This document provides information about selling ecommerce businesses. It discusses why planning ahead for an exit is important and outlines steps business owners can take to make their business more sellable and valuable. These include growing the business in a stable niche, documenting systems and finances, building defensible intellectual property, diversifying sales channels and products, and establishing efficient automation and a strong team. The document also explains how to value an ecommerce business using Seller's Discretionary Earnings multiples and gives an example of a $2.5 million business valuation. It recommends using a qualified brokerage to market the business to buyers and help structure a deal.

1. Ben Leonard
ben@ecombrokers.co.uk
www.ecombrokers.co.uk
Selling Your Ecommerce
Business

2. Selling Your Ecommerce
Business
Make your business sellable and valuable
www.ecombrokers.co.uk
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3. Ben Leonard
❑ Founder of Beast Gear. Mid-7-Figure
international brand. First exit in 2019
❑ Brand Builder
Consultant. Been there. Done it. Still doing
it.
Who Am I
Who Are We?
Allison Walker
❑ > 20 years of M&A experience starting in
pharmaceuticals
❑ MD & owner of Mint Accounting - Fellow
Chartered Accountant (FCMA)
• Specialising in Ecommerce Accounts
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4. About Us
“Why sell your
ecommerce business”
Wrong Question
❑ Because ultimately one day you’re probably
going to sell.
❑ You need the money
▪ For a new project
▪ To sail around the world
▪ To live a life of leisure
❑ Your business has almost peaked
▪ Get out while you’re growing, before you max-out
growth!
“Why make your ecommerce business sellable”
❑ Time to move on
▪ You no longer have the time or the inclination
▪ You don’t have the resources to scale it
❑ Your business is in demand
▪ It’s valued highly and you can sell it for great money
www.ecombrokers.co.uk
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5. Why Plan
Now?
❑ You cannot wake up and decide to sell immediately
❑ You can wake up (now) and decide to prepare
❑ You can wake up and decide to implement the plan you
have to take your sellable business to market
❑ Orienteering without a map…is not a good idea
❑ Get your business valued now
❑ This gives you the foundations of a plan – where to go from here
▪ Work with an expert to make the business sellable and valuable
❑ This means you know what you’re dealing with when aggregators come to
you
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6. Timing
❑ Growing, but not maxed out
Worked Example – A $2,500,000 business
Stable
❑ Favourable niche
❑ No blackhat
❑ Transferable
Documented
❑ Systems and processes
❑ Financial docs
❑ Tax docs
❑ Company formation docs
Defensible
❑ Brand identity
❑ Trademarks
❑ Patents
Diversified
❑ Channels
❑ Markets
❑ SKUs
❑ Traffic
Suppliers
❑ Relationships
❑ Standards
▪ Quality
▪ Enviro/Social
Efficient
❑ Automation
▪ PPC
▪ Inventory Management
▪ Email flows
▪ Chat bots
❑ Team
▪ Social media
▪ Email marketing
▪ Amazon Account management
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7. Worked Example – A $2,500,000 business
Go to market price - $2,497,500
Revenue - $1,800,000
Seller’s Discretionary Earnings - $450,000
How did we arrive at a
$2.5MM valuation?
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8. Worked Example
A $2,500,000 business
❑ Multiply trailing 12-month performance by a
multiple
❑ Performance?
▪ EBITDA – Earnings before Interest, Taxes,
Depreciation, and Amortization
▪ Usually for larger businesses / traditional
acquisitions
▪ SDE – Seller’s Discretional Earnings
▪ Common in eCommerce
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9. Worked Example
A $2,500,000 business
❑ How do we value a business? - For simplicity:
▪ Net Income + Add-Backs + Adjustments = Seller’s Discretionary
Earnings (SDE)
▪ SDE x Multiple = Price of the Business
This does not include landed cost of sellable inventory on hand at the time
of the deal! ▪ Add-Backs
▪ Personal related discretionary expenses – phone, travel,
salary, health insurance, office costs
▪ One-off costs that will not be repeated – IP, video,
photography
▪ Repeated costs that are not applicable
▪ Adjustments
▪ Recognise change in P&L
▪ COGs, profit, shipping method etc.
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10. How is an Ecom
business valued?
❑ Multiples
▪ If SDE is $100k, 2 Yr old business, diversified, growing. Probably get
3-4.5x
▪ If SDE is $500k with massive off amazon sales, lots of IP, massive
growth and its 5 yrs old - could be 4-7x
BUT
It all depends on the overall deal!
