Buying an eCommerce Business: Behind the Scenes of a $500,000 eCommerce Business for Sale

Buying an eCommerce Business: Behind the Scenes of a $500,000 eCommerce Business for Sale

I typically don’t take on eCommerce consulting, but when reader Andy Depperschmidt offered to let me share details of his purchase of a website generating $500,000 in annual revenue, I agreed to advise him at no charge. In this post I’ll be revealing revenue, profitability, traffic stats and the sale price for Andy’s recently purchased site, as well as an overview of the diligence process I performed and advice I gave prior to buying the eCommerce site.


When Andy initially asked for my help, he’d already signed a letter of intent to purchase the eCommerce business and was trying to close the deal within the coming week, so time was short. The time frame and my schedule didn’t allow me to conduct a thorough diligence process, but I did agree to look at the company and give him a better understanding of how to value the eCommerce business for sale.

With limited time, I was most interested in digging into the four areas I thought were most crucial:

  • The quality of the site and niche
  • Historical financials
  • Traffic and the backlink profile
  • The fairness of the purchase price

The Site:

The site for sale was, a drop shipping business specializing in concessions equipment and supplies.



The site’s owner had recently moved out of the country and was having a hard time managing it from his new home in Hong Kong, so he was selling. By the owner’s admission, the business was not in tip-top shape. He’d done a poor job with customer service the previous two years, and revenues were declining. When I tried to call the 800 number to get a feel for their service, it was disconnected!

Also, for the previous three months he’d completely disabled the shopping cart on the site, because he wasn’t able to process and manage the business while abroad.  While the site remained online, customers had consistently been turned away when they tried to purchase.

Between the customer service issues and no-sales period, you could say this was a bit of a fixer-upper and it was being offer for sale at $37,500. Despite these problems, there were a few things I really liked about the site:

Niche Selection: Products like concession equipment have the potential to do well online. They’re hard to find locally yet needed by nearly all schools and sports venues. There’s also the opportunity to sell follow-up items (such as popcorn oil, cleaning kits, etc.) that are required to keep the items running. There were some downsides — and it didn’t meet all the criteria for finding your perfect niche market — but it definitely  had potential.

Website Design and Content: I was also surprised by the quality of the website and, in particular, the Education Center that had been created and was prominently advertised on the home page. I’m a huge fan of using educational guides and resources to help drive sales, so I liked that some resources had been considered and created. The site wasn’t perfect, and many of the product pages could use some serious work. But for a site in this price range, it wasn’t too bad.


Financials and Profitability

It’s always fun digging into the financials of a private business, as these usually aren’t shared. For MyPopcornMachine, I condensed some rather long-form financials sheets into this easier-to-read chart:

For those interested in a further breakdown of “total expenses” – which are very high for a drop shipping site of this size – you can download the itemized financial statements here.  While I didn’t post a revised copy, I’ll be the first to admit that they could use some re-ordering to provide a more accurate financial picture.  For example, a number of card processing fees are listed in ‘Total Expenses” when they really should be included with the product costs to reflect an accurate gross margin.  There are also a number of large charges for “customer service” & “website expense”  that likely won’t be recurring if Andy operates the business going forward.

Everything else from the financial snapshot above is fairly self-explanatory with the exception of “Add-backs.” Add-backs are historical expenses that a new owner likely wouldn’t incur – or that are largely discretionary – and are added back to the business’ profit. An example would be an expensive conference that the owner attended and expensed to reduce the company’s tax burden, but that wasn’t necessary for running the store.

What stood out most was the dramatic decrease in both revenue and the conversion rate from 2010 to 2011 – largely due to the poor customer service, I’m guessing. Apart from this, I had a few questions/points that I thought Andy should understand before purchasing:

  • Where are the credit card processing fees? Most merchants pay 2.5% of revenues to process credit cards, and I didn’t see these in the financials. I’d make sure this isn’t an unexpected expense you’ll incur. (Turns out they’re part of the “Total Expenses” line item above)
  • Why did shipping fees drop off in 2009? Did they get baked into the overall COGS (cost of goods sold / purchases) starting in 2009?
  • Make sure that the add-backs are legitimate expenses that you wouldn’t normally have incurred. Without them, the store is operating at a loss.
  • With 2012 financials not made available to me, make sure you understand how profitability and revenue are trending, and make sure they are similar to 2011.


