How To Value An E-commerce Business (Buyer’s Guide 2025)

You browse through e-commerce business for sale listings and finally land on what looks like a perfect, established online store you would want to acquire.

It makes money, looks promising, and seems like a good investment.

But you stop and ask yourself: What is this business really worth? This question is one of the most important steps in buying any e-commerce business.

If you pay too much, you risk losing money. If you pay too little, you might miss out because the seller walks away.

E-commerce business valuation is about looking at numbers, history, and future potential.

In this article, we'll explain how you can value an e-commerce business using simple methods and practical checks.

What “Value” Means in Buying An E-commerce

Before you do anything deep, you must understand what “value” means when it comes to buying an e-commerce business.

Simply put, value refers to how much you would pay for the business now, based on its past and expected performance.

This value usually depends on earnings, risks, assets, growth, and how easy or hard it will be to run.

As a buyer, you must think about what returns you expect, the risk you take, and how much effort you put in.

Key Methods To Value the Business

When it comes to e-commerce valuation, there are several messages you can use. In this section, we’ll walk you through the most common methods people use to value e-commerce businesses for sale:

Seller’s Discretionary Earnings (SDE) Multiple

The SDE method of valuation is common for smaller e-commerce businesses (under about US$1-5 million).

For starters, SDE is the net profit plus the owner’s salary and any discretionary expenses that a new owner wouldn’t need to continue paying (like personal travel or one-time software tests).

This method is suitable for smaller businesses, given that they're often “owner-operated,”. As such, SDE gives buyers a sense of how much income they can take home if they run it themselves.

To use this method, you add back things that a new owner might not use. Then you multiply that by a factor (the “multiple”) based on risk, size, growth, etc.

Many e-commerce acquisition brokers agree that businesses like this often sell for 2.0× to 4.0× SDE.

NOTE that key factors such as consistent growth, low owner involvement, diversified traffic sources, strong supplier relationships, and repeat customers can push the multiples even higher.

Likewise, declining sales, heavy dependence on one product, high seasonality, or an owner who works 40+ hours a week in the business can push the multiples lower.

The formula for valuing a business using SDE is:

Valuation=SDE × SDE Multiple

EBITDA Multiple (EBITDA E-commerce Valuation)

This is the perfect valuation method to use for larger businesses. EBITDA is an abbreviation for Earnings Before Interest, Taxes, Depreciation, and Amortization.

The good thing about this valuation method is that it gives you a clear picture of the business’s profitability.

To put this method into action, you simply take the real profits from operations, excluding non-operational costs. Then you assign a multiple.

Flippa explains that the EBITDA multiples for solid e-commerce businesses may be higher (ranging from 3x to 6x). However, the exact multiple depends on the company’s scalability and industry.

To calculate value with the EBITDA method, use this formula:

Valuation=EBITDA × EBITDA Multiple

Revenue Multiple

Sometimes, profit is irregular or very low (for example, if the business reinvests heavily in ads to grow fast).

In those cases, buyers may look at revenue instead of profit.

Here’s how it works: Take total revenue and apply a small multiple, usually 0.3× to 0.5× revenue for traditional e-commerce.

This method is particularly great when valuing venture-style growth businesses with rapid revenue expansion.

It also works for brands with strong market share or unique positioning but thin short-term profits.

Unfortunately, revenue multiples can overvalue a business if margins are weak.

Take, for instance, a store with $1M in sales at a 0.5× multiple is worth $500K (but its profit is only $50K).

In this case, you’re effectively paying 10× earnings, which is high for most e-commerce deals.

When using revenue as the base, the formula is:

Valuation=Revenue × Revenue Multiple

Discounted Cash Flow (DCF)

DCF is a more advanced valuation method where you forecast the business’s future cash flows and discount them back to today’s value.

This particular method gives you a valuation based on expected future performance, not just past results. This makes it ideal for:

Businesses with stable, predictable revenue (like subscription models).

Businesses with clear growth investments (e.g., proven expansion into new geographies or product lines).

That said, this method isn’t without its downsides. Downsides. For instance, it requires a lot of assumptions about growth, ad costs, and market trends.

Also, small errors in forecasting can swing the valuation massively.

Because of the challenges, most e-commerce buyers only use DCF as a “supporting check” rather than the main valuation method.

Step-by-Step Valuation Process You Should Do As a Buyer

Below is a simple breakdown of the steps you should take to value an e-commerce business:

Step 1. Get Financials For Last 2-3 Years

The first step is to get reliable business financials for the past two to three years. Ask for the profit and loss statements, bank statements, and tax returns if possible.

