Blog Due Diligence Ultimate Buyer Due Diligence Checklist for Online Businesses

Ultimate Buyer Due Diligence Checklist for Online Businesses

Buying an online business is exciting and potentially profitable—but it’s also one of the riskiest investments if proper due diligence isn’t performed. Whether you’re a first-time buyer or a seasoned digital entrepreneur, understanding exactly what you’re acquiring is crucial.

This guide walks you step-by-step through the complete buyer due diligence process, including tips, tools, and best practices for verifying a website’s legitimacy, revenue, traffic, and intellectual property.

🧭 What Is Due Diligence?

Due diligence is the process of verifying that an asset is as it’s claimed to be. In the context of online business acquisitions, this includes:

Confirming revenue claims
Validating traffic and user engagement
Ensuring the business operates legally and ethically
Verifying intellectual property and technical assets

At Flippa, we offer full-scale due diligence services, but you can also perform thorough checks yourself using this comprehensive checklist.

🔍 Step 1: Understand the Business Model

Before diving into financials or traffic reports, you need to understand how the business actually operates. Ask the seller:

Is it eCommerce, SaaS, affiliate marketing, or content-driven?
Does it require inventory or dropshipping?
What is the daily/weekly time commitment?
What technical skills are required to operate the business (e.g., WordPress, Shopify, coding)?
What are the primary monetization methods?

Understanding these basics will help you determine whether the business fits your skills, resources, and goals.

🧾 Step 2: Verify Domain and Ownership

WhoIs Lookup

Use whois.domaintools.com to check the domain’s registration history.
Review changes in domain ownership, IP address, hosting provider, and registrar.
Multiple changes within a short period (+/- 3 days) may indicate red flags.

Hosting History

If the domain is privacy-protected, examine hosting history.
Verify that ownership and infrastructure have been consistent over time.

🤝 Step 3: Get to Know the Seller

Building trust with the seller can make due diligence smoother.

Check social media and LinkedIn profiles for the seller’s business history.
Ask about reasons for selling, past performance, and future growth ideas.
Request a conference call or screenshare to answer detailed questions.

💡 Tip: An authentic seller is transparent, confident, and willing to provide supporting data.

⚙️ Step 4: Investigate Business Operations

Understand who performs which tasks, their time commitment, and technical expertise.
Review the standard operating procedures (SOPs) for the business.
If there are employees, understand their roles and how they contribute to revenue and traffic.
Ask about outsourced services and their costs.

📝 Step 5: Check Content and Plagiarism

Use Copyscape to ensure content is original.
For blogs, check a sample of 5–10 articles for plagiarism.
Confirm that the website uses white-hat SEO techniques.

🏛 Step 6: Verify Establishment and History

Use archive.org to check the website’s historical snapshots.
Look for large gaps in archives—they may indicate downtime or domain parking.
Check the site’s robots.txt; if archive.org is blocked specifically, proceed with caution.

🔒 Step 7: Legal Protections

Non-Compete Agreements

Ensure the seller agrees not to compete in the same niche for a set period (typically 2–3 years).
Negotiate if necessary, especially if the seller owns similar sites.

Trademarks

Check for trademarks on business or domain names.
Verify that the domain doesn’t infringe on existing trademarks (e.g., iphone7.com would be problematic).
Resources:

💵 Step 8: Financial Verification

Refund/Chargeback Rate

For eCommerce, refunds/chargebacks should generally be under 2%.
Ask for a trend analysis to ensure this isn’t a recurring problem.

Revenue Accounts

Verify that payment accounts (PayPal, Stripe, etc.) can be transferred or replaced easily.
For subscription models, confirm how current subscribers will transition to the new owner.

Taxes

Confirm the business has properly filed taxes.
Any discrepancies could create future liabilities.

TTM Financial Trends

Review Trailing Twelve Months (TTM) revenue trends.
Investigate sudden spikes or drops in revenue to understand causes.

📊 Step 9: Traffic and Analytics

GA Access

Request read-only access to Google Analytics for full visibility.

Traffic Sources

Verify that organic, referral, and paid traffic sources are legitimate.
Cross-check revenue per visitor with the business model.
Watch for unusual referral traffic or potential paid bot traffic.

Visitor Engagement

Evaluate bounce rates, session duration, and returning visitor percentages.
Extremely low or high engagement may indicate tracking errors or fake traffic.

Paid Traffic

Identify any paid traffic campaigns and confirm associated costs.
Assess sustainability and ROI.

Traffic/Revenue Countries

Verify that the locations of traffic sources align with customer base and revenue.

💻 Step 10: Technical Operations

Ensure all platforms, plugins, and software licenses are included in the sale.
Verify that source code is clean, functional, and transferable.
Confirm transfer of all domains, email lists, customer records, and product assets.

🏆 Step 11: Intellectual Property

Confirm ownership of website content, proprietary tools, or unique technology.
Include clauses in the sale agreement to secure intellectual property rights.