After you've made an offer, sent payment to Escrow.com, and the seller has shipped assets to you it's time to begin your inspection period. The inspection period is a set length of time during which you are required to take a final look at the items you're purchasing to ensure that everything you've received is as advertised by the seller.
Accepting all milestones in your Escrow.com transaction will end your inspection period. Because all Escrow.com transactions are final, it's very important that you do your due diligence during this period. Accepting milestones is binding, and once you accept the seller is paid and the business becomes yours.
In this guide:
When does the inspection period begin?
After you've paid Escrow.com the seller is instructed to begin shipping assets to you. This most often includes any domain names, social media accounts, ownership of apps, or physical inventory. Once the seller confirms with Exchange that they have sent you these items, you must mark them as received in Escrow.com which effectively begins your inspection period.
Log into your Escrow.com account and head to the transaction you have open with the seller. Check off the assets that you've received and click the green "Process Actions" button on the transaction page to begin your inspection period.
After you've done this, you should receive confirmation from Exchange that it is time to begin your inspection.
How long is the inspection period?
This depends on the length of time that was agreed upon between you and the seller at the time the transaction was created. A typical inspection period lasts 3 days, but for higher value transactions it's recommended that you agree to a longer inspection period. However, sellers are able to propose an inspection period as short as 24 hours.
Can Exchange assist with the inspection?
Exchange calculates revenue and traffic data for the seller when the listing is created. This means that you can rest assured that the sales and traffic reported in the listing graphs are based off data that is available to Shopify.
Some sellers may, however, claim that their revenue and traffic is higher than what is reported in the graphs on their listing because they've made sales outside of Shopify. You should always have the seller validate these numbers for you during the inspection period.
Other than sales and traffic, there are vital pieces of information about the business that you will need to inspect yourself. All claims about profit margins, expenses, traffic sources, and so on are reported by the seller and can not be verified by Exchange.
What should you have access to before inspecting?
First, refer to your Escrow.com transaction to see the full list of assets the seller has agreed to hand over. At the inspection period stage, you should have received access to all of these assets. The only exception is account ownership status of the Shopify account. You should already have a staff account for the shop, but Exchange will not make you account owner until your inspection period ends.
Other things you should have possession of are:
- Domain names. Depending on where the domain name is hosted, you should receive notification by email that a domain name has been transferred to you. To have the domain transferred to you, the seller will most likely need your contact information.
- Social media accounts. Facebook or Instagram accounts are a common part of most sales made on Exchange. If you've agreed to take ownership of these accounts, ensure that the seller makes you the new account owner.
- Apps. Most Shopify stores use a variety of apps to function. Because many apps are created by third-party developers and not Shopify, their account information needs to be handed over to you by the seller. If you're purchasing a dropshipping store, it's especially important that you ensure the seller transfers ownership of the Oberlo, Printful, or any other fulfillment apps.
- Physical Inventory. If your purchase includes physical inventory, ensure that the seller has shipped the inventory to you for your inspection. Always ask the seller to provide you with tracking information for the shipment.
It's not uncommon for a seller to request that you give them your contact info (including physical address) in order to properly transfer ownership of assets to you.
Can you make changes to the business during the inspection?
The seller has transferred ownership of the business assets to you in good faith. This is to give you the buyer the opportunity to ensure that everything is as described by the seller and to ask the seller any questions you may have before the end of the transaction.
Do not make any changes to the payment settings, shipping settings, or products during your inspection period. Doing so could result in automatic termination of the inspection period with the seller receiving the payment in full.
Your Inspection Period Guide
Your inspection period can not begin until the seller has created a staff account with the necessary permissions for you.
It's the seller's responsibility to create this account for you. Once you accept the items the seller has handed over and end the inspection period, Exchange will remove the seller as the account owner and hand ownership of the business to you. This account ownership change is not reversible, please follow this inspection guide carefully.
1. Verify and understand all traffic sources.
Taking a closer look at the business' traffic trends is a great place to start your inspection. To do get started, log into your staff account for the store and head to the Analytics tab on the left side of the admin.
The analytics section of the Shopify account is a fantastic portal into some valuable insight about the business you're purchasing. On the Dashboard of the Analytics section, you'll find reports on sales trends, traffic sources, and customers. If you notice anything on the Dashboard that raises questions, you can expand the reports to find more information or ask the seller to walk you through these reports.
You should also look at traffic trends. If you notice any peculiar spikes or dives in traffic, ask the seller for more information about the traffic for those dates. Understanding these trends is important in order to validate the traffic.
Most importantly, when analyzing the store's traffic, be sure that the sources of the traffic are legitimate and can be recreated by you, the new owner.
Want to investigate traffic data further? Ask the seller for read-only permission to their Google Analytics account. Google Analytics will provide you with more in-depth information about organic, direct, referral, social and other types of traffic.
