In stock terms, using the scuttlebutt approach basically involves performing extensive research into a company talking to suppliers, customers, and just everyday people to find out if the company has brand recognition and if its products are well regarded. “I did a lot of work in the earlier years just getting familiar with businesses and the way I would do that is use what Phil Fisher would call, the ‘Scuttlebutt Approach.’ I would go out and talk to customers, suppliers, and maybe ex-employees in some cases. Warren Buffett provides an excellent quote that introduces the idea of scuttlebutt: The term “scuttlebutt” admittedly sounds a bit silly, but it is one of the foundations that many great investors rely on. Today, we’re going to take a due diligence lesson from the great Phil Fisher, and see how we can apply his due diligence ideas to investing in websites.
Scuttlebutt method how to#
There are many lessons that website investors can learn from successful traditional investors, and how to perform good due diligence is one of them. Still, even Empire Flippers and other top notch brokers do not give you the same kind of protections that a stock exchange would (for example, publicly listed stocks will often go through months of scrutiny and due diligence pre-IPO). On open marketplaces like Flippa, outright fraud is not uncommon (obviously going through a broker like Empire Flippers reduces this risk significantly). Also, if you invest in the stock market, there are often legal protections (depending on your jurisdiction) that simply don’t exist when buying websites. Typically, even the smallest listed company is significantly more transparent than any website you might buy. When investing in websites, due diligence is even more essential. penny stocks) are known for engaging in less than ideal behaviors (pump and dumps, outright fraud, etc.). After all, smaller listed companies sometimes use accounting tricks to boost (or lower) earnings and the smallest listed companies (e.g. On the other hand, if you’re looking for superior returns and you want to invest in individual companies (particularly small cap stocks), being able to perform strong due diligence will play a large part in your success. If you’re resigned to achieving average returns, you have the option of investing in index funds and putting due diligence aside the companies included in the index are usually well known enough that there’s little room for shady accounting or fraud, and besides, if you own an index fund, you’re suitably well diversified anyways. With traditional investments (stocks, real estate, etc.), performing good due diligence is often the difference between success and mediocrity. One of the most important skills that you can learn when it comes to investing your money in websites is good due diligence. Still, I value George’s points here and wanted to share them with you as a guest post. This is a tough topic – no blog post, podcast topic, or eBook is going to cover everything you need.
Today, we’ve asked George to dig into some of the tips and tricks he uses when it comes to due diligence.
If you haven’t seen it yet, I’d highly recommend checking it out for some interesting thoughts on the buying and selling of websites and online businesses. George Do is a website investor and the principal blogger over at. We had such a great response from George’s last post on the “Rise Of The Digital Asset Class” that we’ve asked him back again.
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