Expert: Ezra Silverton - 2/17/2009

Question
I'm currently performing due diligence for the acquisition of an existing 100% web based business. While I have bought and sold businesses in the past this is my first web based business. I'm wondering if there is anything unusual about the business cycle of a 100% web based business that I should be aware of. This business has been conducting business on the web since Oct 2007 and is off to a strong start. Do web based business usually start off strong as this one has and then slow down significantly after the 1st 18 - 24 months or so? I did a whois search on 6 or 7 of the main competitors and based on the registration date of their websites most were started after this one and have lower Alexa rankings. Are there certain Google Analytic reports I should have the seller provide such as Bounce Rate and Avg. conversion rate? If so, are there certain minimum bench marks for these numbers such as an avg. conversion rate of greater than 2% and a avg bounce rate of less than 40%? I would appreciate any heads up you could give me.

Answer
Hi Brad,

I wouldn't pay too much attention to the Alexa rankings. It’s not very accurate.  Just like you would look at a bricks-and-mortar business for ROI, I would use this same metric for the online business.  If you compare the website visitor numbers will the averages found in the industry with similar terms, you can get a rough idea of market share. Conversions rates average 2-3%, but really very.  Bounce rates really very too much and depend on which filters have been setup.

Hope this helps. Best of luck,

Ezra Silverton
http://blog.9thsphere.com/