E-Commerce Business Valuation Calculator

Mark Woodbury

Mark Woodbury

Mark is a Co-Founder of Upward Exits. He is a serial entrepreneur with experience in financial modeling, mergers and acquisitions, and online business ventures. When he isn't working or reading, you'll find Mark at the beach or in the mountain with his dog Heisman
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Valuing any business is part art and part science. There are constant changes in the marketplace the make assigning a value to any type of asset a tricky task. This is also the reason that the stock market can move 30% in one direction or another in any year. Simply put, assets change value on their performance and based on the size of the buyer pool. Only by having a narrow focus on a certain market can any investment banker or broker have an idea of what businesses will sell for. For that reason, we recommend to use calculators (including our own) as nothing more than a guideline.

E-Commerce Traffic Channels & Affect on Valuations

The e-Commerce businesses that sell for the highest valuation multiples will have multiple sales channels and traffic channels. In exploring this further, I’ll make a representation of two hypothetical companies that are the same age, sell the same products and require the same amount of time from the operator.
eCommerce

Company A:

  • $10M in Revenue, $2M in EBITDA
  • 20% or revenue comes from Amazon FBA
  • 20% of revenue from wholesale
  • 10% of revenue from Walmart.com
  • 50% of revenue through the e-Commerce website
    • Website gets 30% of traffic from SEO (organic traffic)
    • 20% from social media
    • 20% from paid search
    • 20% from email
    • 10% from affiliates and other channels
  • 3PL logistics and Amazon FBA fulfill all orders

Company B:

  • $10M in Revenue, $2M in EBITDA
  • 100% of revenue comes direct to the website
    • 80% of website traffic comes from social media marketing.
    • 15% from email marketing
    • 5% of traffic from other sources

Even though these two companies have identical revenue and net profitability, Company “A” will sell for 30-50% more money than company “B”. Similar to diversifying a portfolio of stocks, having diversified traffic channels and sales channels in an e-commerce business mitigates risk and increases business stability.

E-Commerce Valuation Calculator

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Order Fulfillment

How are orders fulfilled?

Amazon FBA
Third Party Logistics (3PL)
Order’s fulfilled in house
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Private Label

Are your products proprietary or do you resale others products?

Proprietary products
Resell others products
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Number of Products

How many SKUs does your business sale?

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Sales Channels

What sales channels does your business use? Select all that apply

Amazon
Walmart.com
Etsy
Wholesale
Website
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Traffic Channels

What channels represent more than 20% of your website traffic?

Social Media Marketing
SEO
Influencers
Affiliate Marketing
Email
Search Engine Marketing
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Business Age

How many years old is your business?

0-2 years
3-5 years
5+ years
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Annual Profit

How much net profit did the business make in the last calendar year?

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The final estimated price is:

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Pending Risks & How They Affect e-Commerce Valuations

The most common risk that faces an e-commerce business is dependency on one sales channel and/or traffic channel. Other prominent risks that affect valuation are:

  • Dependency on a small number of suppliers.
  • “Product of the day” companies.
  •  Sector specific risks
  • Low AOV and low CTV businesses

Related

If you are new to the idea of selling your e-commerce business and looking for where to start, have a look at our Guide to Selling an Ecommerce Business article to learn about what to expect.

Valuation Changes By Business Size

Businesses that have a 5+ year stable tenure will generally sell for higher valuations and quicker than businesses that are relatively new. In addition to a longer tenure, older businesses are generally larger. Quality e-commerce businesses that generate $1M+ of EBITDA per year will sell for higher multiples than businesses that make six figure profit. The next tier of profitability that heavily affect valuation is cresting $5M EBITDA. These businesses that generate over $5M in profit will generally see attention from larger corporate buyers and boutique private equity firms. This increase in competition from buyers drives multiples and deal terms in favor of the sellers. Generally speaking, businesses in this arena will sell for 4-6 X EBITDA while it is very rare for businesses under $5M EBITDA to see  a 4X valuation.

If you would like to learn more about valuation, read our article on the standard valuation multiples for e-commerce businesses.

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