❑ $2mm SDE
▪ $12.6mm cash at closing + an extra guaranteed $700k after 12 months.
▪ IF in the first year and the 2nd year after closing the SDE exceeded
$2mm then the seller received 50% of the increment each year
▪ Guaranteed 6.65x but attractive earn outs!! inventory paid separately!!
This suited the seller who saw the benefit of the earn out
❑ $383k SDE
▪ 3.5x 100% cash at closing = $1.34mm upfront…all done and dusted.
Suited the seller who wanted to get it done and move on
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11. Worked Example – A $2,500,000 business
Go to market price - $2,497,500
Revenue - $1,800,000
Seller’s Discretionary Earnings - $450,000
How did we arrive at a
$2.5MM valuation?
• $450k * 5.55 = $2,497,500
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12. Timing
❑ 4 year old business w/
consistent growth
❑ Clear opportunities for further
growth
▪ International markets
▪ Products in
development
Stable
❑ Favourable niche
▪ Baby
▪ Home/Garden
▪ Sports/Outdoors
▪ Toys/Games
❑ No blackhat
❑ Transferable
▪ Systems and Processes
▪ Team
Documented
❑ Systems and processes
❑ Financial docs
▪ Audited accounts
❑ Tax docs
▪ All in good standing
❑ Company formation docs
Defensible
❑ Brand identity
▪ Raving fans on and off
Amazon
▪ Social media buzz
❑ Trademarks
▪ In USA, Europe, China
❑ Patents
▪ Own designed product
Diversified
❑ Channels
▪ Amazon USA
▪ Walmart
▪ D2C website
❑ Markets – USA, UK, Easy
expansion to Europe
❑ SKUs – 7 SKU’s
❑ Traffic – Facebook, Google, Insta
Suppliers
❑ Relationships
❑ Visited 3 times in China
❑ Standards
▪ Quality
▪ Orders inspected
and passed 99%
▪ Enviro/Social
▪ ISO9001
▪ ISO14001
Efficient
❑ Automation
▪ PPC – specialist agency
▪ Inventory Management - sostocked
▪ Email flows - Klaviyo
▪ Chat bots - sellerchatbot
❑ Team (freelancer or employed)
▪ Social media
▪ Email marketing
▪ Amazon Account management
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13. Due Diligence: process by which buyer verifies that what you say is true
Commercial
▪ Sales
▪ Marketing
▪ Manufacturing
Due
Diligence
Financial
▪ Tax
▪ Payments
▪ Accounts Legal
▪ Intellectual Property
▪ Contracts
▪ Insurance
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14. How Can you Sell?
❑ You can go direct to a buyer, or they approach you
▪ Initially seems wonderful!
▪ Lower price, terms and structure to suit the buyer
▪ Hard work
❑ You can ‘flip’ it
▪ Lower valuation
▪ Ridiculous fees
▪ Poor service
❑ You can approach a ‘consultant’
▪ Double-dipping, you end working directly with a buyer
❑ You can ‘list’ it on a marketplace
▪ “No fees” – not true
▪ You’re on your own
▪ Poor service
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15. Use a qualified
brokerage
❑ Ideally experts with lived experience on all
sides
▪ Business owners, M&A, Accountancy
❑ Work with you until YOU are ready (not the
other way around
❑ Get your business ‘built to sell’ and ready for a
buyer to analyse it
❑ Organise and calculate the number, and add value
❑ Position the business properly
❑ Market the business to the right buyers
❑ Help you structure the deal to suit you
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16. Planning Ahead
❑ The worst thing you can do is not plan for an eventual exit. Even if it isn’t
currently on your agenda
❑ Find out what your business is worth now. Then reverse engineer the exit, with
suitably qualified experts.
Your business
❑ No.1 mistake people make is not planning, then getting an offer and going it
alone or using a generic service
We all hire experts to help us in our businesses – PPC, Intellectual Property, Legal
issues.
Why not do it with your most valuable asset?
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17. Contact us:
ben@ecombrokers.co.uk
www.ecombrokers.co.uk
Get 10% off our fees for Amafest Delegates 17
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18. Ben Leonard
ben@ecombrokers.co.uk
www.ecombrokers.co.uk
Selling Your Ecommerce
Business