You should also check sales reports from platforms like Shopify or Amazon and advertising reports to confirm expenses.

Always compare these documents against each other so you can spot inconsistencies or missing numbers.

Step 2. Normalize The Earnings

Once you have the financials at hand, your next step is to normalize the earnings.

This means adjusting the profit to remove owner perks, personal expenses, and one-time events.

For example, if the seller has been running personal travel through the business, you add that back.

Your goal here is to see what the business would earn under normal, ongoing operations.

Step 3. Estimate SDE or EBITDA

Next, you need to decide whether to calculate SDE (Seller’s Discretionary Earnings) or EBITDA.

SDE is used for smaller owner-operated businesses and includes the owner’s pay and perks.

EBITDA is better for larger companies with staff and professional management because it gives a cleaner view of operating profit.

Choose the one that best matches the size and structure of the business you’re reviewing.

Step 4. Select Comparable Multiples

Now is the time to select comparable multiples. Look at recent deals in the same industry and size range.

Brokers and marketplaces often publish ranges such as 2× to 4× SDE for smaller businesses, or 3× to 6× EBITDA for larger ones.

The idea is to find a realistic baseline from the market, not just rely on what the seller is asking.

Step 5. Adjust Multiples for Risk And Strengths

Once you have a baseline multiple, adjust it based on the strengths and risks of the business.

A store with repeat customers, diverse traffic sources, and low owner involvement deserves a higher multiple.

A business that relies on one supplier, has heavy seasonality, or depends entirely on paid ads, should be valued at the lower end.

Adjusting the multiple is where you account for risk.

Step 6. Check Revenue Trends And Forecasts

You should also study the revenue trends and forecasts.

Look at whether sales are growing, flat, or declining.

Ask if there are new opportunities, like expanding into new products or markets.

At the same time, check if costs like advertising or shipping are rising faster than revenue.

A growing top line with shrinking margins is a warning sign.

Step 7. Inspect The Business Operations

Beyond the numbers, you’ll also need to inspect the operations of the business you plan to buy

Review how inventory is managed, how suppliers are contracted, and how orders are fulfilled.

Check if there are staff or contractors and whether the tech stack (like the store platform and ad accounts) is transferable.

The easier the operations are to run, the more valuable the business becomes.

Step 8. Factor In The Asset Values

Physical inventory, domain names, trademarks, customer lists, and proprietary software or systems may add value on top of earnings.

Inventory should usually be added at cost if you’re taking it over at closing.

Step 9. Don’t Forget About Non-financial Risks

Consider things like seasonality, refund rates, chargebacks, regulatory risks, or heavy dependence on one platform like Amazon or Facebook ads.

Even if the numbers look good, these risks can lower the true value of the business.

Step 10. Compute The Value

Start with normalized SDE or EBITDA, multiply it by the adjusted multiple, and then add the value of assets like inventory.

If there are liabilities or risks that could impact cash flow, subtract or discount for those.

The result is a fair valuation range you can use as the basis for your offer.

What Affects the Multiple (Value)?

The multiple (SDE×, EBITDA×, or revenue×) depends on many things. Here are what you must watch closely:

• Profitability and margin stability. If margins are high and consistent, business is safer, so the buyer pays more. If profit swings wildly or depends on a few big orders, the multiple is lower.

• Growth rate. If sales and profits have grown steadily year after year, buyers expect future growth, so the value goes up.

• Diversification of revenue. If there are many products, many suppliers, many customers, and many traffic sources, the risk is lower. If almost all revenue comes from one product or supplier, the risk is high.

• Traffic and marketing sources. If traffic comes organically (search, referrals) vs all from paid ads. Organic traffic is more stable. If SEO/trends can change, that matters.

• Age of business. Older businesses with a history (2-5 years or more) show a track record. Young ones may have a higher risk.

• Customer retention. How many repeat customers? How loyal are they? If customers buy again, over long periods, that adds value.

• Operational simplicity. How easy is it to run? Does it need special skills, or is it all documented? If you, as a buyer, have to learn a lot or depend on one person, that lowers the value.

• Inventory and supply chain. How current is the inventory? Is there debt tied up? Are suppliers reliable? How much stock is at risk (obsolete, spoiled, float)? These affect value.

• Brand, IP, domain, trademarks. If the business has brand recognition, trademarks, and a loyal following, that adds.

• Risk factors. These include competition, regulation, customer service/returns, fraud, platform dependence (if you depend on Amazon or Facebook, etc.), and seasonality.

Real Data & Benchmarks For Valuing An E-commerce Business

In this section, we’ll look at real numbers you can use as benchmarks to help you pick safe multiples:

#1. According to Finerva, in H1 2024, the median EBITDA multiple for e-commerce companies was about 10×.

