All You Need to Know Before Buying a Website – Part 1

website_for_saleAre you thinking about buying a website to get yourself off to the game faster? Make sure you ready my post before you buy a website so that you don’t waste your hard earn money on an internet property that is not what you’ve paid for. Everyday, many honest people like you will be scammed by scam artists who pretend to sell an established online property for a fraction of the cost. If you are new to online ventures, you need to understand the following before proceeding down that path.

Doing the due diligence correctly for an online property is much harder than buying a business in the real world. You are forced to believe the seller and majority of the time, the only from information that is supplied to you is by the seller. You need to do your homework and you need to be prepared to walk away if you are doubting yourself – you should trust your instinct first as always. I wish I have done that few times in the past. Yes even an experienced entrepreneur like me has a chance to fall into the trap as well. If something is too good to be true, then it really is too good to be true. There are hundreds and hundreds of experienced entrepreneurs waiting to gobble up a website when it comes to the market and if they are not competing with you to buy it, then something is wrong.

This post is not meant to discourage you from buying a website. The purpose of this post is to provide you with some key questions that you need to ask before buying an online real estate. I actually encourage you to go out and buy a website to give yourself a real boost instead of starting from scratch.

Verify the ownership

You need to be creative in doing this. Do whatever you want and ask all the hard question to make sure the website that is up for sale is actually the seller’s. You can use a whois tool to pull up the history of the registrant for the domain name of the website. This is only the first step. You can then verify if the domain registrant matches with the seller’s profile. If they are two different users, then you need to ask the seller to provide proof that he/she owns the website. I would encourage you to ask for proofs even if the whois information revealed the same information as the user. Verifying the ownership of a domain name can be tricky for some domain extension – the .com, .net and .org are prominent and easier to pull up the information. I usually stick to these three domain names.

Once you search the information for the domain name using the whois function, if you are not satisfied, you can ask for a phone number for the seller and call them to have a discussion over the phone. Many scammers will not provide you with their personal address or phone number.

Also make sure the website includes the domain name with it. You will be surprised that many times you will end up running into a website for sale advertisement that does not include the domain name where the website is hosted. This is a waste of your time and I would recommend that it is not worth it. Basically you are just getting a copy of a website!

All of this should provide you with some clue of the real nature of the website that you are about to purchase.

startupbooster_historyDomain Name History

Second thing you need to do is to verify the history of the domain name itself. Many domain names are banned from major search engines like Google or by institutions around the world because once upon a time, the very same domain name could have been serving adult content or been part of a malicious virus attack.

DomainTools for example will allow you to check the status of the domain name and if it has been blacklisted. It also allows you to check how many other websites are hosted on the same web server this particular website is hosted. This will give you a sense of the value of this domain name.

It is believed, and I do believe it, that older the domain name is, the most valuable it is. Now days it is hard to find a good domain name to register on your own. All of the good domain names were registered before the tech bubble and some were registered later. However, they are all gone. Therefore, getting a website with an older domain name speaks volume. It provides you with some history for the search engines, etc.

Understanding the Website – the Business model and revenue

Well you are about to embark on a journey by buying this website. Is this really going to fulfill your dreams? Ask yourself these questions and ask the seller these questions. Make sure you understand what you are getting into and make sure you understand what is up for sale.

There are thousands of websites up for sale at any given point in time. Some are just turnkey operations, others are semi-established and few are established websites. How do you understand the pitfall of what is up for offer? Well ask the owner to properly articulate on a one-pager what he is trying to sell you. Look away from his/her sales pitch and focus on the actual product. Ask the seller to provide you with their revenue projections and the history of revenue earned over the past few months/years.

If the seller is legit, they should be able to provide you with proof of income and proof of a business model. Please note, many sellers will send you screenshots of their payment history from their affiliate programs, Google Adsense or other forms of revenue. It is again hard to believe sometimes because that is all you get. If someone is willing to give away their website for $999 US when their proof of income shows that they can make that money within a few short months then you need to understand that this is a flawed sale. Usually I ask for their income proof for the last month and then I take the number and I multiply it by 12 to 18 months to actually get the value of the website. This should give you a sense of the value of the website and if the seller is really selling it for low, then there is something wrong with it. Trust me, if something is good, you will not be the only one looking to buy that website.

website_trafficConfirming the Traffic

Well I am sure you know by now that traffic is key to success when it comes to online ventures. So when purchasing a website, you need to make sure you do everything you can to verify the source of the past traffic and ask questions about the future traffic. Many sellers pull together a website and then they purchase website traffic from third party ad agencies to make it seem like the traffic is real and that the users are all real. If you go with what the seller is telling you, it won’t take you even a day or two to realize that getting real visitors to your site is the hardest task of running a website.

So make sure you go to sites like Alexa and verify the traffic history of this domain name. Then ask the seller to provide you with stats from their hosting company to show the daily and monthly traffic that comes to the site. Usually the seller will only provide you a high level report. Ask for the detailed report, like referrers, geography and other useful information about the traffic.

Once you do that, go to major search engines like Google and search for this site and see if the site has been indexed by the search engine. See how many pages are indexed in the search engine. In Google you can type to get all of the pages from the site that are indexed in Google. You can type in to get all of the external sites that link to this particular website. These two piece of information are very important to have. They tell you more about the site than what the seller can provide you with. These are real information and they speak volume. If a website is linked by hundreds of trustable websites, then it is worth it. If a site is linked by hundreds of fake ad driving warez sites, then you know that the business you are about to purchase is not getting the real visitors you need to sustain the website on the long-term.

This sort of information will help you identify the real traffic versus fake traffic.

Check for seller’s reputation

Okay now you have done all of the required due diligence on the website. Now for one last time, dig a bit deeper into the history of the seller. Where are you buying the website? Is it directly or is it on a website buy and sell storefront like eBay, sitepoint and or other forums? If you are buying from any one of the sites that I’ve provided as an example, you should be able to pull up the seller’s history of selling websites or other items in the past. This history is very important because you can learn more about the seller from other people’s feedback.

Making the Payment

Well now comes the difficult part. A seller will always have their preference in terms of how they want to get paid. Unless they have a good reputation, you should always argue to pay directly through escrow. This way your money will be safe if you don’t get the product you paid for.

Many scammers will not want to use Escrow. They will want you to pay directly using an online payment system like Paypal (one of the worst for digital products like a website). You will have to trust your instinct before making the payment. I have had personal experience with Paypal where a scammer took my money and didn’t give me the site he was selling. Paypal refused to take charge because they claimed it was a digital product and that they can’t track it down, which I think is rubbish for a reputable company like Paypal.

Ongoing Costs

You will incur many costs when running a website. First the basics – you need to understand where the website is hosted and where the domain name is registered. Once you find that out, you need to then ask the seller about the costs of hosting and for the transfer of the domain name. Make sure you understand all of the ins and outs of hosting and if there will be extra charge should you wish to move the website to another hosting provider.

I could get into many other “cost” related items. I am going to save that for part two of this post. You will be surprised that there are hidden costs of almost everything that I’ve outlined about. Make sure you read the second part of this post as well.

If you have personally been a victim of a scam and would like to share your experience with others, please send me an email. I want to include your story in my future posts and share it with my readership.

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{ 15 comments… read them below or add one }

Jim July 19, 2009 at 5:51 pm

Wonderful post and a great story to share with new folks that are entering the market. I am new to your blog but expect to see me often. Jim

Sarah July 19, 2009 at 8:56 pm

Thanks for the post. Good info.

Guest July 19, 2009 at 9:39 pm

I was burned twice in the past. Great post and you say it as is. Good post for beginners to read. Looking forward to part 2.

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