Technical Website Due Diligence

Technical Website Due Diligence

This following guest post is written by Mauro Chojrin. Mauro works as a consultant and technical trainer, and is the CEO of Leeway, an IT consulting company.


What exactly are you buying when you buy a website?

When you buy a website you are in fact taking ownership of a few things:

  • A domain name (Or perhaps several)
  • A brand
  • Some pieces of content (Photos, texts, etc…)
  • A user/visitor base
  • A piece of software powering this all

There’s a bunch of verifications that can be done from the outside (Like looking at the WhoIs history, Establishment Claims and other concerns addressed in this post), but there’s a lot to be said about the last piece of the puzzle: the software powering this all.

If you can’t run some verifications on the software, it’s very hard to answer questions such as:

  • How costly will it be to update this website to fit my plans?
  • Will it even be possible to update?
  • How long will it take?
  • What kind of help will I need to pull this through?

It’s like buying a used car without even pulling up the hood and looking inside of it. Would you make such a purchase?

What’s to be checked?

First of all, you need to know the different ways in which a website can be built. The list is, of course, huge, but I’ll keep it simple to make my point. I’d say there are three classes of websites you can find out there:

  • Based on someone’s platform (e.g. Shopify stores)
  • Based on an established standard (e.g. WordPress sites)
  • Completely built from scratch

In the first case, there’s really nothing for you to do. Your technical risk here is pretty low (together with your action margin but that’s a different story). The only advice I’d give you here is to watch out for not being too comfortable playing in someone else’s backyard.

The second case presents a low to medium technical risk. What happens here is that there’s a possibility that the original tool has been customized in some weird way that could make it hard to improve upon (Not very common but can definitely happen).

One way to check for that would be to get a fresh copy of the version the site says it’s running and compare the files with the actual site code… it can be a little messy, but it will certainly save you from some trouble.

Basically, if you can check that the used version is up to date you don’t have much to worry about.

If this is not the case though… things can get pretty messed up.

Ideally, you want to have your site run the latest version available. In order to do that you’ll have to run through the migrations that are in place (At least to get to a version that can be supported by the hosting you’re moving the site into).

Now the third scenario is where the fun is (at least for me :)).

When you find yourself in position to buy a site like this (SaaS usually fall in this category but are by no means the only website type that can), you definitely want to pay special attention to a few traits. I’ll list them in descending order of importance and then give a few pointers about why I ordered them this way:

  1. What’s the basic technology behind it? (What programming language is the code written in)
    1. Is it using any kind of framework?
  2. How well is the code documented?
  3. What technology is being used for data storage?
  4. What dependencies with third-party services are in place?
    1. How well are those dependencies isolated from the core?
  5. How complex is the overall infrastructure?

Let’s dig a little deeper into each one.

What’s the basic technology behind the platform?

This is probably the most important technical check you can run. The same piece of software can be built using a big array of different programming languages. You probably heard of PHP, Java, C# or Python, but that’s just the tip of a very big iceberg. There are almost limitless possibilities to this. Of course, as in every other industry, and even though there’s controversy around which language is THE most used, the consensus is around PHP, Java, JavaScript, Python, .Net and Ruby being at the top of that list, so… if the platform is built upon any of these technologies there’s less of a chance finding developers to support its growth will become a major bottleneck.

How do you tell which language the site is built upon?

There’s really little you can do from the outside (Meaning, without reading the actual code). In the case of PHP (My personal field of expertise), one simple way to determine that is by looking at the URL. If you find something like http://www.domain.com/page.php, then there’s no doubt that PHP is involved (It may not be the only technology used, but it’s a start). Unluckily, the URL not showing .php doesn’t automatically mean the site isn’t powered by it (As a matter of fact, it’s a very good security practice to hide this kind of information from the outside).

So… if you really want to make sure, you need to get your hands on the actual code.

Once you got access to it it’s really easy to tell what language is being used, if it’s PHP the file names will end with .php, if it’s Python they’ll end with .py, if Ruby it will be .rb if you see filenames ending with .java you’re looking at Java code and so on.

This should be your first red flag. If you can’t map the source code to any of this popular languages, you may find it hard to evolve the software with any team other than the original.

Then there’s the question of version. Bear in mind that a programming language is also a piece of software (Technicalities aside) so, as any other software piece, it evolves over time, meaning new tools are made available to programmers in order to make their job more efficient, but, at the same time, some tools are removed.

You want to make sure the system is ideally built using the last stable version of the language, or at least not a really old one.