 Traffic, SEO and Backlink Profile

My #1 concern with Andy’s purchase was the quality of the backlink profile and the level of organic traffic from the store. Given the very small margins, it would likely be difficult to profitably run the site while paying for advertising. If the free organic traffic dried up, it could mean the end of the business.

Overall, MyPopcornMachine had some pretty decent traffic stats averaging about 16,000 visitors per month:



That was impressive, but I wanted to know where that came from. Anyone can purchase a boatload of traffic with AdWords, but that doesn’t translate into a profitable business. A quick look into the source of the traffic revealed a pleasant surprise:



I also wanted to see how was ranking for some of the main keywords in the niche. It turns out it was ranking on the first page for a number of its primary and secondary keywords:


Solid rankings with organic sources making up nearly 80% of the traffic was a great sign. But it was crucial to examine the backlink profile to determine how that traffic was being generated. If the traffic was the result of a spammy, low-quality SEO campaign, it’s likely that the rankings – and the subsequent traffic – would drop in the near future as Google updates and improves its algorithm.

I headed over to Open Site Explorer and spent some time poring over the backlinks to After some digging, I discovered that most of the links came from directories and off-topic websites – likely the result of a low-level SEO campaign. Though not horrible, the backlink profile was by no means squeaky clean. There were, however, a few authentic links from quality sites linking to the store, which was a positive sign.

This spring, Google released the notorious Penguin algorithm update, which was designed to penalize sites with over-optimized or spammy link profiles. It wreaked havoc on a number of sites, so I was curious to see how MyPopCornMachine fared in late April 2012, when the algorithm update took effect:

Based on traffic trends from the previous years, it looks like the store did suffer a hit to traffic, although it wasn’t as severe as other Penguin penalties I’ve seen. Post-Penguin, the site was still receiving 16,000 visitors per month and ranking well for a number of keywords. So while not immune from future updates, the backlink profile wasn’t deserving of an extreme penalty – a good sign.

With only 34 linking root domains, the existing SEO footprint was fairly small. An investment in a quality white-hat SEO campaign would go a long way to improve the quality of the backlink profile, improve traffic and help decrease the chances of future penalties for the site.


The Purchase Price – Understanding Multiples

With a better understanding of the company’s profitability, I could get an idea of whether the $37,500 being asked was a steal or a rip-off. In the world of business sales, the asking price is most heavily influenced by the company’s profitability, which can be described as “free cash flow,” the “seller’s discretionary earnings” or, for larger businesses, “EBITDA” (Earnings Before Interest and Tax Depreciation and Amortization).

While it has a number of names and variations, the metric represents the cash/profits being generated by the business. A multiple is then usually applied to this figure to come up with a purchase price. Calculating the earnings is the easy part; the difficult part is determining what’s a fair multiple to apply.

The multiple varies significantly based on the size, track record and industry a company is in. Large, publicly traded companies such as Google and Coca-Cola will trade at multiples of 10x or higher, and some high-growth companies like LinkedIn will trade at seemingly crazy multiples of 100x or more.

But for small companies, these multiples will be much, much lower – usually in the 1x to 3x range for small eCommerce stores. Why such a large disparity? Primarily because there’s significantly more risk. While a company like Coke is a pretty sure bet, there are all sorts of risk involved with purchasing a small store like MyPopcornMachine:

  • It’s easy for competition to enter the market, especially with drop shipping suppliers
  • Google could penalize the site, dramatically hurting revenues
  • Disruptions or problems with suppliers/manufacturers could hurt sales

… and many more. Also, because the human cost involved in finding, researching and closing a deal is relatively large compared to the purchase price, the multiple is further decreased.

