’s just looking for those inconsistencies.

Justin Cooke:                     … The other one I’d say, when you’re looking at the site, is can you find ways to expand the site? With the one traffic strategy or two traffic strategies, whatever traffic strategies you know, or at least have intermediate skill with as we talked about before, can you add value? Can you expand the site in a way that would make you more money? For example, if I see a site and it’s all about, I don’t know, let’s say nursing education or whatever, and I see that they did a couple of states, a couple of cities, but they didn’t do a bunch of other cities and states that I think are important, I see an easy way for me to add value to the site. I can do some geo-targeting and look at those specific cities and states, and add more content, and get more visitors and ultimately more leads for a lead-gen site, for example.

                                                Maybe there are, if I see a site that’s selling dog leashes, and I see an opportunity to add cat leashes, or dog collars, or whatever, I see parallel [inaudible 00:24:54] industries that I think I can add on that I can add value to, and the customers there would appreciate, that’s interesting. If I’m a conversion rate optimization person, I see looking at the site that it’s clearly not laid out, that’s clearly not a conversion, a CRO person that’s done this, then there’s opportunity for me. You want to think about your skills, and how your skills would apply to this site in particular, and see if there is upside for you as a buyer.

Ace Chapman:                   Yeah, if you can go into a site, just like we were talking about earlier, and instantly grow it, basically what you’re doing is buying that business at a discount. If you can buy it at a two multiple, and instantly double the size, you really bought it at a one multiple. After you look at the site and consider all these things, [crosstalk 00:25:41] start to get-

Justin Cooke:                     Hold on Ace, sorry but I had a quick question for you. I was wondering, when you’re working with a client, and let’s say that they are not great. You’re working with a client who wants to buy a site. You have a client that’s not great at paid traffic, they’ve never done AdWords before, for example. You find a site that would probably be a good fit for them. It’s smallish, it’s like 60, 70 000, and it’s not one where you can just hire a specialist or whatever, probably not making enough to do that. Would you have them learn AdWords? Like is that something you would have them do? Or is it something that you would say nope, that’s not a deal for you, I’ll find that for another client? Let’s find a site that better matches your skills.

Ace Chapman:                   So every situation, every individual, is different. One of the reasons that we try to build a strategy around a particular person is because of that. You may have the person that is really interested in learning, but they’ve got a full-time job, they’ve got a family, they’ve got kids playing sports and all that stuff. It’s just not reasonable for them to be able to take over the site, be able to dedicate a little bit of time to actually managing it, and to be able to dedicate time to learning it at the same time.

                                                Now, if that’s not the case and they do have time, we do plenty of deals where we’re like hey, here’s the best resource to go and learn this, but we also want to make sure on those deals we’re checking out that seller, we want to know for sure. We’ve had negotiations before where we’re really focused on how much time the seller has available. It’s not their willingness to train, but how much time does that seller have available to train the buyer? In addition to the willingness, because if we can get that seller to train them, they can go and get a foundation of knowledge. Those two things combined we’ve had a lot of success with. They’ve been able to come in and run the business successfully, despite inexperience.

Justin Cooke:                     That makes sense, ’cause we’ve done deals with you, and you brought buyers to the table where there’s like 30% hold back, based on 30 days of training, or 60 days of training or whatever, and so that makes sense. You bring a buyer in that does want to learn, wants to make sure the seller is gonna be there to support their learning, and that’s kind of the leverage that you guys hold. Just make sure that training happens, and the seller does have time, because it’s easy to say oh I’ll give you plenty of time, and then deal’s done, it’s like I’m done, I’m out.

Ace Chapman:                   Yeah. We like getting specifics, and this is a tip for some of you folks, there will instantly say like, “Oh as much time as you need,” and it’s like no it’s not as much time as I need, because if I decide I need like 24 hours a day you’re just not gonna do that. Let’s dig down, let’s come up with some specifics. What’s reasonable? What’s your schedule like? What’s the timezone? It’s all those real specifics that you have to understand the reality.

Justin Cooke:                     Yeah man, we’re in the weeds a little bit with this one, but I don’t mind, it’s interesting. There are times, you think well the seller wants to get the deal done, and then at the end they are … they’ve been paid, they want to walk away. I don’t think that’s normally the case. I think normally when the seller’s promising training, they really do want to do that. They do want the site to go into good hands, and they want it to go to the right people or whatever, but then after the deal’s done it’s kinda like okay, well, you’ve got your training, let me move on. It’s like after you’ve sold the deal, the deal’s done, you’re kinda like okay, I’m out. Now, a lot of the sites don’t require that much training, so it’s not that big of a deal, but for the ones that do I think that’s important.

