Model the per-order economics that decide whether an online store is worth buying — GMV, contribution margin after fees and CAC, and an SDE-multiple valuation.
Online stores — whether Shopify-native or Amazon FBA — are valued on a multiple of seller's discretionary earnings (SDE): the profit a single owner-operator takes home after all costs and add-backs. Because most small e-commerce businesses are owner-run, contribution margin after fees, COGS, and advertising is the practical proxy for SDE used here. The multiple is then a function of brand strength, channel diversification, and how dependent the business is on paid acquisition.
The default 3x SDE is a fair midpoint for a stable FBA brand. Diversified, branded businesses with strong repeat rates trade higher (3.5–4.5x); single-product, ads-dependent stores trade lower (2–2.8x).
| Metric | What it means | Benchmark range |
|---|---|---|
| Contribution Margin | Profit per order after all variable costs + CAC | >20% strong; 10–20% workable; <10% fragile |
| Platform / FBA Fees | Referral + fulfillment as % of AOV | 15–25% on Amazon FBA |
| COGS | Landed product cost as % of AOV | 25–40% typical |
| Repeat Rate | Share of orders from returning customers | >30% reduces ad dependence |
| 1st-Order Margin / CAC | Whether you profit on the first order | >1x ideal; <1x relies on repeat |
| SDE Multiple | Equity value as a multiple of annual SDE | 2.5–4x for most FBA brands |
Verify revenue and fees directly inside the seller's Amazon Seller Central or Shopify admin — never from a spreadsheet alone. Pull product-level profitability: a store can look healthy in aggregate while one hero SKU subsidizes a dozen losers, and that SKU's ranking or supplier is the real asset you're buying. Check inventory age and any stranded or aged stock that ties up cash. Review the advertising account for ACoS trends — rising ad costs to hold the same revenue is a sign the organic ranking is decaying. Finally, confirm supplier relationships and whether they transfer, plus any trademark, Brand Registry, or account-health issues that could suspend the listings post-close.
A store doing $2M in GMV at 8% contribution margin generates less owner profit than one doing $1M at 22%. Amazon fees, advertising, and COGS can consume the vast majority of revenue, so a high GMV figure tells you almost nothing about what the business is worth. Always work down to the per-order contribution — the number above — before anchoring on a price.
Use the Working Capital Cycle tool to model how much cash inventory will tie up as you grow the store.
An editable Excel workbook — 5-year income statement, balance sheet, cash flow, DCF + exit-multiple valuation, and a deal tab with debt schedule, IRR & MOIC. Pre-filled with the inputs above; every assumption recalculates.
A good acquisition model connects operating drivers to cash flow, debt capacity, and the price you can afford. Use this guide with the calculator to move from a seller story to a buyer-grade view of risk and return.
Seller numbers often include owner choices, one-time costs, unusual salaries, and expenses that may or may not continue after closing. Normalize earnings before applying a multiple, then document each add-back so the lender, investor, or seller can challenge it clearly.
For e-commerce, normalize gross margin after freight, refunds, marketplace fees, payment processing, fulfillment, and ad spend.
The right drivers depend on the business model. For this category, pay close attention to gross margin, contribution margin, paid acquisition efficiency, inventory turns, return rate, marketplace concentration, and supplier reliability. Small changes in those assumptions can move cash flow more than the headline revenue number suggests.
Use the calculator as a first pass, then pressure-test downside cases. A deal that only works in the base case usually needs a lower price, more seller financing, or a more conservative debt structure.
Most buyers focus on price and ignore the cash needed on day one. Inventory, receivables, deposits, payroll timing, and vendor terms can make a profitable business feel cash poor after closing.
Debt capacity should be based on durable free cash flow after owner replacement cost, taxes, capital spending, and working capital needs. If the debt service coverage ratio is thin, the deal may require more equity even if the multiple looks reasonable.
Before you issue an LOI, look for aging inventory, platform policy risk, rising ad costs, weak supplier contracts, poor review quality, and revenue that depends on heavy discounting. These do not automatically kill a deal, but they should change the diligence plan and the structure of the offer.
The safest offers tie price to evidence. Use seller notes, earnouts, holdbacks, working-capital pegs, and closing conditions when the risk is real but still measurable.
Use recent comparable deals only as a starting point. The right multiple depends on durability, owner dependence, growth, margin quality, customer concentration, and how much debt the business can safely support.
Earnings and free cash flow matter most for most small acquisitions. Revenue multiples can help in software, content, and high-growth models, but they still need to reconcile to profit and cash conversion.
A buyer normally expects enough normalized working capital to operate the business without an immediate cash injection. Calculate it from historical monthly balances, not just the latest balance sheet.
Walk when the seller cannot support revenue, margins, add-backs, customer quality, or working capital with evidence. A deal that depends on trust instead of records deserves a lower price or no bid.