So is buying an eCommerce business for $37,500, when it makes approximately $40,000 a year, a good deal? With a multiple of less than 1x, it’s definitely on the low end of the pricing scale, even as small eCommerce stores go. The business definitely isn’t perfect, but for less than 1x earnings, I think it’s a fairly reasonable price to pay ASSUMING you’re comfortable taking the risks discussed above.


The Verdict

So how did I advise Andy? This was definitely a nuanced case, and not one where I could make a blanket recommendation. Website revenues were declining, the site had been neglected, and it had likely been penalized by the Penguin update. And while $37,500 isn’t an insane amount of money, it’s definitely a sizable investment by any standard. On the other hand, the site was generating a substantial amount of traffic post-Penguin, was ranking well for keywords in an interesting niche, and was very competitively priced. So what to say?

Here’s what I wrote to Andy to conclude my findings:


In summary, I think that with some marketing efforts and improvement to the website, you could likely increase the revenue and profits of the store. Additionally, while the backlink profile isn’t squeaky clean, it does generate an impressive amount of traffic in a quality niche. You do run the risk of that traffic disappearing in the future due to a mediocre linking history but this could be largely mitigated by doing some quality marketing and SEO of your own.

If you’re trying to decide between buying this site for around 1x annual income and starting your own site from scratch, I think this option would likely offer a better ROI (return on investment) when you consider the amount of time you’d need to invest to build something from scratch AS LONG AS you’re comfortable with the risk involved. Additionally, make sure you consider the time required for customer service and the occasional cost/need for technical help if you’re not comfortable with complex website changes.


After considering advice from both me and his business broker, and performing his own diligence, Andy decided to go through with the sale. He’s now the proud owner of and has plans to grow and improve the site. Congratulations, Andy! To help him with these efforts, I’ll be writing a follow-up post discussing recommended changes and improvements to make to Stay tuned.


What Do You Think?

Would you buy an eCommerce business given a similar situation and stats? Or would the red flags have been too much for you to risk the $37,500? Disagree with any of my analysis, or have a question regarding it? Let me know in the comments section below! I do my best to reply to each one.

Finally, a big thank you to Andy for being willing to share this information publicly. If you’re in the market for concessions equipment, I hope you’ll check him out!


Photos by Nich Hum, Stephan Baudy and S Falkow.

Andrew Youderian
Post by Andrew Youderian
Andrew is the founder of eCommerceFuel and has been building eCommerce businesses ever since gleefully leaving the corporate world in 2008.  Join him and 1,000+ vetted 7- and 8-figure store owners inside the eCommerceFuel Community.

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ArmandJanuary 30, 2013

I’m trying to buy an online business and this post is very useful. Thanks!

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Andrew YouderianJanuary 30, 2013

Glad it helped, Armand!

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ChrisJanuary 31, 2013

I’ve been in the IM/SEO/Ecom game for sometime. I completely love the post and content here.

Though, I will say the comment or analysis on “poor-low quality linking profile/spammy” I disagree with about 90%.

Why? Just because a link isn’t on a “on-topic niche” doesn’t mean it is spammy/low quality. For instance, if I create a Squidoo lense about conversion rate optimization tips and link it to a blog with ON-TOPIC anchor then it is fine.

Is it more beneficial if the site is “niche specific”. I don’t fight you there because the answer is yes. However, what makes a link spammy/low quality is about the overall authority of the site it is linking from and the relevancy of the content and linking anchors.

Good links in order:
1. Niche specific site, niche specific content with anchor text , brand name or site url pointing back to money site/page (with high page rank/authority).
2. Niche specific content with anchor text , brand name or site url pointing back to money site/page. (Even if thesite itself is off-topic but has high authority/pagerank).
3. Niche specific content with anchor text , brand name or site url pointing back to money site/page. (Even if thesite itself is off-topic with lesser authority/pagerank).

Another example, a mommy blogger is talking about her 5-10 products she sells on her “shop” extension of her site and getting better “merchant service rates”. Now, if that post links to First Data for instance, is that link spammy/low quality? Not at all. Is it the best possible link? No.

