Key takeaways
- Online businesses are easy to present and hard to verify, so insist on live access to analytics, payment processors and advertising accounts.
- Platform dependence is the central risk, whether the platform is a marketplace, a search engine, a social network or an app store.
- Transfer is technical as well as legal, and every account, domain and licence must be moved on closing day with a checklist.
- Sales tax, cross-border and currency questions are real for Canadian buyers and belong with your CPA before you offer.
Online businesses, from e-commerce stores and content sites to software subscriptions and service marketplaces, are bought and sold constantly, and many are listed on marketplaces that let a buyer in Vancouver evaluate a business operated from anywhere in Canada. The upside is clear: no lease, no kitchen, often no staff, and earnings that can be run from a laptop. The risk is that everything about the business is a screen, and screens can be edited.
This guide is the verification method we use with buyers. It assumes you have found a business you like and have signed a non-disclosure agreement. Legal and tax questions go to your lawyer and CPA, and there are more of them than most buyers expect.
Verify traffic and revenue at the source
Do not accept screenshots or exported spreadsheets. Ask for read-only access to the analytics account, the payment processor, the marketplace seller account, the advertising accounts and the hosting or platform account, and look at the data yourself. Compare revenue in the payment processor to deposits in the bank. Compare orders in the store platform to revenue in the processor. Compare traffic sources in analytics to what the seller told you drives the business.
Look at trends over at least two years, by month, and ask about every spike and every dip. A spike in the final months before listing is a question. Look at refunds, chargebacks and disputes, which are costs a summary often omits, and at customer acquisition cost against order value, which decides whether growth is profitable.
Understand platform dependence
Most online businesses depend on a platform they do not control: a marketplace that sets the rules and the fees, a search engine whose algorithm decides their traffic, a social network whose policies decide their advertising, an app store that can remove them, or a supplier who can stop shipping. The question is not whether the business depends on platforms, since all do, but how concentrated the dependence is and what the history of disruption has been.
Ask what share of revenue comes through each channel. Ask whether the seller account has ever been suspended or warned. Ask what happened to traffic after past algorithm changes. A business with an email list it owns, repeat customers who return directly and several traffic sources is more durable than one that lives on a single ranking or a single ad account.
- Share of revenue by channel and by top products
- Account health, warnings and suspensions on each platform
- Traffic history through known algorithm changes
- Owned assets such as the email list, the brand, the domain and the content
- Supplier terms, exclusivity and what happens if a supplier changes course
What exactly transfers
List every asset and account the business runs on: domain, hosting, store platform, payment processors, marketplace seller accounts, advertising accounts, email service, social profiles, software licences, supplier accounts, content and trademarks. For each one, confirm who owns it, whether it can be transferred, and what the platform's transfer process is. Some accounts cannot be transferred at all and must be rebuilt under the buyer, which can mean losing history, reviews or rankings.
Your lawyer will handle the legal transfer of the intellectual property and the agreement. The technical transfer needs its own closing checklist with both parties on a call, moving accounts in order, with funds released as each step is confirmed. Do not pay in full before the accounts are in your control.
The owner, the operations and the time
Ask how many hours the owner works and on what. Ask who writes the content, manages the ads, handles customer service, deals with suppliers and fixes the technology. If the answers are freelancers and contractors, ask whether they will continue with you and on what terms. If the answer is the owner, you are buying a job that happens to be online, and the price should reflect it.
Ask for the standard operating procedures. A well-run online business has documented processes for fulfilment, customer service, content and advertising. If they do not exist, the transition period from the seller needs to be long enough for you to write them.
Questions for your CPA and lawyer
Online businesses raise questions that physical ones do not. Where are the customers, and what sales tax obligations does the business have in Canada and elsewhere? What currency does it earn in and what currency are the costs in? If the seller is outside Canada, how is the purchase structured and what withholding or reporting applies? Are the contractors genuinely contractors? Who owns the content and the code, and is there any licence or open source component that restricts its use?
These are not reasons to avoid online businesses. They are reasons to bring your advisers in before you make an offer. If you want help verifying an online business before you commit, call or text (604) 632-4959 or email ali@sedighi.ca. Ali has built and run digital businesses since 2007 and knows where the numbers hide.