Valuation isn’t rocket science—but it has rules. This FAQ covers the multiples buyers use, the process they follow, and the pitfalls that catch unprepared sellers.
Understand Multiples and Pitfalls
Quick Answers (Top 5 Most Common Questions)
1. What multiple is standard for ecommerce?
2.5x to 3.5x annual SDE is standard. Premium businesses reach 4.0x. Weak businesses drop to 1.5x-2.0x.
2. How do buyers calculate my value?
Buyers calculate SDE, then score five factors: growth, margins, traffic diversification, owner hours, and age. The score determines the multiple. Full guide: SDE calculation.
3. What’s the fastest way to increase my multiple?
Reduce owner hours. Document SOPs and train a VA to handle daily operations. Moving from 30+ hours to under 10 weekly adds 0.4x to your multiple in 90 days.
4. What’s the most common seller mistake?
Underreporting SDE by not documenting add-backs. Most sellers undervalue their business by 15-25%.
5. Should I use a broker?
For businesses over $100K, a broker often recovers their 8-15% fee through a higher sale price. See our broker guide.
Advanced Valuation Questions
6. What’s the difference between revenue and SDE multiples?
Revenue multiples (0.5x-1.0x) ignore margins and are misleading. SDE multiples (2.5x-3.5x) reflect cash flow and are accurate. Always use SDE.
7. How do I document add-backs?
Create a spreadsheet: every add-back item, the amount, and supporting documentation. Present during due diligence. Undocumented add-backs get rejected.
8. Does traffic quality affect my multiple?
Yes, significantly. Organic and email traffic (owned) is worth more than paid and social traffic (rented). A store with 60% owned traffic commands a 0.3x-0.5x higher multiple.
9. How does niche affect valuation?
Niche sets the baseline. Consumables and beauty: 2.8x-3.5x. Fashion: 2.5x-3.2x. POD and gifts: 2.0x-2.5x. Strong execution adds a premium in any niche.
10. What intangibles add value?
Email list ($1-$3 per subscriber), content library ($500-$2,000 per ranking post), brand equity, and customer reviews all add value beyond the SDE formula.
Timing & Process Questions
11. What happens during due diligence?
Buyers verify every claim: revenue, traffic, margins, supplier contracts, customer data. Any discrepancy becomes a negotiation point. Accuracy matters.
12. How long should I prepare before selling?
At least 6 months. This gives you time to diversify traffic, reduce owner hours, document SOPs, and build your email list. Preparation directly increases your sale price.
13. What’s the best listing strategy?
Price 5-10% above your target to leave negotiation room. Buyers expect to negotiate. Listing at your exact target means settling below it.
Risk & Red Flags
14. What risks do buyers discount for?
Platform dependency, customer concentration, supplier dependency, and founder dependence. Each risk factor can reduce your multiple by 0.2x-0.5x.
15. What’s the #1 deal killer?
Inaccurate financials. If buyers find discrepancies between your claims and reality, trust collapses. The deal usually dies. Be accurate from day one.
Understand Multiples and Pitfalls