We get to see and evaluate a wide range of eCommerce businesses, both good and bad, as e-commerce business brokers. We get owners to come to us in every circumstance. We get to see many different businesses, whether they are expanding, contracting, or somewhere in between. eCommerce entrepreneurs frequently inquire about our valuation and potential sale price. We believe that the following eight factors constitute a million-dollar eCommerce business based on that experience and data:


1. Benefit

The main driving variable of 1,000,000 dollar online business is benefit. For e-commerce businesses, the multiple of earnings valuation method is the standard method for valuing them. This indicates that an eCommerce business's value will be proportional to its profit. Most likely, a buyer will pay two to three times earnings. This implies your web based business must make between $333,000 to $500,000 in net benefit each year to be esteemed more than $1 million bucks.


Because the multiple that is paid will be affected by a lot of different things, it is important to get a good valuation to find out how much your eCommerce business is really worth. For businesses under $5 million that are sold on the open market, we will use a multiple of two to three times as the benchmark.


2. Growth

If you could think of three examples: the one that is expanding, the one that is stable, and the one that is contracting; the expanding business will demand the highest price. The graph below best illustrates this. Sell when your website is still in its infancy or growing. An appropriate eCommerce platform will enable you to increase your business revenue.


Buyers are willing to pay more for a growing company because they anticipate future benefits and a quicker return on investment. When looking at financials, buyers typically assume a baseline trend and then project that trend into the future. Let's look at this scenario. Scarves are sold at Joe's online store. Over the past year, his store made $350,000 in net profit and $2,000,000 in sales. For the past year, Joe's business has been expanding at a rate of 2% per month.


If you put the business up for sale at a 3X multiple, the value would be $1,050,000. A buyer would then predict that the company will earn $443,000 in profit in year two and $596,000 in profit in year three using data from the previous year. basically allowing a buyer to recoup their investment in two years. To close deals faster go for a platform with a built-in quoting and selling solution.


If you want to sell, this will work as follows:


You may receive a higher offer or a faster deal; however, you should keep in mind that nothing in business is guaranteed. You might be sitting there thinking, "Why not hold onto it if this is going to happen in my business?" Although it is highly unlikely that a company will expand in this linear manner, it does provide insight into the buyer's perspective on acquisitions and valuations. "How can I get my money back and can I make that return on investment faster?" is their primary motivation. This will impact the valuation that they think of for a business.


3. Table Selection

A poker term, table selection refers to selecting a table where you will ultimately win more money because the other players are worse than you. In terms of e-commerce businesses, this means choosing a market segment with potential for growth, high margins, and a defended market position will ultimately increase your chances of getting a higher valuation.


A toy e-store created using an eCommerce solution we valued and that sold racing car products for kids is a real-world illustration of this. After the toy was released, the business did very well for two years. However, as demand for the product decreased, the business began to sharply decline. Your company has a better chance of reaching a million-dollar valuation if it uses a sales quoting platform to handle complex quoting requirements.


4. Age

Because the Internet is still young, technology evolves quickly, and trends change quickly, you can get a significantly lower price from a business that is one to two years old than from one that is more than five years old. In general, the more data and earnings history a company has, the lower its perceived risk of failure, and the higher its valuation.


5. Defensibility

The price will be higher the more defended your business is. Barriers to entry, income stability, traffic, and supplier sources are all considered defensible.