Where issues arise is when people get into blog comment/profile submissions, articles etc etc with irrevelant content with irrelevant anchors. I had guys that used to rank like kinds until early last year. Unfortunately, you still can for some time now, but is a terrible long-term strategy/model.

I can go a lot more into this, but I hope this helps provide some different perspective.

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Andrew YouderianFebruary 1, 2013

Great points, Chris! However, I think you may have misunderstood me. I agree: just because a link comes from an off-topic site doesn’t mean it’s low quality. There are lots of great links that come from sites in completely different areas.

What I meant was that’s backlink profile had a number of links that were low quality AND from off-topic sites. These were links that were randomly inserted into a blank page on a, say, tire website with no relevant context or reason for being there – apart from a paid SEO campaign. Also, many of these randomly appearing links were on low-quality pages. So it wasn’t the fact that they were off-topic sites, but rather that the sites were low quality and the link placement done purely for SEO reasons in a very obvious way.

Hope this clears things up!

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DavidFebruary 11, 2013

Just want to say this article is great and your content is really useful because its downright transparent and honest. As a reader I dont get the feeling you’re holding back anything. I always run from sites that help you “make money” but are riddled with ads and links everywhere and have all sorts of gimmicky emarketing stuff.

Keep it up!

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Andrew YouderianFebruary 11, 2013

Thanks David! Glad you’re enjoying it, and I’ll try to keep things as honest as possible going forward. 🙂

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Danny HowardFebruary 14, 2013

Hey Andrew

WOW great insightful post. I love these types of posts because they tell a more accurate story and you can never be sure that the person is telling the truth when writing these types of posts 🙂

Do you have an update of how the website is performing via it’s traffic and keywords. It would be great to see if it’s improving financially and traffic.

Cheers again Andy


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Andrew YouderianFebruary 18, 2013

Thanks Danny! No update yet, but I’ll try to do a follow-up post maybe six months or so in the future when there’s been some time to see how things go.

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Danny HowardFebruary 18, 2013

Thanks Andrew look forward to the update.



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TomLFebruary 19, 2013

This is one of the best posts on the subject that I came across so far. I remember Cary from the Adsense Guild talking about selling one of his sites… but it wasn’t quite like this.




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Andrew YouderianFebruary 20, 2013

Thanks Tom! Glad you got a lot out of it.

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TomFebruary 21, 2013

Hi Andrew –

Like all your other fans – thanks for a great and transparent run-down. I am sure it is a very rare occurrence a business opens up like this. Much appreciated.

There is one thing I don’t understand in the statements under ‘add backs’.

In 2011 Bank Service charges come in at a large $27k but then added back into profit.

A. what are they for and why are they so large and b. under your description ‘add backs’ are one-off or discretionary.
How are bank charges one-off or discretionary?

Many thanks!

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Andrew YouderianFebruary 21, 2013

You’re very welcome, Tom! Glad you enjoyed it.

The large “bank service” charges initially threw me for a loop, too. But it turns out those are actually just how the withdraws made by the owner (shareholder distributions) were labeled in accounting. So it’s not an expense, but for some reason it was labeled as a “service charge”. That’s why it was added back in. Hope this clears things up!

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JJMarch 7, 2013

37k was a freakin steal! If those financials are accurate I could bought it fixed it and flipped it for 100k EASILY.

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Andrew YouderianMarch 8, 2013

I tend to agree, JJ! I think it was a pretty good bargin if he was comfortable with the risk involved.

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ScottMarch 28, 2013

I went back and forth with this guy about buying the company several months back and couldn’t get an asking price out of him. Admittedly I low-balled him and when he said it was too low I asked “too low compared to what?” because I couldn’t get a # out of him. Also I had concerns about his transparency and eventually canned the idea. I hope it works well for Andy.

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Andrew YouderianApril 1, 2013

Thanks for sharing, Scott – interesting backstory! I hope it worked out for Andy, too. I haven’t heard much from him since we discussed the case study, so I hope he’s having success getting the business turned around.

