How Much is Your Ecommerce Business Worth?

by Michael Stearns from HEROweb on April 6, 2012

From time to time, I get emails from customers saying that they have decided to move on from having an online business and they are wondering if I can tell them how much their online business is worth.

Business valuation is a tough one and we certainly are no experts in that arena. But we do have some insights on the topic. Here are some of the factors that a prospective buyer will likely consider in determining what they will pay.

1. Customer Base

There is no question that a large and active customer base is a great asset. If you have 30,000 account holds on your website, that would likely have value to a prospective buyer. Building a customer base and continually communicating with them is an important practice on many levels.

2. Inventory

You need to consider whether you want to sell just your website or all the product inventory that goes along with it. Some buyers will be quite interested in your inventory and others will just want access to your customers.

3. Website

As you know, investing the money in a professional website as well as the time to build out all the content is significant. Buyers who are knowledgeable about what it involves to build a full-featured site will understand the value.

4. Domain Name

A great domain name could be worth as much as anything else you have to offer. Of course, you need to have a really awesome name. The market for domain names has declined from the fervor in the early 2000s, but a solid name still has value.

5. Brand Recognition

If you have been successful in building some recognition for your brand and business that will be worth a lot. If you have done nothing to contribute online and establish your brand in your industry, you likely won’t get much of a bump.

6. Revenue and Financials

As with any business transaction, the value often comes down to your financial statements. That is no different with an online business. Be prepared to show sales data and financials to prospective buyers. Here is a blog post from our friends at Practical Ecommerce that gets more into the financial valuation side of things:

http://www.practicalecommerce.com/blogs/post/840-eCommerce-Business-Valuation

7. Traffic and Search Placement

A buyer not only wants to understand your current financial position, but they are going to do their best to determine whether a business acquisition is going to grow and prosper in the future. A strong signal (assuming they are wanting to take over your website)  is your site traffic trends. If your traffic is consistently trending upwards, that is an important factor.

Related to your traffic is your current search engine placement for important phrases. If you can show that you have established your website in the search engines, that can be worth quite a bit to a buyer. We all know  that strong organic placement is not an overnight process!

Conclusion

One of the key elements for any successful business is a clearly defined exit strategy. Although it is very hard to determine exactly what someone else might pay for your business, we encourage you to start thinking about the factors we have listed so you have a compelling package to offer when the day comes for you to test the waters with putting your business on the market.

If you have sold or purchased an ecommerce business, I would be quite interested to hear your thoughts.

 

  • I'm a beginners and a newbie in business and after I read this article I”m interested for those tips and advice's. 🙂

  • There are two forms of value you can create with a business: revenue
    production – the cash you live on – and equity. The equity is the value
    of your business to others, after you settle company loans and
    obligations.

  • A lot of people venturing into eCommerce for the first time feel that
    they are saving vast sums of money by building their own site – and end
    up investing a significant amount of time – without necessarily
    achieving the results they were after. 

  • Online business are depend on many routs like domain , website position , website keyword etc.

  •  This 7 step is very useful for create any articles blog and news for share with all us by internet.

  • 1. Customer Base2. Inventory3. Website4. Domain Name5. Brand Recognition6. Revenue and Financials7. Traffic and Search PlacementThia seven idea is the best for eCommerce online marketing.

  • Thanks for sharing this informative post.

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