For instance, at the time of this writing PHP’s recommended version is 7.1 (7.2 is about to come out).

Many websites are still using 5.6 (Two versions behind) which is not terrible, but certainly is less than optimal.

Now the real trouble comes when you find a website built using PHP 4. This version is so old that even language developers are not supporting it anymore (Meaning it’s vulnerable to all sort of threats) and quite frankly, it’s hard to get developers on board to use such an outdated tool.

I’m not currently using any other language, so I’m not so updated on the look of the landscape for them, but I know for sure similar things must happen.

And now the big question… how can you tell which language version is being used?

Well… this is a tricky one. What you’re looking for here are pieces of code written using old methodologies (Especially those that have been removed from the language moving forward, Php.net has many articles on how to upgrade a piece of software written in an older version that can give you hints) or, better yet, uses of language constructs that were only made available in a particular language version.

Is it using any kind of framework?

A framework is a very handy tool for developers of any language. It’s a toolbox that sits on top of the language and provides out-of-box basic functionality.

So the first thing you want to check (after you know which language the system is built upon) is whether the code is written using a framework or not.

This is usually easy to do. Basically by looking at the main file. It usually contains some reference to the framework being used (If there’s one in place).

The risk of the application not using a framework (or using a custom one for that matters) is that there’s probably little to no documentation available (meaning the learning curve will be steep for new developers joining the team) and it’s very likely that the code base quality is not too high (Standard frameworks are developed and maintained by large developer communities which usually means fewer bugs since there are significantly more eyes on the code).

Within the PHP scenario, there are plenty of candidates, but the strongest are:

  • Laravel
  • CodeIgniter
  • Symfony
  • ZendFramework
  • Yii

In order to actually map the framework being used you need to read through the code (Probably a couple of files will do) looking for a reference to a framework. If you find it, it’s a good idea to check what the community around the framework looks like (You definitely don’t want to be backed by a ghost community like it happened to me when I had to maintain an application built using Limonade PHP, notice how the latest update to the project was done over two years ago… bad sign).

How well is the code documented?

Code documentation is often the most undervalued asset in software development. Very few developers want to be involved in it’s production but, at the same time, they wish the code was better documented when they have to return to it…

But what exactly is it? There’s basically two kinds of documentation:

  1. End-user (Like manuals, FAQs, etc…)
  2. Technical

The one that we’re looking for here is the latter. What you want to have is a set of documents that can guide a new developer through the implementation complexities and at the same time be a reference for existing team members for how to fix common problems quickly.

It doesn’t really matter the length or the format of the documentation (I personally prefer something like a Wiki system where every developer can make contributions, but that’s totally personal).

What’s important is that the documentation is accurate and updated.

How do you check that? Again, this is more art than science, but you can get a very quick feeling of how good (or actually bad) the documentation is by simply reading through a couple of random documents and trying to follow them.

You will immediately notice whether the writing is clear and if it’s up to date with the actual code.

What technology is used for data storage?

Nowadays, almost every website stores some kind of data (Mostly information about their users or their content).

There are many different tools that can be used to accomplish that, and the selection is neither trivial nor simple.

The basic principle is the same as before: when in doubt, fail in favor of the most popular technology.

I’ve been involved in several projects that used the cool new technology where the system requirements clearly dictated otherwise and getting out of that situation was nothing like a walk in the park.

The problem with brand new technologies (Sometimes referred to as bleeding-edge) is that they’re usually poorly documented and, because they’re so new, not too many people have experience with them, so getting help when you’re stuck can be tricky.

This off course depends on the expectations you have for your site. It’s ok to try new things when the stakes are low (That’s the only way we could ever move forward, right?), but if you’re looking at the main software for your business you want to be a little more conservative.

What dependencies with third party services are in place?

Fairly complex websites usually depend on third-party services to perform certain tasks. The most common is email sending and tracking.

There are some excellent vendors out there that make it extremely easy for a small development team to leverage these high-quality services and build them into their own applications.

But the flip side of this is that by using these services you’re actually creating a dependency on a piece of software that you don’t control.

There’s nothing inherently wrong with that… if you know how to protect yourself from updates that could be game changers for your application, which brings me to the next question…

How well are those dependencies isolated from the code?

This is probably the most technical of the checks I’ve been talking about so far, and in order to assess this, you need a mid to high level of technical expertise in the particular tools upon which the website is built.

What you want to make sure is that no external service is used directly by the website.

