Buying an ecommerce business: what to check in the numbers
Short answer
When buying an ecommerce business (a Shopify or similar direct-to-consumer store), verify orders and revenue from the store platform and payment processors, reconcile payouts to the bank, and split revenue by acquisition channel (paid ads, organic search, email, social, marketplaces). Then look at customer acquisition cost against repeat purchase rates, refunds and chargebacks, inventory and supplier terms, and what you'll actually own: domain, store, ad accounts, email list, content and trademarks.
Dropshipping stores need extra care, because there's often little to own besides ad accounts.
Ecommerce stores publish their own data, but it's easy to dress up. Revenue can be bought with ad spend, and margins can hide in refunds, shipping and fees.
Revenue by channel
| Channel | Durability | Check |
|---|---|---|
| Paid social / search ads | Stops when spend stops | Ad spend, CAC, ROAS by month |
| Organic search | Algorithm risk | Traffic trend, top pages |
| Email / SMS | Owned audience | List size, engagement, revenue per send |
| Repeat customers | Strong | Repeat rate by cohort |
| Marketplaces | Platform risk | Account health, fees |
| Wholesale | Concentration | Accounts, terms |
Rebuild one order, then one month
The fastest way to understand an ecommerce store is to follow a single order through to cash. Revenue is what the customer paid. What the business keeps is that, less product cost, shipping and packaging, payment processing fees, the share of orders that get refunded, and the advertising that brought the customer in. Most seller P&Ls show these in different places (some in cost of goods, some in operating costs, ads sometimes netted against revenue), so put them back on one line yourself.
Illustrative example, not a real store
Average order value is $72. Product cost is $22, shipping and packaging $9, payment fees about $2.40, and refunds run about 6% of revenue, so $72 × 0.06 = $4.32 per order. That leaves $72 − $22 − $9 − $2.40 − $4.32 = $34.28 before marketing. If paid ads cost $30 to win a first-time customer, the first order contributes $4.28. The business only makes real money if customers come back. So the next number to get is the repeat rate: of customers who first bought in a given month, how many bought again within 6 and 12 months.
Ask for monthly ad spend by platform alongside new-customer counts for the last 24 months. Divide one by the other to get your own customer acquisition cost. If it's been rising while revenue held flat, the seller has been buying the same revenue at a higher price, and the trend usually continues after the sale.
What you're buying
- Domain, store and theme; product content and photos (and rights to them).
- Customer and email lists, consistent with privacy commitments.
- Social accounts and ad accounts (platform rules on transfers).
- Supplier relationships and inventory; any exclusive agreements.
- Trademarks and brand registrations.
For Amazon-based businesses see Amazon FBA; for content sites and newsletters see buying an online business.
Proof of revenue: platform, processor, bank
Three records should agree. The store platform shows gross orders, discounts, refunds and taxes collected. Payment processors and marketplaces show what they paid out after fees. The bank shows what arrived. Ask for read-only access to the platform and the processor, or watch the seller pull the reports live on a call; exported spreadsheets and screenshots are easy to edit. Then tie twelve months of payouts to bank deposits. Processors also issue Form 1099-K reports to the IRS, which gives you one more cross-check against the tax return. Our proof of cash guide shows the method.
Red flags specific to ecommerce
- Ad spend cut just before the sale. Profit jumps for a few months while revenue decays later. Look at new-customer counts, not just profit.
- Inventory not counted. Ask for a recent count with cost, age and slow movers. Old stock you can't sell isn't worth what the books say. See inventory in a sale.
- One supplier, no contract. If the product can be bought by anyone from the same factory, the brand is the only moat.
- A rising chargeback rate. Processors can hold funds or close accounts.
- Sales tax ignored. Since states began taxing remote sellers, many small stores owe tax in states where they passed economic thresholds. Unpaid sales tax can follow the business; ask your CPA to check exposure.
- No trademark. Search the USPTO database for the brand name; an unregistered name someone else owns is a problem you'd inherit.
