Deciding how to value your e-commerce business can feel overwhelming. You’ve poured in late nights, weekends, and every spare dollar—now it’s time to translate that effort into a number that reflects your business’s true worth and attracts serious buyers.

This guide breaks it all down. You’ll learn:

Why accurate valuation matters
Four EBITDA-based valuation methods (with examples)
Real-world multiple ranges
What buyers really care about (value drivers + red flags)
How to turn insight into action

Why Valuation Matters

Valuation isn’t just a number—it’s your strategic foundation. Here’s why getting it right matters:

Set realistic goals. A data-backed range tells you whether now is the time to sell or grow.
Attract the right buyers. Clear valuation signals confidence and professionalism.
Negotiate with leverage. Understanding the math behind your multiple helps you push back on low offers and hold your ground.

Core Valuation Methods for E-Commerce Businesses

1. Adjusted EBITDA × Multiple

The most common method. Adjusted EBITDA removes non-operational costs like:

Excess owner salary
One-time expenses (e.g., legal fees)
Personal expenses (e.g., travel, car, cell phone)

Typical Ranges:

Small Brands (<$5M Rev): 3× to 5× Adjusted EBITDA
Larger Brands (>$5M Rev): 5× to 8×+, especially with recurring revenue

Example:
$800K Adjusted EBITDA × 4× = $3.2M valuation

2. Tiered EBITDA Multiples by Size

EBITDA Range	Typical Multiple
Under $500K	2×–4×
$500K–$1M	3×–5×
$1M–$5M	4×–6×
Over $5M	5×–8×+

These ranges reflect real M&A deals in e-commerce. Growth, margins, and recurring revenue push you to the higher end.

3. Revenue Multiple

Useful for fast-growing DTC brands not yet fully profitable.

Base Metric: Net revenue (gross minus returns)
Typical Range: 0.7× to 1.5×
High-LTV or subscription models: 2×+

Example:
$5M net revenue × 1.2× = $6M valuation

4. Discounted Cash Flow (DCF)

Best for larger, stable brands with long-term cash visibility.

Projects cash flow 5–10 years into the future
Discounts future value using a risk-adjusted rate

Used less often, but helpful for strategic buyers assessing long-term ROI.

Real Benchmark Multiples

EBITDA Range	Typical Multiple
Under $500K	2×–4×
$500K–$1M	3×–5×
$1M–$5M	4×–6×
$5M+	5×–8×+

Adjust upward for:
High growth, strong margins, recurring revenue, brand equity

Adjust downward for:
SKU or channel concentration, weak margins, operational risk

What Buyers Really Look For

📈 Financial Health

Gross margins: 30–40%+
EBITDA/revenue growth: 10%+ CAGR
Low refund (<5%) and chargeback (<2%) rates

🌐 Traffic & Channel Mix

No single channel >40% of spend
Returning customer rate ≥30%
First-party data ownership

⚙️ Operational Maturity

Documented SOPs
Supplier diversification
Automation (inventory, support, marketing)

🧠 Brand & Community

Clear positioning
UGC, influencer support
High NPS and reviews

🚀 Growth Potential

New SKUs or verticals
Wholesale, retail, or marketplace expansion
Scalable tech stack

Common Add-Backs That Boost Valuation

Add-backs improve your adjusted EBITDA and your multiple:

Owner salary above market
Personal expenses (car, travel, etc.)
One-time legal, marketing, or consulting fees
Event or launch-related costs

📝 Tip: Keep receipts and clear documentation. Buyers will dig during diligence.

Red Flags That Lower Your Multiple

Address these before going to market:

1 SKU or customer = >30% of sales
Over-reliance on paid traffic with poor LTV
Stale inventory (90+ days unsold)
Unreconciled books or cash-basis accounting
Legal issues or platform suspensions

Next Steps: How to Turn Valuation Into Action

Benchmark your metrics against similar exits
Build a valuation model using EBITDA + revenue methods
Get a QoE (Quality of Earnings) report to validate
Map out a 6–12 month plan to increase margin, retention, and scale
Stay exit-ready with clean books, updated SOPs, and materials

Final Thoughts

Valuation is both math and story. A clear EBITDA multiple, supported by strong metrics and narrative, gives you leverage and credibility. Whether you’re selling in 6 months or 2 years, understanding your value is the first step.

Want help? At Merge, we help founders: