Chapter 14: Valuing a webshop

The question «what is my webshop worth?» has no single answer, but there is a method most buyers use. They look at what the webshop realistically earns for a new owner and how secure that amount is. The first is a calculation; the second decides the multiple. This chapter covers both, and what moves the price up and down. The general method for all businesses is in chapter 3 on valuation.

Step 1: Find normalised profit

Start with the result for the last 12 months and preferably the two years before. Normalise it so it shows what a new owner can expect: add back one-off costs, take out private expenses, and adjust the owner’s salary to a realistic level. Use the same period for revenue and costs, and be careful about using a single good month as the starting point.

Profit, EBITDA or SDE?

For small webshops where the owner does most of the work, SDE — the owner’s total earnings before owner’s salary — is often used. For larger webshops with staff, EBITDA after a market salary for management is used. The key is that you and the buyer are talking about the same figure. State in the sales material which figure is used and how it was calculated.

Step 2: Assess how secure the earnings are

The multiple is the buyer’s way of pricing risk. Two webshops with the same profit can have very different values because one has loyal customers and organic traffic while the other lives on paid ads and one supplier. These factors matter most:

Traffic sources

Organic search, newsletter and direct traffic weigh most, because they cost nothing per visit. Paid traffic is not bad in itself, but revenue follows ad prices, and the buyer needs to see what an order costs to acquire. Show traffic by channel for at least a year and explain large changes. A webshop that depends on one channel — such as one marketplace or one social platform — carries a risk that pulls the value down.

Repeat customers

Customers who buy again make future revenue more secure and cheaper to win. Show the share of orders from returning customers, how often they buy and how customers acquired in the same period develop over time. Subscriptions and recurring deliveries weigh even more because the revenue is agreed in advance. A large customer list only has value if it can lawfully be taken over and used.

Margin and costs

A high gross margin leaves room for marketing and price changes. The buyer will want to see margin by product group and the trend in purchase prices, shipping and payment fees. A falling margin pulls the value down even if revenue is growing.

Brand, range and suppliers

An own brand, own products and exclusive distribution are hard to copy. A range that many others sell from the same suppliers competes mostly on price. Dependence on one supplier is a risk, especially if the agreement cannot be transferred or can be terminated at short notice.

History, seasonality and owner dependence

Several years of stable figures weigh more than a short burst of growth. Seasonal swings should be shown month by month so the buyer can see a full year. And the more of the operation depends on you — purchasing, customer service, content, advertising — the more it pulls the value down, unless the tasks are documented and can be taken over.

Step 3: Stock

Stock is handled differently from deal to deal, and it must be clear in the listing and the agreement. The most common solution is that the price for the webshop excludes stock, and stock is settled separately at cost after a count on the takeover date. The buyer then pays for what is actually there, and the seller does not see the price pulled down by a large stock.

If stock is included in the price, agree a normal stock level and adjust for the difference. Old or slow-moving items should be written down before they are included, and goods ordered but not delivered must be dealt with in the agreement. With dropshipping there is no stock, but the supplier agreement becomes all the more important.

Step 4: Calculate the value and test it

Roughly, the value is normalised profit times a multiple, plus stock if it is settled separately. Use Sitavo’s valuation tool to work with your own figures; it shows a range and which factors push it up and down. Then test the result:

1. Payback period: How many years must the buyer run the webshop to earn the price back after tax and their own salary?
2. Financing: Can a buyer borrow the price based on the webshop’s profit, or will it take vendor financing? See vendor financing.
3. Comparison: How does the price compare with webshops for sale with similar figures? Remember that asking prices are not sale prices.
4. Asset value: What are the domain, content, stock and customer list worth if the earnings do not hold?

Many webshops are sold with part of the price paid later, for example as an earn-out linked to revenue in the first year. That can bridge the gap when seller and buyer see the future differently. Read more about the different earnings measures in business sale multiples.

The value of a webshop without profit

A new or loss-making webshop can still have value, but it rests on the assets: domain, brand, content, product photos, customer list, search rankings and stock. The buyer pays for the time and money it would take to build the same thing. That usually gives a lower price than a multiple of profit, and you must be able to show exactly what is included.

Get an independent valuation

The tool gives a starting point, but an adviser can look at your actual figures and normalisations. You can have your webshop valued by a broker or find an accountant among Sitavo’s advisers. Once the price is settled, chapter 13 on selling a webshop covers the sale itself, and you can create the listing when you are ready.