What's your eCommerce business actually worth? (Hint: probably less than you think)
Sorry, there just isn't enough of a moat and leverage to warrant a high multiple
Ever wondered what your eCommerce side hustle is actually worth on the open market?
The truth might be a bit sobering.
I was reading about a skincare brand owner who's considering selling their business. It's a handmade, natural product line on Shopify that generated $75k in revenue last year with $35k profit. Pretty decent margins…even if scale is tiny.
They've stopped actively pushing the business, and monthly revenue has dipped to $2-3k/month, all from organic traffic. The business only requires about 5 hours of work per week.
So what's a business like that actually worth? Let's break it down.
Most online businesses sell for around 2-3x annual profit. This is a pretty standard multiple in the eCommerce space.
But there's a catch. Buyers look at current performance, not past glory. If you're currently doing $2-3k/month in revenue (let's call it $30k annually), and maintaining the same profit margin (around 47%), that's about $14k in annual profit.
At a 2-3x multiple, we're looking at a valuation of roughly $28-42k.
Not exactly retirement money, is it?
What's more concerning for potential buyers is the downward trend. When revenue is declining, it raises red flags. Buyers wonder:
Is the market shrinking?
Is competition increasing?
Has the product lost its appeal?
What will it take to reverse the trend?
All these questions create uncertainty, which buyers hate. And uncertainty drives valuations down.
Another important factor that came up in discussions is whether the owner's involvement is essential to the business. Since this is a handmade product, a buyer would need to either:
Learn how to make the product themselves
Hire someone to make it (eating into those profit margins)
Convince the current owner to stay on in some capacity
This dependency on the founder is what investors call "key person risk" and it significantly impacts valuation.
Some commenters suggested using platforms like Flippa, which has an AI appraisal service that might give a ballpark figure. But remember that these automated tools can't account for all the nuances of your specific business.
If you're thinking about selling your own eCommerce business, here are some key takeaways:
Your business is likely worth 2-3x its current annual profit (not revenue)
Declining revenue will hurt your valuation. Consider putting effort into stabilizing or growing the business before selling
Handmade or owner-dependent businesses often sell for less because they're harder to transfer
Having a clear growth plan can make your business more attractive, even if you haven't been executing on it recently
Low time commitment (5 hours/week in this case) can be a selling point if the business is truly that turnkey
The truth is, most small eCommerce businesses aren't worth as much as their owners hope. One commenter even suggested that businesses under $35k in annual revenue fall into the "personal hobby" category and may struggle to find serious buyers.
Buyers are typically looking for scale - businesses that can grow beyond their current state without requiring proportionally more effort.
So before you dream about cashing out, take a hard look at your numbers, your growth trajectory, and how dependent the business is on you personally.
That's the reality check many eCommerce entrepreneurs need to hear.