What I Look For When Acquiring an E-commerce Business

I've reviewed over 50 e-commerce businesses. Most I've passed on quickly. A few have made it to LOI. The ones I pass on fast share common characteristics. So do the ones I move on.

Here's exactly how I think about it.

The 5 Numbers I Check Before Getting on a Call

Before a call, before a deck — I want to see these five things:

1. Revenue trend (36 months). Not the revenue number — the direction. A business doing $2M with 20% YoY growth is a completely different asset than one doing $2M with a 20% decline. I'm looking for stability or growth. Flat is fine. Down is a conversation. Down and accelerating is usually a pass.

2. Customer acquisition cost vs. LTV. E-commerce lives and dies by this ratio. If CAC is high and LTV is low, the business is running hard to stay flat. I want to see LTV at minimum 3x CAC — ideally higher.

3. SKU concentration. If 80% of revenue comes from one product, that's not a business — that's a bet. One algorithm change, one competitor, one supply chain disruption ends it. I prefer distributed revenue across 5+ products.

4. Channel concentration. Same logic applied to platforms. 90% Amazon is a single point of failure. I'll still look at those deals, but they need to be priced accordingly. The best businesses have 2-3 channels working.

5. Owner dependency. This kills more deals than anything else. If the founder is doing all the buying, all supplier relationships, all creative work — the business isn't transferable. I need to see a real team, or at minimum, documented SOPs I can build on.

The Red Flags That End Deals

These are the things that stop conversations fast:

Unexplained revenue spikes. A 3-month spike in a 5-year trend with no explanation — no launch, no PR, no seasonal reason — suggests manipulation. I always ask. The answer matters.

Inventory problems. Excessive inventory means capital tied up in unsellable SKUs. I want clean, turning stock. Stale inventory is a liability masquerading as an asset on the balance sheet.

Single-supplier dependency. One supplier, no alternatives, no contract = risk. I've seen deals collapse 30 days after close because the supplier decided to go direct-to-consumer. If there's no backup, I need a serious discount.

Messy books. I'm not asking for a Big 4 audit. But if revenue and bank statements don't reconcile, if expenses are inconsistently categorized — that's a problem. Messy books almost always mean more is hidden underneath.

The Green Flags That Make Me Move Faster

On the other side, these things accelerate everything:

Recurring revenue or strong repeat purchase rates. Consumables, subscriptions, high-repurchase products — these are much easier to value because the revenue is predictable. They also tend to be more defensible.

Untapped opportunities I can see clearly. A business that's Amazon-only but has obvious DTC potential. One that's never done email marketing to a list they own. One with a strong US base that hasn't touched Canada or the UK. I can create value the seller hasn't — and I don't need to pay for upside I'll generate myself.

A seller willing to stay involved. Not required, but a seller who'll do a real transition period or earnout signals confidence in what they built. It also protects me during knowledge transfer — which is where deals often go wrong.

Brand signals beyond the platform. Organic search traffic, Amazon brand search volume, social following, press mentions — anything showing the brand is recognized beyond the transaction. That's equity the next owner inherits.

How I Think About Valuation

Simple framework: adjusted EBITDA times a multiple.

The multiple depends on:

Revenue size (bigger businesses command higher multiples)
Growth rate and trajectory
Channel and customer diversification
Owner dependency level
Category dynamics and competition

For most e-commerce businesses in the $500K–$3M EBITDA range, I'm working in the 2.5–4x range. Exceptional metrics across the board can push higher. Single points of failure push lower.

One rule I don't break: I don't pay for potential. If there's untapped opportunity, I factor that into my operating plan — not into the purchase price. The seller gets paid for what they built. I get paid for what I build next.

If You're Thinking About Selling

The best time to start preparing for a sale is 12-18 months before you want to close.

Clean up the books. Document your processes. Diversify your channel mix if you can. Build the team or at least write the playbooks. Have a product roadmap you're actively executing.

Businesses that sell well look like businesses — not owner-operator side projects that happen to have revenue.

If you're thinking about an exit and want a straight conversation about where you stand — reach out. No pitch, no obligation.