How to Sell Your Shopify Store for Multiple Six-Figures
Updated on September 6, 2021
To move forward, you need to let go of the past.
Whether you’re planning to buy a house and build a family or pursue new business ventures, one thing is for certain—your time is limited and you won’t be able to focus on all of these projects at the same time. Taking the next steps in life usually requires you to start from a clean slate.
However, there are many people who spend a lot of time and energy building a Shopify store who have never considered selling it. And it’s understandable. Pouring all that effort into growing their darling ecommerce company into what it is today would naturally leave any founder emotionally attached to their startup.
In today’s world, we often look for different ways to increase our side income.
What started out as a side hustle eventually grew into a reputable dropshipping or ecommerce business. But if you’ve found or want to look for different opportunities, letting go of the business that you grew with your own hands probably isn’t the first thought you had.
If this sounds like you, we wanted to explain how selling your store could be the key to opening the door to your next opportunity in life.
Why Sell Your Shopify Store?
A lot of ecommerce store founders never think of selling their ecommerce business. After all, if you’re not forced to, why should you?
Even if you entertain the idea, you’ll probably share a lot of similar concerns with other entrepreneurs on the same idea.
“I spent a lot of time/resources building it…”
“Am I selling to the right person?”
“Am I letting go of a winner too soon?”
These are all valid concerns, and in our experience, people tend to sell their established business for two major reasons.
Personal Circumstances
While some people prefer to keep their business separate from their personal life, it can be difficult when something crops up.
A death in the family usually means there’s a change in priorities, so some people might sell so they can be around their loved ones.
Some people might just want to disconnect from the internet entirely. What better way than to sell the business so you can take a break from your current situation?
A common situation we see is when an entrepreneur is bitten by the travel bug and wants to enjoy their adventures without any strings attached. Selling the business helps them raise the money to have fun while not worrying about how they can afford their vacation.
While these types of situations in your personal life can push you towards selling your small business, there could be equally compelling reasons related to running the business itself that mean a sale makes sense.
Business Opportunities
As you become better at running your Shopify store, it’s not unusual for new business opportunities to present themselves as your reputation grows. By investing more time into these side projects, you might find yourself not having enough time to focus on running your primary business.
Selling the business helps you invest in these new business ventures in two ways. First, you free up time and mental bandwidth to focus more on your other side hustles. Second, you raise capital that might be necessary to grow the projects and get them off the ground.
Selling your business is often a mix of all the above reasons. However, the real question is, “Will selling my Shopify store get me closer to my goals?”
Collect 2–3 Year’s Worth of Income Right Away
As renowned author T. S. Elliot once said, “The end is just the beginning.”
Selling your Shopify business isn’t the end but another chapter of your entrepreneurial journey. A profitable exit allows you to collect a ton of money upfront. How much money, you ask?
We see dropshipping stores selling for six figures all the time, and such a large injection of capital opens up so many possibilities. You could buy a house and settle down to start building your family. You could have enough capital to start flipping businesses and putting your knowledge and experience to use to grow young dropshipping businesses and sell them for a profit further down the road.
The opportunities are endless.
But everything leads to one question, “Will anyone buy your Shopify store for six-figures?”
Can You Sell Your Shopify Store for Multiple Six-Figures?
Spoiler alert—it depends.
You might feel that your business is worth a lot, but we see a lot of entrepreneurs often have bias when it comes to the valuations of their brand. This is because of “emotional equity.” Think of this like rose-tinted glasses; an entrepreneur wears them all the time after they’ve journeyed with their business and watched it grow from nothing into a profitable brand.
That’s not to say selling for a large sum isn’t possible. Your online store can sell for six figures, but it depends on how much it’s earning. Six-figure Shopify store valuations depend on whether the store is earning at least $3,500 in monthly net profit over a 12-month average.
This figure means selling for six figures is fairly realistic for most Shopify entrepreneurs.
The even better news is that there are plenty of potential buyers waiting to buy up a profitable business. In fact, our marketplace has a buyer network with over $4 billion in verified liquidity ready to be deployed in business acquisitions.
If you want to access this buyer network, you can list your Shopify business on our marketplace for free here.
But how did we arrive at this valuation? Let’s cover how online businesses are valued.
Understanding How a Shopify Store Gets Its Valuation
A common formula people use is EBITDA X Multiple.
Our valuation formula is slightly different from other brokers in that we use a variation of EBITDA. Instead of using a yearly average, we look at the monthly average.