2. Confirm financial information.
While Exchange does calculate most sales for the seller which you can find in the seller's Exchange listing, you should always make sure to ask the seller to give you more information about expenses and any sales made outside of Shopify.
You can make use of the Analytics available in the Shopify admin to get started. These numbers will be useful in determining average daily or monthly revenue information, as well as data about average order value and more in-depth information about customers.
It's important to know that Shopify does not calculate its merchant's expenses. For this reason, you should ask the seller to provide you with detailed information about their expenses.
Some things you may want to ask the seller to provide are:
- Invoices from Facebook or Google Adsense for advertising spend amounts.
- Invoices from Shopify.
- Invoices for app subscriptions such as Mailchimp, or any Shopify apps that charge a recurring fee.
- Cost of goods. The seller should provide you with information about the cost of the goods sold by the business.
Gathering this information from the seller will help you verify that the average monthly profits reported by the seller in their listing are accurate.
3. Examine past orders.
Go to the Orders section of the Shopify account to examine all past orders from the business. Some things you may want to check for in the Orders are the number of chargebacks, unfulfilled orders, or refunded orders.
While it's perfectly normal for an established store to have a small number of refunds issued or even the rare chargeback, it's very important that you double-check that all orders are marked as fulfilled by the seller.
If you notice many unfulfilled orders, be sure to ask the seller why. Once you become the new owner of the business, it's likely that customers could come to you for help. You can avoid this by inspecting the past orders to ensure that they've been fulfilled and paid for.
4. Understand the apps used by the seller.
Apps can be an important part of running a Shopify store. Many sellers make use of apps to fulfill orders, purchase shipping labels, or handle some marketing of the store.
Go to the Apps section of the Shopify admin to see which apps the seller has installed. Ask the seller any questions you have about these apps, what they're used for, and if they charge a recurring fee.
It's also important that the seller change account ownership of these apps to you. If there are order fulfillment apps being used, such as Oberlo, you can check the account information for yourself by heading into the app.
Not all apps require the seller to transfer ownership but ask the seller to double check that you will have access to any required apps before you're made the new account owner.
5. Vet social media accounts.
Social media followings are a valuable asset to an e-commerce business. If you're purchasing a business on Exchange on the basis that it comes with a strong social media following, you should ensure that the numbers the seller advertised matchup.
Once you have access to social media accounts, you can take a closer look at engagement and follower accounts to double check that there is value in purchasing these assets from the seller.
While there is no way to ensure 100% that the follower counts are quality, you can always take a look at conversations on posts, and take a closer look at the follower profiles to get a better idea of who the customers are.
6. Understand how to process payments.
Most businesses on Shopify use Shopify Payments to process payments through the online store's checkout. It's important to understand that Shopify Payments is only available if you reside in the United States, Canada, Australia, New Zealand, the United Kingdom, Ireland, Hong Kong, Japan, or Singapore.
You should also double check that the shop meets all the legal requirements to process payments using Shopify payments. Look over the Shopify Payments Terms of Service for your region here.
If you live outside of these supported countries, you can still process payments for the business, but you will need to find a supported third-party payment gateway. There are plenty of options supported by Shopify.
If the seller is already using a third-party payment gateway, ask them for more information about the sign-up process for that gateway to ensure that when you become the new owner of the business you can start processing payments right away.
7. Arrange supplier relationships and product licensing.
Some products require a reseller's license. If you're not sure if the products being sold by the business require a license, ask the seller if they have already obtained the legal rights to sell the products on the shop and whether or not this licensing can be transferred to you.
Ask the seller who supplies their products. If it is a third-party supplier, arrange to have the seller give you the contact information for the supplier to ensure that once you become the new owner you can order from the same supplier.
If you're purchasing a dropshipping store, you will most likely be using an app like Oberlo or Printful to fulfill orders. Dropshipping apps handle the fulfillment process for you, but you still need to ensure that the ownership of any dropshipping apps has been transferred to you. It is the seller's responsibility to make these changes for you.
8. Ask the seller about their customer support.
A great way of gaining insight into the business is to understand the needs of the customers. Ask the seller if there are any ongoing customer support issues that need to be addressed.
If there are any outstanding chargeback cases or returns that need to be arranged, it is the seller's responsibility to handle these before you are made the new owner. Otherwise, the seller should educate you on how to handle customer support issues.
Ending your inspection period.
The inspection period will end when you mark the items as accepted in your Escrow.com account or once the agreed upon time length of the inspection period has expired.
Once you accept, Escrow.com will release your payment to the seller. Someone from Exchange will be in touch with you as soon as possible letting you know that you've been made the new account owner.
It can take up to 3 business from the time you end your inspection period to being made the new account owner. During this time Exchange will make necessary changes to the store to ensure that everything's ready for you to successfully become the new owner.
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