Due diligence is a crucial part of acquiring any online business. Performing proper due diligence on Amazon FBA, e-commerce, and SaaS businesses, as well as content sites, is crucial to making smart investment decisions.
While I understand the excitement of finding a potentially great opportunity to acquire a new site or online business, proper due diligence is an absolute necessity. Good due diligence can take some time, but it’s a step that should never be skipped.
This is a process that can be streamlined with experience, but it’s important to be aware that due diligence is always going to take some time.
How Long Is The Due Diligence Period?
How long due diligence takes can vary based on several factors including the size of the sale, how quickly a seller gets information back to the potential buyer, and whether the deal is through a broker or done completely privately.
Due diligence is one of the single most important parts of any deal and I don’t approach a business owner for a deal until I do initial due diligence, and I never proceed with a deal until I’m fully satisfied that all my criteria have been met.
Aside from Flippa, which is an unvetted marketplace and leaves all due diligence responsibilities to the buyer, most major brokers do at least a basic due diligence, with others performing a more in-depth dig into the important details.
Examples of due diligence ranges from top brokers include:
- Empire Flippers (1-3 weeks on average)
- FE International (Several weeks)
- Investors Club (Within one week)
- Quiet Light (1-3 weeks depending on preparedness of the seller)
- Motion Invest (3-10 days on average depending on responsiveness of seller)
In my experience private due diligence can vary but often can go for several days even into a couple weeks, especially when I find the need to walk a first-time seller through the more technical parts of the due diligence process (such as setting up a “view only” profile for sharing Google Analytics access).
However, I have bought sites in as little as 24 hours from start to finish (case study). This requires understanding your own due diligence process systems in place, experience running due diligence, and a responsive seller replying quickly to questions and concerns.
Generally, I expect to be able to perform due diligence within a week for the type of deals I’m looking for.
If there’s a delay beyond that it’s usually from the seller not providing requested information, which can also be a reason to walk away from a deal if my gut tells me there’s something odd about the situation such as the seller trying to hide something.
Negotiation of Due Diligence Period
Always make sure to provide yourself with enough time to do proper due diligence. Keep in mind the larger the deal, the more information that will need to be verified and confirmed.
There’s no reason due diligence with a responsive seller can’t be done in a few days, though giving yourself more time for “just in case” scenarios is never a bad idea.
What Happens During The Due Diligence Period?
Due diligence is the period where the potential buyer is going to be busy. When I’m doing due diligence I’m looking at Google Analytics, backlink profiles, traffic trends, and searching for any hint of a red flag.
Sifting through this information early on in the process is crucial so I can request additional information or ask the seller for clarification on any potential abnormalities or red flags that come up during the due diligence process.
My process organizes questions based on the topic so I can organize my research and speed up my investigation without missing any crucial information.
These topics include:
- Basic questions
- Domain questions
- Platform questions
- Niche questions
- Content questions
- Backlink profile questions
- Website traffic questions
- Earnings questions
- Other questions
By focusing all the questions I have on each topic in a cluster I can get all my answers on one topic and immediately move on to the next one.
The main goal of any due diligence process is the same: get all the necessary information to make an informed decision on whether or not to buy.
What Happens After Due Diligence Period Expires?
After the due diligence process has taken place the buyer needs to begin negotiations on the offer. If they wait too long, the seller is going to look for other buyers.
This is the time when the information from due diligence is used in negotiating for a lower price or moving forward as-is with the original pricing.
If the two sides can come to an agreement then the escrow is created, the proper papers drawn up, and the sale is made. If going through a broker, some of these steps will be mediated by the broker.
In a private deal, this responsibility will fall on the buyer.
FAQs on Due Diligence Periods
Nothing beats the actual experience of going through several deals to streamline the due diligence process that works best for you, but here are answers to some of the most common questions to help beginners prepare.
Does the due diligence period include weekends?
Generally, the due diligence period should be considered to be quoted in business days. This means 14 days actually stretches into 3 weeks on the calendar, although if all the necessary information and access is provided by the seller quickly it’s possible the due diligence will be finished more quickly.
However, I make sure to make it clear how long I expect due diligence to take with any online website or business I’m trying to acquire and am quick to let the seller know if I need additional information or time to finish my due diligence process.
Can you extend the due diligence period?
Yes, but doing so does increase the risk of the seller getting cold feet or reaching out to others to see what offers they might have.
Learning to do thorough due diligence in a reasonable time frame is an important part of the business acquisition process.
Can you negotiate during due diligence?
Generally, you negotiate after due diligence.
It’s best to have a list of concerns from due diligence to talk to the seller all at once rather than sending a slew of emails over a few days as each new thing comes up.
Negotiation is best done at the end of due diligence, and having all the data at once also puts the buyer in a stronger position to make the case for a lower selling point.
Due diligence is a necessary part of the process but it can take some time. Especially with larger deals or relatively new sellers. When acquiring an online business the average due diligence period will range from a few days to a few weeks, with most falling in the 5-10 day range.
There are always going to be exceptions with times when due diligence can be done very quickly thanks to prepared and responsive sellers, and times that will take longer. The 5-10 days is a good basic range to get an idea of the average amount of time due diligence will take.