Checklist for the Evaluation of an Internet Business
- Arnold Shields
- Mar 17, 2010
- 3 min read
Updated: Jun 23
Don’t Be Misled: Get the Full Story
When we're asked to value an online business, whether for purchase or in commercial litigation, we always start by comparing two things: the story told by the numbers, financial statements, tax returns, traffic reports, and the story told by the business owner.
Ideally, these stories match. Often, they don’t.
Online businesses can be particularly tricky. There’s no physical stockroom to inspect, no foot traffic to observe, and no storefront to visit. The domain might be registered to someone else. Content might be borrowed. And the income may be inflated.
That’s why thorough due diligence is absolutely essential.
28 Areas to Check When Buying an Internet Business
The purpose of this checklist isn’t to tick boxes. It’s to uncover the full picture, test for inconsistencies, and ensure that the stories, the traffic, the conversions, the income, line up. Here’s where to start:
Google Analytics reports – At least 12 months’ worth; ideally several years.
Link reports – Use Yahoo, Majestic SEO or similar. Are the backlinks paid, permanent, or temporary?
Domain ownership – Ensure the vendor actually owns the domain.
Conversion rates – What percentage of traffic turns into paying customers?
Revenue sources – Is income from Adsense, product sales, affiliate commissions?
Traffic sources – Organic, PPC, referrals, email, affiliates?
SEO practices – White hat or black hat?
Email list quality – Size, open rates, click-through rates, and whether it’s double opt-in.
Email list origin – Generated from opt-ins, purchases, customer history?
Email platform – Who manages email delivery?
Systems and processes – Are order fulfilment and customer service documented?
Copyrights – Are the images, code and content legally owned or licensed?
Earnings history – Are they consistent, or cherry-picked time periods?
Scope of purchase – Are you buying the full business or just a portion?
Tax returns and financial statements – Do they match other reported data?
Complete expenses – Includes PPC, paid links, affiliate commissions, hosting, development, shipping?
Backlink stability – Will they continue? What’s the cost of maintaining them?
Reason for selling – Always a critical question.
Owner involvement – How many hours per week do they spend in the business?
Net profit – Annual profit after all expenses. Is it reflected in financial reports?
Pages indexed by Google – Use site: domain.com to check.
Top ranking keywords – What terms rank in Google’s top 3? Are they commercially valuable?
PPC split testing – Have they tested ad variants? What were the results?
Landing page split testing – Same as above, any proven results?
Sales data – Weekly, monthly, does it match financials?
Operational costs – Monthly outgoings, do they reconcile with tax filings?
Contracts and agreements – Hosting, software, affiliate networks, suppliers.
Legal issues – Is the business subject to any disputes or investigations?
Why It Matters
You’re not just collecting data. You’re piecing together a story. One that should be told the same way by:
The analytics reports
The financials
The vendor’s answers
The tax returns
If they don’t match, proceed with caution.
This isn’t an exhaustive list. The nature of the business, the structure of the deal, and the risks involved will shape the due diligence process. But it’s a strong starting point to avoid being misled by surface-level claims or incomplete figures.
Need help assessing an online business opportunity?
We specialise in business valuation and forensic investigation. Get in touch to speak with one of our experienced advisors.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.
