What’s an Ecommerce Company Worth?

Views: 50 Comments: 0 0 Post Date: February 2, 2021

Can you tell the difference between virtual and reality?  Do you feel like Neo from the Matrix sometimes, where you can’t tell the difference between reality and augmented reality?

The world of online retail is based on this very prefix. Let’s see what an e-commerce business is worth…

There are approx. 3 million e-commerce companies operating 20 million sites globally. The e-commerce sector is poised to hit over $1 trillion in revenue by 2022.

There are THREE TRENDS affecting this rapidly evolving business –  what's it worth

  1. Influencers – everyone is an influencer of some kind. Pastors, politicians, actors, radio jockeys, athletes, podcasters, bloggers.    All of them have a tribe, and they all can help or harm an e-commerce business. The trick is to get on their good side when they are on the rise.
  2. Personalization – gone are the days of ‘you get what you see.’ Customers are now looking for a brick and mortar comparable experience when shopping online. That includes customizing merchandise, alterations, customer service, returns, and after-sales service.
  3. Artificial Intelligence – it is cool to now run a $10M business with only five people. Fewer the people, the more automation the better. Automation can be tweaked, purchased, and canceled. Hiring, training and managing employees is a whole different skill set which many business owners do not have.

 

Companies with revenue under $5M, are sold at 2-4x on SDE. Seller’s Discretionary Earnings. The range depends on – the quality of earnings, the stability of traffic, and efficiency of operations.

 

How to Maximize Value?

  1. Focus on customer experience – virtual is reality – be there for your customer. They want to receive the same personalized experience they expect at a brick and mortar store. The closer you bring your website and customer service to that the better.
  2. Partnerships – drop shipping, returns, add on services, keep them coming back to the website again and again. This will provide you steady monthly visitors, and repeat customers giving recurring revenue.  Music to any buyer’s ears.
  3. Reduce owner involvement – owners that work less than 15-20 hours a week have really built a company. Owners working more than that have created more of a job for themselves.  Create a company that can run in your absence.  Automate processes.  Hire remote customer service reps.  Work with vendors and suppliers who will value your customers before their bottom line or their policies.

Communication is at the heart of e-commerce and community building. The key to virtual reality or any kind of online experience is closely replicate the in-person experience at a touch of a button, anytime, anywhere.  How close is your business to that?

Bharat Kanodia – Founder and Chief Appraiser

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