Our formula is as follows:
12-month average net profit X Multiple
The first part of this formula is straightforward. Arriving at a multiple is a slightly more nuanced practice.
Fortunately, you don’t need to work this out on your own. We have a valuation tool that will give you a free valuation in less than five minutes. It’s built using the data of selling many Shopify stores to give you an accurate estimate of your store’s worth.
How Multiples are Created
Multiples can range anywhere from 30x to 50x.
The multiple depends on a lot of factors related to a Shopify store’s current state. A lot of them are based around common sense but also reflect the business’s growth trajectory.
Traffic diversity
Naturally, where an online business gets its traffic from is a major factor.
We’ll take into consideration whether a Shopify store gets its traffic mainly from a single source through paid or organic channels, as well as the traffic sources (search engines and SEO, social media accounts, email marketing, etc.).
If an ecommerce business gets traffic from various sources, that tends to work in a seller’s favor.
Revenue diversity
In the same way, we’ll also look at where all the revenue comes from. Is it generated predominantly from a single monetization or business type? If you have several sales channels, such as a print-on-demand store alongside a dropshipping store, which makes the most money?
Is there an additional revenue stream outside of ecommerce, such as affiliate programs?
The more diverse the revenue sources are, the more likely it is that your Shopify business will receive a higher valuation. If your business makes money from different revenue streams, it will be less impacted if one of these streams is affected because of some unforeseen circumstances.
Age
Generally, the older the business is, the more profitable it will be.
Our data study backed up this bit of common sense.
That’s not to say that younger businesses can’t sell for a decent sum. However, an older business will probably have SOPs in place, will have survived shifts in industry standards, and will have proven that it’s making money in a niche that isn’t going to fade away in the coming months.
Higher average net profit means a higher multiple
This more or less speaks for itself. The more profit your online business makes, the higher the multiple will be in general.
If you’re looking to improve your business, aiming to increase your monthly profit margins is always a good strategy.
Pricing Windows
Generally, we use a 12-month pricing period.
There are times when we use a 6-month or even 3-month period instead, at a seller’s request. We recommend that it’s best to stick to a 12-month pricing period unless you want a quicker sale at the cost of a lower multiple.
A very short pricing period can leave interested buyers with some doubt about whether everything will still be in good standing if they become the new owner.
Brand
Branding is a tricky factor to quantify. We distilled this big term into a simple definition.
A strong brand means the company is associated with a positive experience in solving a specific problem for certain customers. This tends to manifest in the positive feedback and responses from customers who used the product or service.
This can look like a lot of positive organic engagement on social media, or emailing in with unprompted testimonials. The way the company presents itself has to be above par as well; the company’s site has to be more than just a landing page or homepage.
Another strong indicator of a strong brand is the number of returning customers that make up the total revenue.
A decent number of repeat buyers show the quality of products and trust in the brand.
There’s a Lot More Too
This isn’t an exhaustive list by any means; there’s plenty more that goes into a valuation, but these are the basics.
If you’re curious what your Shopify store is worth, you can try our Valuation Tool for free to get a ballpark figure. The estimates our Valuation Tool produces are backed by real sales data from thousands of deals, so they should give you a good idea of what it’s worth based on actual sales.
So we’ve covered how we value an ecommerce store. If you want to take the plunge, here’s an outline of what you need to do to sell your Shopify store.
Here’s What to Expect When Selling Your Shopify Store
Before you can list your Shopify store for sale, you’ll need to get your house in order first. Buyers will be doing their thorough due diligence and will leave few stones unturned. That said, there’s a lot of overlap in what they tend to ask.
We’ll cover some common documents buyers require, as well as frequently asked questions.
One thing to note is that we’ve found honesty to be the best policy when answering buyer questions about your business. Transparency will establish trust between you and interested buyers and improve the likelihood of securing a sale that all parties are happy with.
With that said, here are bits of housekeeping to do so you’re in the best position to sell your Shopify store quickly.
Clean Profit & Loss Statement
As far as selling your business goes, this will be the most important document you can bring to the table. It’s also the one Shopify store owners usually get wrong because bookkeeping isn’t their forte.
While it might not seem high in your list of priorities to prepare, getting this wrong could put a deal in jeopardy. If a buyer sees that the P&L statement is riddled with inaccuracies, they’ll probably start to question what else is wrong with your store, and this is before any negotiations have even started!
In short, you definitely need a solid and well-organized P&L statement.
The good news is that we’ll build this for you as part of our services. Although, if you decide to manage this yourself, we recommend hiring a bookkeeper who has experience with online businesses.
