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 Web businesses are like ads. They have to be constantly updated or changed to maintain interest and targeted to the right demographics. You don't want to change the message, but you have to constantly think of new ways to present it.
Depending on the business, their sales cycles follow standard industry patterns.
A website hit is a response to an ad. In this case, the website is the salesman. Since there is no personal touch, conversion rates will be lower but the closer they are to conversion rates in non-web related businesses, the better. The website also has to do a good job of keeping customers once it has them.
The danger is that a new owner may not understand the demographics of his business or have the skill set to place effective ads and keep the website updated to do the selling.
Alexa rankings are not always an indicator of whether or not a website is reaching the right people.