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Shaun LinderbaumApril 16, 2013

I’ve done quite a few acquisitions myself over the years and many had similar issues that I thought we could fix. Traditionally I’ve had a lot of trouble turning a bad egg into a good egg though despite some significant investments and dedicating some of my best people towards the sites. My feeling is that once it’s spoiled by mis-management or a Google penalty the cost to recover it ends up being much more than starting something from scratch or buying a website at a higher multiple of earnings but with a steady trend of year over year growth. Sometimes revenues flatten out on a site for reasons you can’t see, understand, or fix. That’s many times why the owner is selling it because that has happened to them too and they’d rather move on to something more fruitful. So just like the stock market you’re better off paying more for a business with a steady uptrend then trying to go bargain shopping. At least that’s been my experience….

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Andrew YouderianApril 16, 2013

Really valuable experience – thanks for sharing. I’ve wondered a lot about this, too. I’ve thought about purchasing sites in the past, but you’ll likely either need to pay a larger multiple for good, healthy ones or have to deal with some of the issues discussed in this piece to find a bargin.

I can say that currently, I’m working with a site that was hit hard by the Google Penguin update and it’s a LOT of work to try to get it back to it’s previous ranking level. If you’re purchasing a site with a similar penalty history, I think it’s important to not necessarily assume that you can get all of your traffic (at least from Google) back when figuring what a pair price is. In this case, the multiple (after penalty) is still pretty attractive so you can make a case for the purchase. But it’s still definitely not a sure-bet turnaround.

Again, thanks for sharing!

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Brendan HallMay 29, 2013

Great content. I have been thinking about building a drop shipping website and this is one of the best posts I have read for a while.

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Andrew YouderianMay 30, 2013

Thanks Brendan!

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JockJune 29, 2013

Hi Andrew,

Would be interested to know how this site is going 6 months after purchase.

Maybe a follow up post ?


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Andrew YouderianJuly 1, 2013

That’s be very interesting. Unfortunately, I think the owner has been slammed with other work and not sure if he’s had a chance to properly invest the time needed. Hopefully he’ll be able to make the changes soon, and I’d love to do a follow-up once he does.

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WaimanJuly 4, 2013

Yep agree that a followup at some point would be a great learning tool to see if he can turn things around by implementing some of your recommendations. Would be a complete case study then!

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Shannon DouglasAugust 20, 2013

Nice post. I have a 2 businesses one being ecommerce. I have had if for 7 Years and thinking about selling it to focus on my main business and purchase a new warehouse. Do you have any suggestions on the best way to sell the site. It can be ran from anywhere. I stock some product and dropship some.

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Andrew YouderianAugust 27, 2013

Congratulations on the success of your business so far! Suggestions for the best way to sell a site? I could probably write an entire post series on that. 🙂

If possible, I’d try to run the business as profitably as possible for the 12 months leading up to the sale so you’ll get the best possible price for it. A business broker can be helpful if you’re not familiar with the process, but if you are relatively smart, can put together a 20-page sales piece on the business and don’t mind promoting it yourself you may be able to save some money without them on the commission.

Best of luck!

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AllenAugust 27, 2013

This is a really nice post. Kudos for the quality material.

Might I ask how the sale of this website came up? Where exactly was the website listed for sale, or was it discovered through the buyer’s personal network? If I wanted to find a website like this to buy, where would I go?

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Andrew YouderianAugust 27, 2013

Thanks Allen! The buyer approached me, but found the website for sale on a Business Broker website.

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ChristianSeptember 11, 2013

Hi Andrew,

Found your blog by accident and can relate to this article and your own personal story. I am in a similar dilemma and what I wanted to ask you is, where on the internet could I buy into an existing ecommerce business? Do you know of any trustworthy resources/sites I could look into?



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Andrew YouderianSeptember 11, 2013

There is, of course,, but they have a lot of junky sites as well as good ones. There’s also sites like, which have a lot of businesses for sale.

If you sign-up for my eBook, you’ll also get a special lesson on brainstorming which includes a PDF sheet with a list of Business Brokers online:

Hope this helps!

