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Home > Tools and Resources > Ask the Expert > Due Diligence of Online Businesses

Due Diligence of Online Businesses

By Richard Parker | Diomo Corporation
Contact Richard Parker | Visit Website | About The Author

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Question:
Hello Richard. I purchased your course last December and it's been very helpful. In my area (Seattle) the business listings have been terrible for the last six months. To combat that, I've decided to expand my search to relocatable online businesses. My question, how do you perform a proper due diligence with something that's as intangible as online businesses?

Answer:
Great question and you'll be pleased to learn that performing the due diligence for an online business is basically the same as a bricks and mortar one at least from a financial perspective. The numbers are the numbers. The critical components are in the actual operations of the business investigation to be certain that any software being used is licensed, if it's an e-commerce enabled business that you'll be able to secure the same terms from credit card processors, that they have proper ownership of the domain, that you can readily operate the technical side of the business (website maintenance, changes, etc). Also, depending on the nature of the business, is there a programming element that the seller has that you may not be able to work with? Who handles the website? What does the owner do everyday?

The other thing to be careful about is the non-compete. If it's a business with a low barrier to entry, then you will need a mechanism to be sure that the seller does not compete with you. The problem is that an online business can operate discreetly from anywhere and the last thing you want is to chase the former seller for having allegedly breached the agreement.

On the other hand, online businesses can be phenomenal. The best thing we ever did was to convert our business into an online venture. It's the ideal business model: high margins, no inventory, no receivables, few employees and best of all: the world is your market.

If you'd like to speak me with directly, because you are a Diomo client, please email me at the address in your original order receipt or through the contact page on our website and we can set up a phone call together.

Get more expert advice in Richard Parker's How To Buy A Good Business At A Great Price - the most widely used reference resource and strategy guide for buying a business.

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About The Author
Richard Parker is the author of: How To Buy A Good Business At A Great Price, the most widely used reference resource and strategy guide for buying a business. He has purchased ten businesses in his career and has helped thousands of prospective buyers worldwide learn how to buy the right business for sale. He is also founder and President of Diomo Corporation - The Business Buyer Resource Center.

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