A new verification & assessment service offered by Flippa.
Due Diligence Includes:
- Initial Consultation
- Seller Analysis
- Financial Analysis
- Traffic Analysis
- Sales & Marketing Analysis
- Operations & Legal Analysis
- Industry & Competition Analysis
- Pricing Analysis
- Risk Assessment & Recommendations
Buying a business is stressful, and there is some risk involved.
Our official Due Diligence Report provides deep analysis, insightful recommendations, and peace of mind. We combine our expertise with data from over 100,000 Flippa transactions to help you uncover the unknowns, identify problem areas and hidden risks, and assess the value of the business you are considering purchasing.
After an initial consultation, your dedicated expert will perform due diligence along eight dimensions:
1. Seller Analysis
2. Financial Analysis
3. Traffic Analysis
4. Sales & Marketing Analysis
5. Operations & Legal Analysis
6. Industry & Competition Analysis
7. Pricing Analysis
8. Risk Assessment & Recommendations
We highlight what the business is doing well, what could be improved, and pinpoint areas of risk. We show how the business stacks up against benchmarks, where it falls short, and even offer recommendations & guidance on next steps.
Every business has a story. Sit back & relax: we’ll find out what the story is, and tell you what you need to know.
Turnaround time: About 7-10 days.
- Phone call. We start with a 15-minute phone chat to understand your needs, goals, and focus areas.
- After the phone call, we’ll assign a dedicated team member as your point of contact.
- Personal details. We verify the seller’s telephone number, government-issued ID, and social media accounts.
- Duplicate accounts. Any duplicate or alternate accounts will be identified.
- Location check. Ensure the seller’s billing location & activated IP addresses pass our location check.
- History. What businesses have they bought & sold in the past? Do they have any other conflicting business interests?
- Other key employees. Who else is critical to business operations?
- Video walkthrough. Perform live, recorded walkthrough of primary revenue sources. Ensure there are no discrepancies or misrepresentations.
- Revenue verification
- Verify all revenue streams at the source. Review payments and confirm the flow of money from end to end
- Ensure revenue claims are accurate and match what the seller has claimed
- Uncover revenue-boosting & origination (payments from other sites or personal accounts to boost profits)
- Expense verification
- Trace expenses back to the source. Confirm the flow of money from the invoice back to the original bank or credit card transactions.
- Uncover hidden costs, including those which may be deliberately masked or “off the books”, such as staff or marketing expenses.
- Insights & benchmarks. How does the business stack up against similar businesses in the industry? Cross-check to ensure expenses are reasonable for the site and the industry it operates in.
- Tax returns. If available, we verify tax returns for the past 12 months.
- Traffic Sources
- Where does the traffic come from?
- What is the quality, sustainability, and dependence the business has on each source?
- Direct Traffic
- Is there any evidence of bot traffic?
- Referral Traffic
- Most prominent
- Most recent
- Top 10 indexed pages
- Organic Traffic
- Number of organic keywords
- Top 20 keywords
- Top 10 “non-branded” terms
- Paid Traffic
- Number of paid keywords
- Google Ad Traffic
- Unique visitors/month
- Pages per visit
- Avg visit Duration
- Bounce rate
- Backlinks & Referring Domains
- Number of backlinks & referring domains
- What websites are sending traffic to the site?
- Percent follow vs. no-follow
- Geography & demographics
- What countries/regions does the traffic come from?
- What is the persona of the typical visitor?
- Blacklists and penalties. Has the site ever had any known blacklists or penalties?
- Insights & benchmarks.How does the site’s traffic stack up against similar sites in the industry?
Sales & Marketing Analysis
- Top-sellers. Which items are responsible for the majority of sales, and how dependent is the site on these? Does inventory sell well across the board, or does the 80/20 rule apply? How easy or difficult is it to keep top inventory in stock?
- Average order value. What is the AOV, and how has it changed over time?
- Conversion rate. What is the conversion rate, and how has it changed over time?
- Customer Acquisition Cost. How much does it cost to acquire each new customer? (CAC)
- ROI by channel
- Which channels bring in the majority of sales?
- Which marketing channels are working, and which ones are not working?
- Uncover changes in ROI over time. Is the business getting more or less effective with ad spend over time? Identify the wasted ad spend.
- Revenue consistency. What is the holiday & seasonal effect? Is the revenue consistent over time, or is the business susceptible to wild swings? What causes them?
- Growth opportunities. What are the biggest unexplored or under-explored growth channels?
- Insights & benchmarks. How does the site’s ad spend, profit margin, ROI, conversion rate refund rate, and RPM stack up against similar sites in the industry?
Operations & Legal Analysis
- Time commitment. Full breakdown of the minimum amount of time it takes to run the business, and the true amount of time it takes to grow the business. Is the owner ignoring or glossing over anything?
- Efficiency opportunities. What is the owner spending too much time on? What opportunities exist for
- Skills required. What are the typical functions and skills required to operate the business?
- Legal analysis. What licenses are needed to operate the business? Are there any current or past lawsuits, patent infringements, or other hidden legal issues?
- Seller feedback. How is the business rated? Are there any active claims from BBB or other agencies?
- Violations and warnings. Are there any past or current policy violations or warnings the seller has not disclosed? Ensure the Seller is complying with Facebook/Google/Amazon policies.
- Mailing list validation. Verify email addresses in the customer mailing list.
- Geographic limitations. What potential issues could arise if the business were to be run from another location?
- Supplier contract validation. Validate contracts & pricing sheets with suppliers are up-to-date.
- Asset transfer risk. Identify potential issues with transferability/migration of business operations. For example, income tied to an account that cannot be migrated (PayPal), or domain names that cannot be transferred without a business license (such as .com.au domains).
Industry & Competitive Analysis
- Top competitors. Who are the top 5 competitors? Where does the business stand in relation to them?
- SWOT analysis. A breakdown of competitive strengths, weaknesses, opportunities, and threats.
- Trends. What are some interesting trends across the industry? Using data from Google trends, Glimpse, Exploding topics, and more.
- Industry analysis. Where has the industry been, and where is it headed? How does the growth rate compare to others? Is the site’s niche a “fad,” or is it evergreen?
- Fair market value assessment. Is the price reasonable? We perform a full pricing analysis based on:
- Standard multiple
- Median industry multiple
- Profit per 1,000 pageviews
- Profit per 1,000 uniques (RPM)
- Profit per 1,000 real uniques
- Profit per 1,000 real free uniques
- Comps. Where does the price fall in relation to similar businesses? What multiple have similar businesses sold for in the past?
Risk Assessment & Recommendations
- Risk Assessment
- Profit risk assessment. How likely is the site to continue earning profit? What are the risks?
- Traffic risk assessment. How much risk is there of the site losing traffic from each source?
- Sales & marketing risk assessment. How dependent is the business on the effectiveness of advertising in each sales/marketing channel? What are the biggest ROI risks?
- Operations & legal risk assessment. What are the critical operational & legal risks that could harm the business in the future? What risks are not critical, but are being ignored or downplayed?
- Questions to ask the seller. We summarize what you should specifically ask the seller, get further clarification on, and include in a Letter of Intent (LOI) or Sale Agreement.
- Negotiation tips. We tell you what levers you can pull, and provide tips for negotiating a lower price, if possible.
- Interest from other parties. How much interest does the listing have on Flippa? How do the views & watchers translate to likelihood of a sale. Should you make an offer before the auction ends? What is the risk of waiting?
Wrap-up Call. Finally, we’ll schedule a wrap-up call with you to go over the report, answer any final questions, and summarize all of your actions and next steps.