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ChrisSeptember 13, 2013

Very useful post! Thanks.
I am in the process of setting up an ecommerce business myself. I am in an early stage and have read your book and most of your other posts which all have been very helpful.
Andrew, may I ask what other ebooks, courses or resources you could recommend that will help me with my venture?


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AashayDecember 17, 2013

Hi Andrew,

Extremely useful post, thanks for the info!

1. I’m was hoping you could help me with Open Site Explorer and how to read the data in there. Say I am looking at, how would you interpret the data on this URL and its backlinks?

2. What tool did you use to get the traffic and keyword data in your analysis?


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DMJanuary 16, 2014

Hi I came to your site searching for average net margin for ecommerce websites. I was shocked to find out a site like this only make 3-7.8% net margin. Is this common for small ecommerce sites? What are the average net margin consider doing pretty well? How about in cosmetic in particular?

I sell name brand cosmetics and recently facing a challenge seeing lots of my product selling on Amazon and ebay for a lot cheaper, even the samplers were on sale. If I don’t compete, for sure Im losing the sale. But, if do, I will hurt my margin significantly….my question is if my goal is to build this site a brand name that’s deep in product assortment, like one of the example you mentioned in proprietary selection, do you still recommend me to go into the pricing war?

Also, do you suggest me to use the same name as my site to sell on Amazon and ebay? Why


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ADMarch 10, 2014

Thank you for such a wonderful, in-depth article. I am a currently exploring avenues to purchase a good eCommerce business. Since I am a newbie at this, my thought was to get a smaller business (< $10K) and from that experience, hopefully buy something decent like you mentioned above.

What are the things I should be looking at before I plunge in with a particular seller? Any tips? I will be looking to buy your book, needless to say…

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Jacksonville Reputation ManagementApril 30, 2014

Jacksonville Reputation Management

Behind the Scenes of a $500,000 eCommerce Business for Sale

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PersonJune 13, 2014

Hi Andrew –

I am by no means an expert in selling a website, but the cursory googling I have done always results in statements like “2 to 3x Gross earnings” or “2 to 3 times Net Income”. I have never heard it based off of “Discretionary Income”. I suppose maybe because small business owners tend to write off significant amounts of money as business expenses that are not mandatory. Like Business dining and entertainment. Travel. Conferences. A portion of home office rent. Vehicle expense, utility expenses, my cell phone bill, etc. I am not clear why these would play any part in the valuation of my business, let alone drastically reduce its value on paper. Seems like they shouldn’t. If you were to value a business for its performance, why wouldn’t you value its performance and necessary operating expenses only? I have an online business that does $1 million gross per year, and I have a net of about $600,000. Of course on paper, we work to knock down those numbers to minimize tax liability. I have been told to ask for 2-4 times that $600,000 if I were to sell. I have a site that has over 350,000 unique visitors monthly with 100% organic rankings extending back now 14 years. We are well established, but relatively small. Only 15 products on the store, and could easily expand to 100 or more to quadruple the income. No advertisers, so that could easily double the income right there. Three major industries could be added to the site and further increase its profitability. So I am stuck in a weird place. I know the potential of this site, if someone puts the effort in, but I personally am burned out on the topic after 14 years. I would like to sell, but I have a difficult time selling a $1 mill site that could easily hit $3 mill+ for something so small, like 1x my discretionary income ($200,000) grand total. I think everyone above has commented aptly that the selling price was extremely undervalued and I think the seller got a bad deal unfortunately. Let me know where I am viewing this wrong.

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MikeOctober 11, 2014

THANK YOU Andrew for this great article

Perfect timing for me.

I am considering buying and online store.

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Breaking The Glass Ceiling Of Search Through AcquisitionJanuary 2, 2015

[…] can be a lot more to it than the points above, especially if we were talking more about an e-commerce purchase, but it’s important to remember that the core goal of the technique I’m describing is […]

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IvanApril 16, 2015

Great article, just discovered it so will be hunting for more updated material. Cheers

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TommyAugust 7, 2015

Another risk not mentioned is what happens when Amazon sells the same products for less, with free shipping? That seems to be the case today for most of the products.

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