Buying an existing business is a good idea. If the enterprise has been in business for an impressive number of years, that is a sign of its reputation and stability in the industry. Should you take out your checkbook and issue a downpayment or reservation fee?
No.
When it comes to buying an existing business, don’t take chances and assume everything is in order. Performing due diligence via a financial audit is a smart first step but it is not enough.
Financial records and bank statements will not give you an idea of how the business is perceived by the industry and its market. You should perform an audit on the business’s online presence to learn more about its reputation and approach to managing its activities.
Here are the 6 things that you should look for when performing an online audit on a business:
1. Brand Awareness – Determine the Online Reputation of the Business
You may be surprised by what a simple Google search may yield!
With the Internet accessible to more than 4.5 billion people or 58% of the world’s population, it will be hard to stay hidden for long. News websites, content aggregators, and Internet users regularly upload or share information that captures their interest.
If the business you are planning to buy engaged in news-worthy shenanigans in the past, trust that your Google search may pull out deal-breaking reports:
- Was the business engaged in fraudulent activity?
- Is the business mired in debt?
- Is the company facing lawsuits from clients or customers?
- Is the government after the business for tax evasion?
- Does the company have a director who is suspected of criminal activity?
- Are the products of the business the subject of scrutiny regarding their quality?
- Are the employees treated proper?
You should also check the social media pages of the business.
- What are they regularly posting about?
- What topics or issues appear to be of interest to them?
- How is the lead-in to the content presented? Is it in a professional manner?
- How does the company moderator interact with the commenters?
70% of recruiters screen the social media content of job applicants to assess if the candidate is a good fit for the company.
You should do the same with a business before you buy it because your company will assume its brand. The message of the brand must align with your business’s purpose, values, and vision.
A good website to visit is Glassdoor.com which allows current and former employees to post reviews, comments, and information on their employer. If the business you are planning to buy is listed in Glassdoor, you may get helpful information about the company.
Of course, there is always the possibility of reading reviews made by disgruntled employees. After going through a few posts, you may have a better idea of what the company’s culture is like.
2. Uncover the Relationship of the Business with its Customers
One of the greatest benefits of the Internet is that it creates avenues for customers to engage with the business. Among the most popular avenues are social media platforms and chat messaging.
If the business you are planning to buy has social media accounts – and it should – visit their pages. When a business opens a company page, people who follow or like the page will be allowed to post comments.
Keep in mind that there is no such thing as a perfect business. It is not realistic to expect every consumer to like the product or service. Then, there are the unfortunate incidents. No matter how stringent the quality control processes are, mishaps are bound to happen.
The usual course of action is for customers to file a complaint. While some customers will be discreet and choose email or chat messaging as the medium of communication, many will post the complaint on the business’s social media page.
When reviewing the social media page of the business, assess the following:
- Are the majority of the comments or posts from irate customers?
- Did the company respond in a respectful manner?
- Did the company respond within an acceptable time-frame such as 24 to 48 hours?
- Do the engagements between the customer and the company result in extended communication threads?
- Was resolution eventually achieved?
- Did the business provide a process for the customer to follow?
The new term for customer service is relationship management. Businesses should take great care of their relationships with customers.
A disgruntled customer can become a loyal customer if the issue was dutifully resolved. Excellent relationship management will also strengthen the brand of the business.
3. Assess the Scope and Depth of the Business’ Online Presence
The scope and depth of the business’s presence on the Internet should play a factor in determining its true worth. After all, you are buying their brand.
- What online activities has the business undertaken to build its brand?
- How much work has been done to increase brand awareness online?
- How strong is brand recall?
- Does the website attract an impressive amount of traffic?
- Do the social media pages have a good number of followers?
- How would you assess the level of engagement in the business’s social media pages?
- Which channels of communication are in place? Chat support? Social media moderation? Email? Inbound call service?
- How invested is the business in ensuring excellent customer service?
- Does the business have a blog page?
If the business has not done much or anything at all to enhance its online presence, that means you will have to do a lot of the heavy lifting to give the brand the traction it needs on the Internet.
All of that heavy lifting may come at a heavy price:
- If the business does not have a chat support service, you will have to install the feature on the website or on its social media pages.
- If the business does not have social media pages, you’ll have to set up the accounts yourself. Building a network of followers will take time.
- If the business did not blog, you may have to hire a content writer to create compelling blogs.
Building the business’s presence on the Internet will cost you resources in terms of time and money.