                                                Alright man, let’s look at the fourth thing. This is looking at the listing documents. I actually think, we mentioned the three other ones because you can take more of a cursory glance at those, this you have to dig in a little bit, but it’s still pretty cursory. We’re gonna talk about, again, 80/20, focusing on the easiest stuff to look at. Remember we’re taking a skeptical approach to all this stuff. The first thing we looked at is are there any inconsistencies in the traffic and earnings? All you’re looking for here are just numbers that don’t match up. If they say in the listing they made X in February, and they made Y in February based on the actual earnings screenshots, that’s a problem. That’s something to document. Depending on how big of an error it is it may be something to walk away from right then. If you’re sketchy on the numbers or you think the numbers are sketchy, it may be reason for you to just walk and move on to the next one, right?

Ace Chapman:                   Yeah, when you’re getting that documentation, in any site you’ve got a lot of different things that you’re gonna get screenshots of. It’s like the earnings, the traffic, there’s a subscription site, you’ve got the customers, or their mailing list size. All of these different things. Sometimes it can be a little bit overwhelming, but the important thing is trying to match things between them, to see if there are inconsistencies. When it comes to revenue, for instance, you want to get the initial documentation, but then you may wanna log in to the admin later, or get actual documentation from the merchant account, and see okay, does this match up? Because any of those discrepancies there could be a sign that there may be something a little weird going on. I know you guys do some of this, as you’re looking at deals as well Justin.

Justin Cooke:                     Yeah I look at this … They have the initial documentation out there, and as you get further down the deal you just keep a note of it, you have the documents with you. Ask for something. Ask for something, for example a screenshot that’s a slightly different date range. Ask for this range or that range, and then see if that exact screenshot matches up with the other ones. If it doesn’t then obviously there’s a problem. You’re asking for additional documentation to purposefully catch an error that they’ll make. It’s trying to lay the trap, so to speak, and get them to send you information that’s clearly wrong. Sometimes it’s an honest mistake because they’re dealing with lots of numbers, something’s a little off, but sometimes it’s not. Sometimes they may be trying to pull the wool over your eyes. We’re talking about the profit and loss. Sometimes you can see okay, what’s this exactly, and okay well let me see the other month, and you can start to find inconsistencies that you can document, and at least dig into later.

                                                One of the things with these types of sites you’ll see too, Ace, is sometimes these sites have been listed before other places. So it always kind of makes sense to do a Google search, and see if the site was ever listed on Flippa, for example. So let’s say I’ve got all the documentation in front of me, I’ve got 12 months of documentation. I do a quick search, I see that it was listed on Flippa, say six months ago. I look at my current documentation, let’s say earnings, or traffic, month by month, and I see how those earnings match up with the listing they had previously. If they’re completely off in April on this documentation compared to the one in the other one, that’s a big problem for me.

Ace Chapman:                   Yeah. One of the things that I like is actually if the site has sold once, and, you know if it was listed once and it actually did sell once, and then that person owned it for a long period of time, you’re getting two different people’s perspective. You’re getting two different people that were running the site, and that can be a really strong thing. It does get a little concerning if it was listed before and it didn’t sell, and then especially if you add any inconsistencies on top of that. That’s something to consider as you’re looking at that listing that may have been out there before.

Justin Cooke:                     Yeah, it’s interesting too, on Flippa for example, or on other places, sometimes there are comments. So if you open the comments and they’re saying oh yeah here’s how I did link building, and then they’re saying in the new listing oh no I did link building this way, again looking for that inconsistency. That’s a good one actually to walk from. If you caught them in a clear lie, in terms of what they said previously and what they’re saying now, that’s a good time to walk. At least keep that in your head and make sure to ask very directly and purposefully about it.

                                                Alright man let’s do a wrap up on this episode. Again, I think it’s really important to remember that this is the 80/20 stuff, you’re taking a skeptical approach to all these listings, and you’re really looking for a formula that allows you to quickly dismiss listings that don’t fit the bill. That could be fitting the bill for you personally, fitting the bill for sites in general, your expectations. You want to look for things that can immediately make you pass on the deal. You’re looking at a lot of deals at this point. You haven’t moved them down the funnel. Now, as these sites start to look better and better, and they pass this checklist of things that you’re testing them against, then you can spend more time. If they pass everything else, and you’re finally getting to the documentation phase, you might take a little bit longer there, and make sure … It’s okay, because they’ve already gotten so far that you’re willing to take it a little further. Now you start to head into due diligence, and that’s something we’re gonna take a look at in the next episode.

Ace Chapman:                   Yes. Knowing your system, having a process, and not just feeling your way through the dark, gives you a lot of power as a buyer.

Justin Cooke:                     Yeah, I think it’s worth creating a spreadsheet, or a checklist, for yourself until you get this down. Remember, a lot of this is gonna be personal to you. The steps that I take, in particular, with my skillsets and my interests and my moral or ethical issues, are gonna be different than yours. So this is gonna be somewhat personal, but I hope that this is a fairly good guideline that you can use to help you complete that initial website evaluation and find yourself a winner that you can move forward with.

Speaker 1:                           Thanks for listening to the Web Equity Show. Now is your chance to be a part of the action. Go to www.webequityshow.com/gift, and send us your business acquisition or exit question, and have it answered on the show.

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