Explanation of Traffic Dips and Spikes
It’s normal to see dips and spikes in traffic numbers throughout the year. It’s not a problem as long as the general trend over time is upwards. However, if there are any big spikes outside of the norm, buyers will usually ask for the reason behind them.
Maybe it was an experimental marketing strategy you implemented that resulted in a huge bump in traffic. Or maybe drop off from your normal traffic numbers could have been due to a Google algorithm update.
Either way, be prepared to explain what happened, as serious buyers will ask.
Explain Revenue Dips and Spikes
Similar to traffic, buyers will want to find out why there were significant increases or decreases in revenue during the year. This could be due to inventory issues like running out of stock, or maybe you were holding onto inventory for longer than six months (aka “dead inventory”).
While inventory issues are the bane of every ecommerce store, it’s important that you’re honest about why these deviations happened. Explaining the rationale behind your inventory management gives potential buyers insight into what it takes to run your business.
Depending on what you sell online, wild changes in revenue could be due to seasonality. Let buyers know if the business sees more activity during certain festivals or seasons to help them plan ahead for these peak periods.
Speaking of Traffic… Have Analytics
It’s difficult to demonstrate your business’s value if you don’t have the data to back it up. That’s why we recommend you install analytics as early as possible if you don’t have it already.
Google Analytics is the gold standard for the majority of online businesses, and its interface will be familiar to many buyers. You can also use Clicky as an alternative.
As far as history goes, you should have at least 12–20 months of traffic data for the website to provide context for the business’s growth.
Be More than a Dropshipper
This note only really applies if your primary business model with your Shopify store is dropshipping.
Dropshipping businesses are harder to sell because of how easy they are to copy. But that’s where things like a solid brand or exclusivity in what you’re selling comes into play. You need to build a moat around a business so that it’s much more difficult for copycats to come along and replicate your dropshipping store.
The more unique factors you can implement, the stronger your business’s defense will be.
This could take the form of exclusive discounted rates with suppliers, a really well-designed storefront, or customized packaging.
Make Sure Everything is Transferable
As obvious as it sounds, a deal is difficult if you can’t transfer ownership to allow the buyer to be the account owner for all the different aspects of the business.
All of the business must be transferable, such as the Shopify account, the domain, and the name. If you have an exclusive agreement in place with your logistics forwarder, this special discount in shipping must transfer over to the buyer or it will count against your valuation.
It’s the same with suppliers and is especially important in an exclusivity relationship between a dropshipping business and its suppliers.
If you can guarantee that most of the business can be transferred over to the buyer seamlessly, the new owner can step in and continue running the business as it was without much change, making a deal more likely.
How to Negotiate When Selling Your Shopify Store for a Profitable Exit
With all your pieces in play, it’s time to discuss how you approach the table when you receive an offer.
We see a lot of sellers who use brokerages with a dog-eat-dog mentality, fighting for every inch to make sure they get a great deal for themselves. It’s important that you approach negotiations as a collaboration instead of a show-down. After all, you’re both business owners, or business-owners-to-be.
Successful negotiations will take time and patience. As long as you’re willing to compromise on some terms instead of engaging in a gladiatorial contest, you’ll come out of this with a good deal instead of no deal at all.
Keep your copywriter hat on
Keeping this hat on can really increase your chances of finding the right buyer.
Many sellers forget their marketing skills when it comes to negotiations since they’re so focused on securing a sale.
Asking yourself what the buyer’s motivations are for wanting to buy your business will provide you with a script of sorts that you can use when talking to said buyers Just as you would ask yourself what pain you are solving for your customers, you must do the same for the buyer if you want to highlight the benefits of buying your business.
The Give and Take
Many Shopify entrepreneurs never sell their business because they’re too rigid in their accepted sales price. However, selling for the highest sales premium might not be the best deal for you. If you’re adamant on getting the highest sum from the sale, then you may need to accept an earn-out.
Earn-outs are a type of deal structuring that helps finance the business. Many earn-out offers tend to leverage seller debt to pay for the store.
For example, you have a $600,000 Shopify store. An offer with an earn-out might mean you accept $450,000 upfront with $150,000 paid out over a period of time. If you want the maximum amount of money without any earn-out, you may have to ultimately accept less money—instead of $600,000 with an earn-out, you get $500,000 upfront with no earn-out involved.
Negotiations are always about the give and take. Both parties must be willing to meet in the middle for a good deal.
To help yourself stay calm during negotiations, it can be really helpful to set yourself some parameters as a guideline.
