E-Commerce Traffic Channels & Affect on Valuations

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