#2. According to BizBuySell data, from 2020 to 2024, websites & e-commerce businesses had average earnings multiples around 3.3× SDE, and revenue multiples around 1.1× revenue for sold businesses.

#3. FE International says many small to mid-sized e-commerce companies often sell for 4.0× to 6.0× SDE or EBITDA, depending on size and strength.

These numbers show that small businesses often have lower multiples. Bigger or more stable ones get higher multiples. Use data for businesses similar in size, niche, and geography when comparing.

Common Mistakes Buyers Make In E-commerce  Valuations

Before making an offer, it’s important to be aware of the common mistakes buyers often make when valuing or reviewing an e-commerce business.

These include:

• Relying only on revenue growth: High growth but poor margins or high costs can hide losses.

• Forgetting hidden expenses: Owner perks, inflated salaries, excess shipping or advertising costs.

• Ignoring the traffic quality: Cheap traffic that yields little profit is not worth as much as smaller traffic that is loyal and converting well.

• Overlooking supplier risk: If one supplier fails, goods stop. If there is no backup, the value is fragile.

• Not having proper legal/IP/ownership documentation: If brand, content, or domain ownership is messy, the buyer may face trouble.

Example Of Real-Life E-commerce Business Valuation

Here is a simple example to show you how numbers work when it comes to valuing an e-commerce business…

Suppose you find an e-commerce store with these normalized earnings (SDE) of $200,000 per year.

It has been running for 3 years with steady growth. It has multiple product lines, good customer retention, and low supplier risk.

You examine data for similar businesses and find SDE multiples of 3× to 5× in similar cases.

You might value it at:

• Low end: $200,000 × 3 = $600,000

• Mid: $200,000 × 4 = $800,000

• High: $200,000 × 5 = $1,000,000

Then you adjust: Suppose inventory is old, so you subtract some value. Or the brand is strong, so you add. Final offer might be ~$750,000.

If instead the business had normalized EBITDA of, say, $500,000, then an EBITDA multiple of 8× would give $4,000,000.

But the buyer must check whether the business really earns that and the risks are low.

Valuing An E-commerce Business Frequently Asked Questions:

Valuing a business can feel tricky, so let’s clear up some of the most common questions buyers ask:

Is a business worth 3 times its profit?

A business can be worth three times its profit, but it depends on the type, size, and risk. For small e-commerce companies, sellers often use a multiple of 2× to 4× Seller’s Discretionary Earnings (SDE). A stable business with steady growth may justify 3× or more.

What are the EBITDA multiples for e-commerce?

EBITDA multiples for e-commerce businesses vary by size and stability. Smaller online stores may sell for 4× to 6× EBITDA, while larger, established e-commerce firms can reach 8× to 12× or more. In 2024, the median global EBITDA multiple reported for e-commerce was around 10×.

How to calculate the value of an online business?

To calculate the value of an online business, start with normalized earnings such as Seller’s Discretionary Earnings (SDE) or EBITDA. Then apply a multiple based on market data and risk. For example, if SDE is $200,000 and the fair multiple is 3×, the value is $600,000. Add assets, subtract liabilities.

What factors increase the value of an e-commerce business?

Strong profit margins, steady revenue growth, repeat customers, and diverse traffic sources all raise value. A well-known brand, reliable suppliers, and simple operations also help. Buyers pay higher multiples when they see low risk and consistent long-term potential.

Do e-commerce businesses with Amazon or Shopify stores have different values?

Yes, platform dependence affects value. Stores tied heavily to Amazon may face a higher risk due to strict policies and competition. Shopify stores with owned traffic and loyal customers often sell for higher multiples because they have more control and independence from platforms.

Is revenue or profit more important when valuing an online business?

Profit is more important because it shows what cash the business actually produces. Revenue matters too, but high sales with thin margins may not create strong value. Buyers focus on profit first, then look at revenue growth to gauge future potential.

The Bottom Line

Valuing an e-commerce business is a crucial step in your acquisition process. You want to start with profit (SDE or EBITDA) and apply a realistic multiple, then adjust for risks like traffic dependence, supplier stability, and customer diversity. Always confirm financial records and review recent sales data for context.

Remember, your goal is not to get the cheapest deal, but a fair price that sets you up for growth. With the right process, you can make smart offers and avoid costly mistakes.

Your next e-commerce business acquisition should set you up for real success. With our proven acquisition process, we can help you find, value, and acquire a profitable e-commerce business in just 30 days. Check out our EcomAcquire services to see how we can guide your next purchase.