How complex is the overall infrastructure?

A regular website has a fairly simple infrastructure:

  • A web server
  • A database server
  • An application server

Which, depending on traffic and concurrency can well be fit into one single computer (physical or virtual) and thus be easy to keep up with.

As the application complexity and usage grows, infrastructure tends to expand as well (There might be a need for extra servers, load balancers, etc…).

The most complex the infrastructure is, the higher the maintenance costs and the risk of failure.

As a general rule, I’d say that if the infrastructure is far from the standard, the help of an expert is useful (Not only in determining the cost of maintaining it as is, but also the possibility of reducing it without losing quality).

In conclusion

The whole idea behind these checks is to determine:

  • How flexible the software is
  • How experienced will a technical team need to be in order to take over
  • How hard will it be to bring new technical resources ready to put their hands in and tweak or upgrade the site

That should give you an idea of what you’re getting into by investing on this website. The fact that all the red flags are raised doesn’t immediately mean it’s a bad investment of course if you can purchase it at a bargain price and have the technical resources to fix all those issues it could be a great opportunity, but it’s important that you don’t get any false expectations.

Is it worth going through all this trouble?

Going back to the used car analogy… if you don’t know your way around cars you better have a trusted mechanic by your side when you’re evaluating that shiny used car.

Failing to do so can put you in a very uncomfortable situation. I should know… I’ve been there myself (With the car, not the website!).


 Have any questions? Find me on Linkedin or post a comment below!

 

Full Video Interview with Joe Burrill, A Website Investor

Full Video Interview with Joe Burrill, A Website Investor

Ever wonder what it’s like to be a professional website investor? We recently invited Joe Burrill down to our Melbourne office for an exclusive interview on what it’s like buying and selling online businesses as a career.

Sidenote: Joe is the only person on Flippa to hold all three seller badges on Flippa: Gold star (for 2+ years of positive feedback), Super Seller (recognizes number of sales and the sale value), and Premium Seller (for selling multiple high-quality assets).

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How to sell a business for $300,000 on Flippa

How to sell a business for $300,000 on Flippa

Today we catch up with online entrepreneur Jeff Taylor, CEO at Devise Media, to discuss his experience founding a successful web development company as well as his $300,000 sale of FightState.com on Flippa. This interview is a must-read if you’re thinking about selling a high-value content site.

Tell us about your background as web entrepreneur.

I became involved with digital marketing over 7 years ago. I had a great job as a Business Intelligence consultant, helping the public sector make intelligent business decisions based on their data. I was incredibly fortunate to have been given the chance by the owner of the company. It was a great 5 years, the money was excellent, but something was missing, I just wasn’t happy. I decided to risk it and follow what interested me the most, which was creating and building websites.

I quit with no guarantees of succeeding. I think every entrepreneur has probably faced this decision at some point. You can’t be halfway in. I started a Web Design firm that focused on building websites for local area businesses, and then from there expanded to providing digital exposure and marketing services for client websites. I soon realized that client work is like having hundreds of bosses; that’s when I made the push to create digital assets to earn revenue for myself.

What is your education/employment/career background?

College is expensive and I didn’t want to take out massive loans to get myself in serious debt, so I joined the U.S. Navy to pay for college. It was an amazing experience, I was able to travel the world, and learn so much about other cultures and countries. I still talk with a bunch of the people I served with. All amazing people. The irony of it all was the experience in the Navy and secret clearance was what got me hired and a strong job afterwards, not my education.

When did you begin building and buying web businesses?

I started building web businesses outside of clients 4 or 5 years ago. It’s been a rewarding experience. I’ve met so many great people. I’ve had some great partners. My partner Evan Lisabeth has been right there with me for most of it all. Couldn’t have done it without him. The years of experience, and knowledge gained from working with people have been the most valuable asset. With the right knowledge and experience time is irrelevant.

What kind of sites have you worked on in the past?

I’ve had multiple seven figure website sales, revolving around fitness, gaming, and style. I’ve also had several six figure sales revolving around MMA, Tech, and Health. Those sites have ranged from affiliate based sites to display advertising. They all had strong communities of support that were passionate about the niche. These websites have all been content based sites (articles/videos). Very low tech. Anyone with decent WordPress knowledge could have built them.

Any special skills that you bring to the table?

Hundreds of hours of watching YouTube videos, reading forums, and learning from others. I don’t know of any course that will teach you what you need to know. You just need to get out there and fail as much as possible, and fail fast, so you can figure out what works and what doesn’t. Stop waiting for the perfect time. Stop reading this interview. Go work on it right now.

