Acquiring Minds Top 3 Pitfalls When Buying an Online Business
8 snips
Aug 30, 2021 Ahmed Raza, a due diligence pro, shares the 3 things to evaluate when buying e-commerce, SaaS, or content businesses. Topics include product defendability, competition from Amazon, financial aspects, operational side of online businesses, importance of staging environment for SaaS, SEO importance and defendability of content, vulnerabilities of affiliate-based businesses with reliance on Amazon and Google.
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Test Referral Concentration
- Check revenue concentration from referral partners or niche review sites for SaaS deals.
- Quantify exposure if those partnerships end and stress-test the business without them.
Diligence Technical Processes
- Always run a technical codebase and process review for SaaS acquisitions.
- Require proper version control, staging, rollouts and rollback processes to reduce takeover risk.
Price In Staging And Dev Costs
- If a SaaS lacks staging/dev environments, budget post-acquisition engineering costs or negotiate price down.
- Estimate environment-building costs based on stack (Firebase easier; some AWS setups cost more).