How To Spot A Scam Business Listing

How To Spot A Scam Business Listing

Back when I first heard of Flippa in 2013, it was full of scams.

They’ve done a great job at cleaning it up and I haven’t seen any obvious scams listed there for a good few years.

It used to be the wild west.

In fact, it was the reason I started Humanproofdesigns.

I remember seeing how many people were buying these fake “turnkey” business-in-a-box websites for $497 and thinking “I could do real businesses for them”, and started packing up these done-for-you affiliate websites with unique content and keyword research.

There were a ton of these dodgy listings out there.

They’d say obviously scammy stuff like “Make money on autopilot! This website can make you thousands per day without doing any work! Only $199!!”

Mmmhmm, and you’re just giving it away for $197.

But there were more sophisticated scams too:

  1. Fake traffic.
  2. Cloned websites.
  3. Fake sales that would be refunded as soon as you bought the business.

And so on.

a quick update:

Onfolio launched Dealpipe.io recently for people looking for off-market deals. It’s a proprietary search service where we’ll help you find high-quality deals for online or even offline businesses. Only apply if you can buy something $1m and up, as the service isn’t cheap.

Dominic Wells

I used to rank number 1 in Google for “Flippa review” and had this cool article highlighting some of the ways a seller could scam you, but the article is gone now (and it wouldn’t be a fair representation of Flippa anymore).

Anyway, I’m reminded about this because last week I was recording an over-the-shoulder due diligence video at Acquire.com and I stumbled across a scam.

The Acquire team removed the listing pretty quickly after I highlighted it, and they take this stuff seriously.

To be fair, most of the marketplaces these days do a good job of cleaning up scams, and really the only “buyer beware” is figuring out if something is a good opportunity or not, and weighing the levels of risk.

But there are still scams out there, and here’s how to find (most) of them.

Traffic and Income

The first thing to be aware of is what exactly it is the scammer is trying to convince you of. That is usually 1 of 2 things:

  1. The income of the site
  2. The traffic of the site.

Traffic is fairly easy to fake with bots, so you shouldn’t just rely on Google Analytics alone. Look at third-party tools like Similarweb or Semrush and Ahrefs to verify if the site actually has any traffic.

You also need to use a bit of common sense. If a business is getting a ton of revenue off little traffic, or a ton of traffic from “direct” or “referral” sources, you might want to ask yourself if it seems real.

Or if the business is based in the US but all its traffic is coming from somewhere in Asia.

It’s not alwaaaays the case that traffic and revenue correlate though. Sometimes a low-traffic business makes a ton of money, sometimes a high-traffic business makes nothing.

Want to get better at analyzing it? Start doing due diligence on multiple businesses and you’ll start to get a feel for what is authentic and what isn’t.

Domain Name History

Another thing you want to do is do a Whois lookup of the domain name and see when it was registered (this is how I caught the Acquire.com scammer).

Sometimes people get a legitimate business and clone it, so they can keep on earning after they’ve sold it to you. 9 times out of 10, they’ll start a brand new domain and sell you that, so the domain history is a clear giveaway.

You should also go to archive.org and see the history of the site, and check ahrefs.com to see if they have been redirected from another business.

There can be legitimate reasons for this to happen, so a redirect isn’t a smoking gun by itself, but if the seller hasn’t disclosed it, you should immediately assume the worst.

Fake Sales

Some forms of sales are harder to fake than others, but I’ve seen people selling ebooks with a ton of sales, then dug deeper and found the sales to be fake (“How many Aaron Andersons are buying copies of this thing??!”). I’ve even seen people actually buy copies of their own ebooks via Stripe to make it look legitimate.

For smaller sites, this is a much bigger problem, as the volume of sales they’re faking is lower.

How do you avoid this? Well, aside from practice, you want to have a long inspection period and a long escrow period so you can verify everything is legitimate.

Ultimately you want to get access to their email support system as well. If there are a ton of sales being refunded and customers having a poor experience, it might not be a scam, but not a good sign either. Conversely, if they’re showing a ton of sales and very little support activity, that is also a potential flag.

Nobody sells a bunch of products and doesn’t’ get “Why can’t I access my thing?” emails from customers.

Another way people might fake sales is to use the same tracking ID across multiple sites, so the sales are legitimate but aren’t actually from the sale you’re buying. This used to be common with affiliate links and things like Amazon associates.

There aren’t many easy ways to verify this, other than a combination of using escrow, traffic stats, and digging deep. Fortunately, it is less common than it used to be.

Man Holding a Sheet of Paper on the Laptop

Fake Users

Another common area scammers will fake is “users”. This can take many forms.

  1. It could be that an email list is full of fake subscribers or spam traps.
  2. It could be fake testimonials.
  3. It could be a marketplace with fake user profiles.
  4. Most commonly it is email.

We always ask to take a look inside someone’s email service provider to look for sending stats, open rates, click rates, replies, and that kind of thing.

If possible, you should also ask permission to verify an email list via a service that improves deliverability, but in reality, sellers are often nervous about letting you randomly play around with their email list, so the above methods will have to do.

Fake Results

I’ve also seen people selling a business built around an info-product that doesn’t actually work. I once bought a business that came with a fitness ebook with tons of fantastic before/after pictures, and I later found out the seller had just lifted other people’s before/after pictures from Instagram, and they were nothing to do with the ebook. Oops.

I had to rebuild the ebook from scratch and generate new sales, which was not what I bought the business for.

How To Actually Spot These

In many cases, you need a combination of things to actually spot and avoid these things. Any one single thing can often go unnoticed, but in combination, they start to add up.

You have to build a kind of “confidence score” on the business (and this applies to legit ones too) and see where you land.

Do a lot of things seem fishy or unclear?

It’s probably not in your interest to talk yourself into that acquisition…no matter how persuasive you might be.

The best piece of advice I can give is to 

Hire a due diligence firm like Centurica (no association, but I’m friends with the founder)

Or

Just simply keep practicing your own due diligence skills, consuming content, kicking the tires until you learn how to get better…and perhaps even making a few small purchases where getting scammed isn’t going to completely ruin your life, but you’ll learn a ton from the process.

Who knows, you might even buy something profitable by accident.

Avoiding scams is something we all have to face when we go online (are we ever offline these days?) so it shouldn’t be too difficult to adopt that mindset when looking at businesses to buy.

The best takeaway I hope you can have from this article is to just be aware of what things people do, so you can get better at spotting them, plus anything else they throw at you.

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