What an SBA lender will want
Lenders will check tax returns against IRS transcripts, look for inventory as collateral, and ask how dependent the store is on paid ads and one platform. SBA rules allow an alternative to the usual site visit for e-commerce businesses. Expect questions about who runs ads and operations after the seller leaves, since under SBA change-of-ownership rules the seller can consult for a limited time but not stay on as an employee.
Cohorts: the report that shows whether customers come back
A cohort table groups customers by the month they first bought and shows how much each group spent in the months after. It's the most honest picture of an ecommerce brand, because it separates real loyalty from revenue bought with this month's ads. Most store platforms can export order history with customer IDs, which is enough to build one in a spreadsheet.
Illustrative example, not a real store
In January the store won 1,000 new customers who spent $72,000 on their first orders. Over the next twelve months, 280 of them bought again, spending $36,400 in total. So each January customer was worth $72 + $36.40 = $108.40 in revenue over a year. At a 47.6% contribution margin before ads (the $34.28 out of $72 from the order example above), that's about $51.60 of contribution per customer. If January's ad spend was $30,000, or $30 per new customer, the cohort earned back its acquisition cost with about $21.60 to spare after a year. Run the same math for every month. If recent cohorts repeat less than older ones, the brand is weakening even if revenue is flat.
What moves the value of an ecommerce brand
| Factor | Supports a higher value | Pulls it lower |
|---|---|---|
| Repeat purchases | Strong cohorts, owned email list | Almost all first-time buyers from ads |
| Channel mix | Several channels, none dominant | One ad platform or marketplace |
| Product | Own brand, registered trademark, defensible | Generic product anyone can source |
| Supply | Two suppliers or a written agreement | One supplier, no contract |
| Trend | Stable or growing contribution margin | Rising acquisition cost, falling margin |
We don't publish multiples or put a value on deals; these are the factors an appraiser and a lender will weigh.
Questions to ask the seller
- What did you spend on ads each month for two years, and how many new customers did each month bring?
- What share of revenue comes from repeat customers and from email?
- Who are your suppliers, what are the terms, and is anything exclusive?
- When did you last count inventory, and what's more than a year old?
- Have any ad, marketplace or processor accounts ever been suspended or restricted?
- In which states do you collect and remit sales tax?
Frequently asked questions
How do I verify ecommerce revenue?
Use the store platform's own reports (with you watching or read-only access), payment processor reports, and bank deposits. Compare net payouts with orders after refunds and fees.
Why do repeat customers matter?
If almost every sale comes from paid ads to new customers, revenue stops when ad spending stops or costs rise. Repeat buyers and an email list make revenue more durable.
Is a dropshipping store worth buying?
Sometimes, but often what's for sale is mostly ad account history and a supplier relationship anyone could copy. Verify margins after ad costs and refunds, and how defensible the brand is.
What transfers in an ecommerce sale?
Usually the domain, store, product listings, content, email and customer lists (subject to privacy rules), social accounts, supplier relationships and trademarks. Ad accounts may need careful handling under platform rules.
What is contribution margin in ecommerce, and why does it matter?
It's what an order leaves after product cost, shipping, payment fees, refunds and the ad spend that bought it. Revenue and even gross margin can look healthy while contribution margin on first orders is close to zero. Work it out per order and per month before you trust the profit line.
How long should the seller stay after selling an ecommerce store?
Long enough to hand over supplier relationships, ad account management and any manual processes, often a few weeks to a few months of part-time help. Write the scope and hours into the purchase agreement. If you use an SBA loan, the seller can consult for a limited time but can't stay as an employee after a full change of ownership.
Sources
- IRS: About Form 1099-K
- SBA SOP 50 10 8.1, Appendix 15 (site visit alternatives for e-commerce)
- IRS: What is taxable and nontaxable income (gross receipts)
- USPTO: Trademark search
- Streamlined Sales Tax Governing Board (state sales tax information)
Related guides
General information, not legal, tax, financial or investment advice. Rules and lender practices change; check the linked sources and talk to your attorney, CPA and lender about your deal. Examples with named numbers are illustrations, not real businesses. OKtoBuy's Deal Check does not value businesses or give price opinions.