Minimum Price Threshold
The minimum price threshold is also known as, “What’s the smallest amount of money I can accept and walk away happy that I made the deal?” This number should be kept top-of-mind to make sure heated negotiations don’t lead you to accepting an offer you’re not comfortable with.
Negotiate Beyond Price for a Better Price
Negotiations aren’t always about how much you’re selling your Shopify store for.
You can throw in additional benefits like your support or other elements that can help a buyer get going, so they won’t talk you down on the final price. A buyer may be willing to buy at a higher price if you offer your expertise and guidance to help them hit the ground running.
Staying with the business on a sort of consultancy basis helps facilitate an easier transition period, where sales drop at a negligible level or not at all.
Where to Sell Your Shopify Store?
There are a couple of routes that most people go down when selling their Shopify business.
You could either use a broker or offload the business in a private sale.
Brokers
We recommend first-time sellers to use a broker.
One of the greatest advantages of brokers is their excellent deal flow of interested and qualified buyers. A good broker also has high-quality services and is able to help with vetting the business, connecting you directly with interested/non-tire-kicker buyers, and migrating the business.
In addition, some brokers provide an escrow service, which is a great security so there’s a win-win-win situation for all parties involved. By holding onto the money agreed in the deal, the buyer has time to verify that the business runs and achieves revenue figures as originally advertised. This builds trust between the seller and the buyer and helps the new business owner transition easier into their new acquisition.
Private Sale
There’s the potential to get a really great deal if you have a good network of high networth individual (HNWI) buyers. However, another reason we recommend that first-time sellers to use a broker is because experienced buyers will know how to work the deal in their favor.
Brokers have many HNWI buyers with millions of dollars raised to acquire digital assets like yours. In fact, buyers will actually compete to win your deal when you have all the necessary documents in order.
If you plan to go for a private sale, you could consider using PayPal to act as your escrow.
Let Us Handle That For You
As the leading broker in online businesses, we’re confident that we’ll be able to handle your deal smoothly and efficiently. We have all those services mentioned above, not to mention a really sophisticated platform to help you manage incoming deals that are always evolving.
To make sure our marketplace is filled with high-quality buyers, we ask buyers to provide proof of funds. Savvy investors like using our marketplace so much that a total of over $4 billion in verified proof of funds is available and waiting to be deployed into acquiring Shopify stores like yours.
Start your journey by using our free Valuation Tool.
In just a few minutes, you can find out how much your ecommerce business is worth. After inputting a few key metrics, such as like how many hours you work and how much revenue your business makes each month, we’ll provide you with a pretty accurate estimate of how much your store would sell for on our marketplace.
We’re the only broker who has such a tool that quickly gives you an indication of how much you could sell your ecommerce business for.
If the number isn’t quite what you expected, you can focus some time on improving the asset and trying again in a few months’ time.
The Exit: What to Do AFTER You Sell Your Shopify Store for Multiple Six-Figures?
If by this point you’ve sold your business, congratulations!
However, it’s not uncommon for entrepreneurs to get depressed a few days after selling their business. This is because of a lack of planning around what to do with the capital. They’ve suddenly got this huge allocation of time that used to be spent running their business.
Now, they have money but no plan on what to do with it. The absence of any decent and feasible plan leads to paralysis analysis, and ultimately could lead an entrepreneur feeling regret over their sale.
If you’ve read this far, you know that selling your business is a purposeful action to help you achieve your next goal.
You can achieve that goal with likely the largest capital windfall you’ve ever received.
What to Do with Your Capital?
As we mentioned earlier, selling your business is the beginning of a brand new chapter. You could take all of your experience and knowledge and apply it by building a new and profitable Shopify store from scratch. Except this time, you’ll be able to do it on a speed run since you know all the shortfalls of building an online business and can expedite the timeline.
However, you won’t be able to avoid all the usual pitfalls of growing a startup.
Alternatively, you can buy online businesses to skip the grueling startup phase so you can get straight to the building (and fun) part! Our marketplace has loads of potential online businesses for you to find a great deal.
Maybe you’re tired of the online world and need some R&R to recuperate from your burnout. You could instead invest in real estate or stocks as another passive income stream. Maybe the capital opens up the opportunity to pursue a long-held dream, like traveling the world or buying a home without a mortgage.
There are many possibilities, and it all starts with realizing that a profitable exit unlocks all of these opportunities in just one deal.
When you’re ready, register on our marketplace to sell your store.
It could be the key to opening the door to the next stage of your journey.
