Ecommerce Valuation Multiples

December 31, 2020

1342021 eCommerce businesses are generally valued on a revenue multiple to reflect high growth potential and recurring or repeat revenue patterns. We use that multiple to determine the valuation or list price for the business.

How To Value And Sell An E Commerce Business Fe International

221 rows Multiples reflect the average price of a company when compared to a value.

Ecommerce valuation multiples. E-commerce companies usually have a longer gestation period and this results in investors focusing more on the topline in the immediate term. Revenue multiples for eCommerce businesses tend to be in the range of 07-3x. You will regret if you simply use rules of thumb profit multiple to calculate the selling price for your eCommerce business.

SDE Net Profit Owner WagesBenefits. Where the e-commerce business has a history of profitability an earning multiple is a convenient way to arrive at a companys valuation. Level of brand recognition.

Generally a business valuation would use a discounted cash flow methodology however because ecommerce businesses are slightly different to traditional mainly their high reliance on goodwill the accepted valuation method used is a multiple of earnings method. This uses the historical earnings of the business to determine a valuation. Quality e-commerce businesses that generate 1M of EBITDA per year will sell for higher multiples than businesses that make six figure profit.

Growth stage of the business. So an e-commerce business with 4 million in annual earnings and a 3x earnings multiple achieves a valuation of 12 million. 29122019 The majority of Ecommerce businesses doing under 1M in profit sell for between 25 X and 35 X their annual profit.

2452011 Profit multiples are a valuable tool to find a direction or a range of selling price but you cant rely on them to determine exact value of your business. Note the multiple is on revenue not GMV Gross Merchandise Volume. The two most common multiples to look at for an eCommerce business include SDE EBITDA and REV multiples.

We calculate the profit for the business using SDE Sellers Discretionary Earnings using this formula. 1122016 Most valuations of an e-commerce business look at the historical earningsthe net profit of the business for at least the last twelve monthsand apply a multiplier typically between 15 and 35 though some calculations put the multiplier as high as 5 to arrive at the companys valuation. However this valuation spectrum varies greatly by the quality of the business as well as its size.

On average that would mean that its annual profit was around 111000 300000 divided by 27 because the average multiple for that size is around 27x. 642021 That is referring to a multiple of the businesss profit. 1392019 In addition to a longer tenure older businesses are generally larger.

Here is how to understand this graph below. Customer profile and purchasing patterns. We provide enterprise value multiples based on trailing Revenue EBITDA EBIT Total Assets and Tangible Assets data as reported.

The eighteen companies in this data set are diverse. Average REV Multiple range. The next tier of profitability that heavily affect valuation is cresting 5M EBITDA.

Here are just some of the valuation drivers we examine when arriving at the earnings multiple. Valuation Multiples by Industry The table below summarises eVals current month-end calculations of trailing industry enterprise value EV multiples for US listed firms based on trailing 12-month financial data. 312021 Depending on the fundamentals of the e-commerce business most companies will garner an earnings multiple of between 25x to 4x.

642021 In general the larger the Ecommerce business the more it is worth. 3082015 Aviral Jain Director at American Appraisals says companies are typically valued on the basis of income discounted cash flows and the market trading or transaction multiples approach. However on median they marketplace companies generate 11bln in revenue with 18 YOY growth and positive EBITDA 112mm and cash flow 137mm.

Typical factors which are often assessed when determining the multiple for your business might include the volume of sales required to reach your revenue revenue distribution across products the cost base marketing spend and the multiples achieved in precedent deals. These can be dependent on. 2782018 Revenue multiples for marketplaces fell to 37x.

142021 As we have worked with multiple eCommerce businesses we have come to recognize some of the common valuation multiples an eCommerce business transacts at and is valued at. Businesses making over 250K in annual profit will be at the higher end of that valuation while smaller businesses 100K will be. Lets say that a business sold for 300000.

1102019 E-commerce businesses are valued using a variety of metrics. Lets quickly look at this in action.

How To Value And Sell An E Commerce Business Fe International