Red Flag Report
Recommended for price range
$0 – $ 30,000
The Report will be focused on identification of high-level risks and opportunities with presentation of limited financial and traffic information.
The Report will be based on data for last 12 months. Verification of provided data to source documents (invoices, bank statements, etc.) will not be performed.
Recommended for price range
$30,000 – $ 200,000
The Report will be focused on identification of detailed risks and high-level opportunities with presentation of enhanced financial and traffic information.
The Report will be based on data for last 24 months (please note that period under analysis will be subject of data availability). Information provided by the Seller will be checked with limited coverage against source documents (invoices, bank statements, etc.) This includes verification of selected sales and cost-related transactions for one month (approximately 5 sales and 5 cost transactions).
Recommended for price range
The Report will be focused on identification of detailed risks and opportunities with presentation of enhanced financial and traffic information.
The Report will be based on data for last 36 months (please note that period under analysis will be subject of data availability). Information provided by the Seller will be checked with enhanced coverage against source documents (invoices, bank statements, etc.) This includes verification of selected sales and cost-related transactions for three months (approximately 10 sales and 10 cost transactions). The Report will also included overview of the industry and key trends.
Who will be doing your due diligence?
Meet Stefan von Imhof. Stefan has a wealth of experience working with buyers and sellers of online businesses and has bought & sold over half a dozen online businesses himself.
|Personal details||Verification of the seller’s telephone number, government-issued ID, and social media accounts.||-||√||√|
|Duplicate accounts||Identification of any duplicate or alternate accounts.||-||√||√|
|Competing Business Interests||Verification if the Seller has bought & sold any business in the past and if he / she currently has other businesses.||-||√||√|
|Critical human resources||Identification of owners, employees critical to business operations.||-||√||√|
|Revenue verification and analysis||Presentation of revenue by sources (website being sold, Amazon account, Social Media Accounts, etc).||√||√||√|
|Verification of revenue streams to source documents, review payments and confirm the flow of money from end to end.*||-||√||√|
|Verification if payments were made from personal accounts to boost profits.||-||√||√|
|Analysis of revenue and margin by product, client, geography, if respective data are available.**||-||√||√|
|Analysis of seasonality, development, and recurrence of sales over the analysed period.||-||-||√|
|Expenses verification and analysis||Uncover hidden costs, including those which may be deliberately masked, such as staff, marketing expenses or work done by the owners, which is not included in costs (e.g. temporarily substitution of regular staff by owners, etc.).||√||√||√|
|Verification of expenses back to the source documents and bookkeeping records. Confirm the flow of money from the invoice back to the original bank or credit card transactions.*||-||√||√|
|Breakdown of expenses by type.||√||√||√|
|Analysis of seasonality, development, and recurrence of expenses over the analysed period.||-||-||√|
|Inventory analysis||Analysis of inventory structure, slow moving or obsolete inventory.||-||-||√|
|Identification of inventory depreciation and its impact on future earnings.||-||√||√|
|Profit risk assessment||Verification of business continuity and sustainability of profit level.||-||-||√|
|Tax returns||If available, we verify tax returns for the past 12 months.||-||√||√|
|Traffic sources||Verification of traffic sources.||√||√||√|
|Verification of the quality, sustainability, and dependence the business has on each traffic source.||-||√||√|
|Direct traffic||Check of the bot traffic.||-||√||√|
|Geography and demographics||Identification of countries/regions where the traffic is coming from.||√||√||√|
|Identification of the typical visitor persona, if possible.||-||√||√|
|Blacklists and penalties||Verification of the site blacklists or penalties.*||√||√||√|
|Traffic risk assessment||Verification the risk of the site losing traffic from each source.||-||√||√|
Sales and marketing Analysis
|ROI by channel||Identification of sales & marketing channels which brings the majority of sales. Identification of marketing channels which are working, and which ones are not working.||√||√||√|
|Changes in ROI over time. Assessment of efficiency of marketing costs over time.||-||-||√|
|CAC||Identification of the cost to acquire each new customer (CAC).||-||√||√|
|Average order value||Average order value its development over time.||-||√||√|
|Growth opportunities||Identification of the biggest unexplored or under-explored growth channels.||-||-||√|
|Sales & marketing risk assessment||Verification of dependency of the business on the effectiveness of advertising in each sales/marketing channel and identification of related risks.||-||√||√|
Operations & Legal Analysis
|Time commitment||Comments on the minimum amount of time it takes to run the business, and the amount of time it takes to grow the business. Areas of the business which were ignored or glossed over by the owner.||-||√||√|
|Skills required||Identification of the typical functions and skills required to operate the business.||√||√||√|
|Legal analysis||Licenses needed to operate the business.||√||√||√|
|Identification of current or past lawsuits, patent infringements, or other hidden legal issues based on discussion with the owner.||√||√||√|
|Business Rating||Identification of the typical functions and skills required to operate the business.||-||√||√|
|Violations and warnings*||Identification of 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||Verification of email addresses in the customer mailing list.||-||√||√|
|Geographic limitations for new owner||Identification of potential issues 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.||√||√||√|
|Operations & legal risk assessment||Identify critical operational & legal risks that could harm the business in the future based on the discussion with the Seller.||-||√||√|
Industry & Competition Analysis
|SWOT analysis||A breakdown of competitive strengths, weaknesses, opportunities, and threats. High level comparison of the business against key competitors.||-||-||√|
|Top competitors||Identification of top competitors.||-||√||√|
|Pricing Analysis||Fair market value assessment. Comparison of the ask price to similar businesses based on net profit multiple.||-||√||√|
|Comparison of the additional ratios (RPM, Monetization Efficiency, etc) of the Business to the market for better investment decision.||-||-||√|
Recommendations & Next Steps
|Recommendations & Next Steps||Summary of recommendations, list of additional information needed and list of issues to be resolved with the Seller before agreeing to purchase.||√||√||√|