As the saying goes, “Your business is representative of your leadership”. If there is no online presence, you should start to wonder about the people you are dealing with.
4. Existence of Social Proof
You’ve done the feasibility studies, checked the finances, and performed due diligence. In business, there is no such thing as a “sure thing”. Even if the results of the projections are in your favor, it does not mean the business you purchased is a good deal.
One way to ease your worries about the viability of the business is to look for the existence of social proof.
Social proof is a concept that was introduced by Robert Cialdini, a professor of Marketing at Arizona State University. According to Cialdini, consumers change their behavior based on the actions of others.
For example, if you see a long line of people outside a donut store, you will be compelled to join the queue because your assumption is that the food must be good.
Of course, you may end up disappointed when reality falls short of expectation. Still, the presence of an impressive queue was enough to get you to try the donut store – and ring the business owner’s cash register.
What types of social proof should you look for that attest to the viability of the business you are purchasing?
- Product or Business Reviews
- Influencer’s Endorsement
- User, Client or Customer Testimonials
- Positive Reviews or Reports From Various Media
- Social Media Shares of Published Content
When reviewing social proof, take the good with the bad. You can’t please everybody. Consumers have individual tastes and preferences. However, if the feedback is overwhelmingly negative, you might want to re-think your decision to purchase the business. At the very least, use social proof to tilt final negotiations to your favor.
5. Is the Website Responsive?
It’s not enough for the business to have a website. It must be responsive. Otherwise, your business will not be accessible to potential customers who use mobile devices to conduct an Internet search.
How important is it to have a website that is mobile responsive? More than 60% of searches on the Internet are carried out on a mobile device.
If your website is not mobile responsive it will not set up properly on a smaller screen. The Internet user will not have the patience to zoom-in just to read your content and to navigate around your website.
What will happen if the website of the business is not mobile responsive?
- Poor user experience means Google will punish the website in the search rankings.
- 61% of Internet users will abandon the search if the website is not mobile responsive.
- Internet users will abandon the search If it takes longer than 3 seconds to load your website on a mobile device.
For the reason that the Internet opens up your business to an ocean of opportunities, you simply will not thrive with a website that is not mobile responsive. Thus, you will have to spend to make the website mobile responsive.
Similar to building the online presence of the business, you have to bring up the matter of the non-responsive website to the negotiation table.
6. Is the Business Visible on the Internet?
Does the business post content on its website and social media pages? Blogging is a proven way of building the brand of a business. Its other benefits include driving more traffic to the website, generating leads, improving the search ranking of the website, and enhancing the business’s online presence.
However, to realize these benefits, the content must be optimized.
It won’t matter how amazing the blogs read. They won’t be seen unless the content is optimized with the right keywords.
And it’s not just the blogs. The content on the website must also be optimized.
Here’s a checklist of what to look for when testing for website optimization:
- Presence of broken links
- Optimization of meta tags
- Page loading time
- Existence of spelling errors
- Quality of keywords
- Assess the quality of the links
Improving site optimization will take time. If the content published thus far isn’t good quality, then you will have to start from scratch. Poor quality content is described as content that is:
- Irrelevant
- Not informative
- Poorly researched
- Embedded with irrelevant links
- Not unique or fresh; risk of plagiarism
- Presence of spelling and grammatical errors
Poor quality content will affect brand perception. Spelling and grammatical errors will put off readers. Plagiarism will damage the reputation of the business perhaps beyond repair.
It is strongly advised to run the published content through a plagiarism checker program such as Copyscape before finalizing the decision to purchase the business.
Conclusion
Buying a business is like buying an old house.
The value of the property is not on the house itself but on the land it is built on. Of course, the value of the home is considered when calculating the final sale of the property.
A house that is for sale may look good on the outside but make no mistake, it is a depreciating asset.
Even if the seller says he spent for repairs, don’t take his word for it. Inspect the house from top to bottom. Bring in an engineer or general contractor to give you a professional opinion.
If you have to conduct repairs, the cost should be factored in when negotiating for the final price because you will be spending extra money to make the house livable.
Like real estate property, the business you acquired can pay out dividends in the future. However, before buying it you have to ascertain the viability of what you are paying for.
Otherwise, you end up paying more than it’s worth. If the online reputation is poor and potentially beyond repair, you may never recover the cost of the investment.
Are you thinking of buying a business? Give us a call and we’ll help you run an audit on its website and overall online presence.
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