I don’t think there’s anything special I do in particular. I love this stuff. It never feels like work. I think maybe that plays a big part in it.

What brought you to Flippa? Why do you use Flippa?

I’ve used Flippa since the early days of it. It’s always an exciting experience. There’s not many experiences in this business better than seeing that bid icon light up. It’s no secret that Flippa has high visibility and a large, active userbase. I want to get as many eyeballs on a sale as possible. I’ve always focused on building quality sites with very strong communities that support them. There’s nothing to hide or shy away from. The sites I’ve sold are the result of months to years of tedious leg work, so I want them to be seen, and Flippa is the obvious choice for that.

You once sold FightState.com for $300,000 on the Flippa marketplace, what was that experience like?

It was a great experience. It was actually one of the largest public Flippa sales ever at the time. The response was overwhelming. Nothing drives exposure like a Flippa listing. During the course of the sale, I answered hundreds of messages, and met some great people. The Flippa staff was very helpful and provided excellent support throughout the entire auction through their account management service. Their support was invaluable, and made the experience very smooth from listing all the way to escrow and transfer. I’ve never had a bad experience with Flippa.

This interview i’m doing with Flippa is in itself proof of the great support from the staff.

For those who don’t already know, tell us what the site about?

Fightstate was a very popular (Alexa top 10k) entertainment website revolving around combat sports (MMA/Boxing). We put together a team of fight nerds who spent their time scouring the internet for the most entertaining martial arts content.

The site had multiple large social profiles that supported it, with hundreds of thousands of fans across Facebook that would send an average of over 6 million visits to the website a month. We worked hard to build up the community first. The website was an extension of the social community itself.

We had countless articles go viral with coverage from BBC, Vice, Yahoo, and hundreds of mentions, retweets from famous fighters, boxers, and other social influencers. In the end the hard work paid off and the business sold for $300,000 on Flippa.

Any advice for other web entrepreneurs looking sell websites on Flippa?

Be patient, don’t rush the process. Explain details clearly. Try to answer every single message and comment. It can be a lot of work, but it can also be very rewarding. You never know who you could be speaking to. I’ve actually met future business partners through Flippa messages. It’s been a great vehicle for my business, I couldn’t recommend them any higher.

So there you have it, that’s Jeff’s Flippa story! If you have a high-value content site that you might like to sell on Flippa, request a free website valuation and we’ll get back to you within 24 hours to let you know what your site is worth!

Craft the best listing description for selling your website

Craft the best listing description for selling your website

Writing the perfect website listing description may seem daunting for new sellers. This blog post will provide new sellers tips on how to best structure your listing description for an online business, and the do’s and don’ts associated with selling your business on Flippa.

Structure

When you write the listing description when selling your website, the structure of your listing is one of the most crucial parts of setting up your listing for success. Since establishing the website marketplace, our account management team has refined a listing structure which is easy to follow, and reduces the amount of questions buyers ask sellers during the auction process.

The following has been identified as the best structure for a website’s listing description:

  • About the Seller – Briefly describe yourself and your role in the website. Indicate whether you are the original owner of the business.
  • Business Model – Describe what the website does.
  • Reason for Sale – Briefly describe why you are selling the business.
  • Development – Briefly describe how the website was developed. This should include the programming language and any frameworks/platforms used.
  • Operation – Briefly describe what is required to keep the website operational. This should include an average time spent per week. Additionally you should indicate where the website is hosted.
  • Traffic – Briefly describe what country most of the traffic originates from, and the sources that generate the most traffic for the website.
  • Monetisation – Briefly describe how you generate revenue through the online business. Any peaks or troughs in revenue should be explained.
  • Expenses – Briefly describe the expenses required to operate the online business.
  • Reliability – Briefly describe how you are willing to prove your financials? Will you post a video walkthrough of backend earning reports? Will you provide live screen-sharing sessions to prospective buyers?
  • Marketing – Briefly describe what marketing initiatives you have used to establish the website.
  • Included in Sale – List the items included in the sale. Include any domains or social media accounts included in the sale.
  • Future Opportunities – Briefly describe what a buyer could potentially do to improve or grow the website.
  • Keep the lines of communication open – Let buyers know they can reach you in public comments or via private message if they have any follow-up questions.

