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Whilst many are familiar with the concept of due diligence, website due diligence, also known as checking a website's performance, is a separate exercise which may be unfamiliar to those looking to undertake acquisition transactions. However, website due diligence is essential for gaining full visibility of a business’ complete revenue stream when acquiring a business with an online presence.
What is Website Due Diligence?
Website due diligence refers to the analysis undertaken on a company’s website. This is important because it allows truer insight into the opportunities and economic activity of a business by taking a deep dive into the health and performance of its website.
Websites can be used to attract and direct new and potential customers to your business, as well as allow customers to purchase products instantly through eCommerce (online commerce). Therefore, by not undertaking a thorough website audit, or due diligence, you could be missing out on key financial information relating to the business as a whole.
How to Perform Website Due Diligence
Performing website due diligence will include tracking the activity of the website and auditing the website health. There are a few ways to do this:
- Online website valuation calculators.
- Gathering your own data.
- Outsourcing to a professional.
Website valuation calculators are available online to estimate the value of a website and its revenue – they can be a quick and easy way to gain an idea about the worth of a website. However, these calculators are not accurate and it is not usually recommended to use them in isolation if you’re looking to conduct an accurate website check.
You can, of course, complete your own research. This is a cost-effective way to complete due diligence, however it is time intensive and requires you to understand what you’re looking for and additionally have the tools to do this.
Finally, you can outsource the auditing work to a professional. Though you will have to pay, outsourcing to a professional is a stress-free and accurate way to gain the information you require about a website and even advice regarding the potential investment.
When Should You Perform Website Due Diligence?
Website due diligence should be performed prior to committing to a merger and acquisition (or M&A) contract or buying a website, usually at the same time as due diligence is undertaken on the business itself.
You need to have a clear idea about the complete financial risk and reward of the business, alongside the cost of the business, in order to put in a fair and informed offer.
What to Look For when Completing Website Due Diligence
Whether you’re completing website due diligence yourself, or outsourcing to a professional body, it is important to understand what you should be looking for in a website audit.
By following our checklist for digital due diligence, you will be able to complete a thorough website audit.
One of the foremost elements of analysing a website is to look at its health. The health of a website includes a range of factors, such as:
- The age of the website. Well, it is not so much the age of the website as the quality. Older websites which have not been maintained over the years generally do not perform as well – they may not be compliant with the latest regulations and legal requirements, for example, and could face penalisation. Older websites may also be slower and not offer as good a user experience as newer websites – such as the design, images and information being low quality and outdated, which may put off potential customers.
- The platform the website is built on. The functionality of the platform can also affect the health of the website. Some platforms have increased capabilities, including Magento and WordPress, which allow you to better maintain and customise your website over time. Other platforms may be more limited which can stunt the performance, and therefore value, of the website.
- The traffic sources to the website. It is essential to note the main traffic sources to the website, as well as the amount of traffic, to determine how healthy the website is through its ability to attract visitors. A great website will earn traffic organically (without paid methods) – this may be by drawing visitors through its content or backlinks (other websites link back to your website, enabling their visitors to discover your website, too).
We helped advise The Skinsmith on the health and maintenance requirements of their old website, before moving them on to a more suitable platform during the development of their new website.
Digital Marketing Strategies
Picking up from the previous point regarding traffic sources to the website, you should make note of any existing marketing strategies used by the website to draw traffic.
If the company is paying for marketing channels such as search engine optimisation (SEO), pay-per-click (PPC) advertising, paid social advertising (PSA) and content marketing for their website, the performance of these strategies must be reviewed. This will help you determine the value they may add to the website if they’re successful, or detract from the website if they are not being carried out effectively.
The revenue generated by the website is another key element to a website audit. By drilling down into the revenue of the website, you can verify how much money the website is currently making, and how these figures correlate to the statistics found during health checks – such as the volume of traffic to the website – which can indicate the accuracy of these checks.
What are the Benefits of Website Due Diligence?
If the company you’re interested in acquiring or merging with has a website, or is based online, then it is always beneficial to complete website due diligence alongside all the regular checks. Some of these benefits include:
Make More Informed Investments
You cannot make a truly informed investment without taking into account all revenue streams of a business – this includes its website. By reviewing all aspects of the website, you will have a clearer idea of the worth of the website, and will be able to put in a more competitive or accurate offer, improving your success rate when acquiring the business and, later down the line, your return on investment.
Greater Insight Into Maintenance Costs
Website due diligence allows you to explore the maintenance requirements of a website. If a website is currently undergoing digital marketing campaigns such as SEO, these campaigns will need to be continued in order for the website to maintain its competitiveness. If the website is not undergoing marketing, or is marketing ineffectively, you may need to consider the costs of starting this or developing the current strategy to help improve the performance of the website in attracting and retaining customers.
Improve Cyber Security
A poor or outdated website may be vulnerable to cyber security breaches – putting your business under attack. By auditing the health and security of the website, you can prepare against any potential vulnerabilities and be safe in the knowledge your data is secure.
Achieve Your Goals Quicker
Understanding where your website sits on a search engine results page (for instance, Google’s search results) and where this is in relation to direct competitors will help you understand what you need to do to make the website more successful or to maintain its success. You can then put this plan into action immediately after acquiring or merging the business, helping you to achieve your goals quicker.
Though website due diligence may often be overlooked or not undertaken in its entirety, it is an important part in gaining a holistic view of the merger or acquisition deal you may be undertaking. Websites can be a great sales tool if developed and maintained correctly – and due diligence on a website will help you gain a better understanding of how a website is or can be used in this manner.
Ensure You Invest in a Healthy Website which Works Hard For You by...
Omnisity can help you understand the health of your website by undertaking a free website audit, competitor examination, and review of current marketing tactics.
Make certain you're informed with all the current information available about your website to generate the greatest return on investment.