Here are a few examples of websites that have sold with detailed listing descriptions:

Do’s and Don’ts

Don’t lie

When selling your website, lying or omitting items will almost always hurt you, as it is sure to come out in the due diligence process. It is crucial that all information you provide in the listing is accurate for the online business you are selling. All claims should be able to be verified by potential buyers on request.

Attach proof

Any revenue claims need to be supported by proof. This proof can be in video or image format. We also suggest providing proof of traffic and other claims you make on the listing.

Provide as much information as possible

Buyers want to have access to as much information as possible about the online business before they place a bid on it. Providing as much information as possible will allow buyers to have access to this, and reduce the amount of questions you will be asked throughout the auction process.

Don’t be rude

Be professional! Respecting potential buyers and the questions they submit is important to ensure buyers want to work with you. To ensure the auction process is smooth, ensure that you assist and support buyers during the auction period when they are deciding if the online business is right for them.

Be clear

Potential buyers of your website don’t want to be searching through your description for specific information about your online business. By using the structure provided above, and correct grammar will improve the quality of your listing.

Case Study: The $100 Startup Success

Case Study: The $100 Startup Success

I recently had the opportunity to sit down with Cindy Molchany, a web entrepreneur who started CraftBeverageJobs.com after reading the $100 Startup by Chris Guillebeau. The site quickly exploded, and after 3 years of hard work, Cindy decided to sell her business on Flippa for $20,000.

As a first-time Flippa seller, Cindy details what the auction process was like and what it was like to work alongside our account management team here at Flippa.


Tell us about your technical background and how you started CraftBeverageJobs.com.

My background is in wine and beer marketing, and I have no technical background per-se except I had started a WordPress blog or two (but I’m not sure you can say that is a “technical background”).

When I came up with the idea to launch Craft Beverage Jobs, I actually did it as a way to grow exposure for my digital marketing services to the industry. I thought offering an industry job board with compelling content and a strong social media presence would help me stand out among the competition and drive interest for my digital marketing services.

When I discovered I could build a job board the way I wanted using WordPress and a $100 plugin, I was up and running within 30 days as a way to challenge myself after reading “The $100 Startup”.

Craft Beverage Jobs actually ended up quickly taking on a life of its own, and the more involved I got with building and growing the site, the more interested I became in Online Business in general and the less beverage marketing I did. Funny how that works.

What made you decide to sell your website?

The simple answer is that my interests have evolved, and I was neglecting it. I knew the site and concept excited people, but I didn’t feel like I had much left to contribute in order to take it to the next level. It needed fresh energy.

Tell us about your first sale went.

My first sale was a flop!

A website isn’t like a car where you can look up the Kelly Blue Book value and understand what a good market value is – even though a lot of “experts” will tell you that it’s as black and white as adding a 2-3x multiplier on your site revenue (or profit – not sure which one is used).

So when I initially launched Craft Beverage Jobs for sale on Flippa, I had zero confidence going in because how I valued the site was in such contrast to what the online calculators out there showed. And even though I got a couple of “Buy It Now” offers above the reserve price I set initially, I ended up pulling the auction only after a few days because I decided I would rather keep the site then sell for less than what I thought it was worth.

I thought that was it, but then shortly after I ended the sale, Joseph at Flippa reached out and extended the offer to do an evaluation for me and to potentially work together should I decide to relist.

He confirmed what I suspected all along. That value is in the eye of the beholder, and he expressed confidence (in his expert opinion – not a guarantee) that I would get a price I would be comfortable with.

What was it like working with our account management team?

Having access to the account management team made all the difference in the world. With the free upgrades, the featured newsletter spot, and the social media promotions, my auction got a lot of attention from many different interested buyers. In addition to the validation on value, I was able to ask for help on strategy up to the very end of the sale. This was very important to me because it gave me the confidence I didn’t have the first time around.

In all honesty, Flippa can be a little intimidating – especially for a newbie. I didn’t want to make a beginner mistake on something so important to me, and working with Joseph was like having a coach the whole way through.

What suggestions would you have for others looking to sell their website?

  1. Putting heart and soul into your website can most definitely add value.

  1. It’s about finding the right buyer, not just any buyer. Talk to people who express interest, answer all their questions (the more the better the sign), and find out their intentions with your website.

  1. And jump at the opportunity to work with the Flippa team if given the chance.

Would you like to add any closing statements?

I miss running a website like Craft Beverage Jobs, and am already starting a new transactional niche website to build, grow, nurture (and maybe sell on Flippa one day).

Enjoy reading Cindy’s story? Continue reading more Flippa case studies now.