What I Look For When Acquiring an E-commerce Business

I've reviewed over 50 e-commerce businesses and I'm actively closing one right now. 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.

LOI (Letter of Intent): A non-binding document that outlines the key terms of a proposed deal before formal due diligence begins.

The post-aggregator market is a different animal than it was three years ago. The $15B in aggregator dry powder that pushed multiples to 5-6x is gone. Most of those funds restructured, sold at a loss, or shut down. The buyer pool now is operators, strategic acquirers, and high-net-worth individuals who actually understand the unit economics. And current multiples reflect that reset. (I broke down what those multiples look like in how to value an e-commerce business in 2026.)

Here's exactly how I think about it.

Key Takeaways:

• Five numbers matter before getting on any call: revenue trend, CAC vs. LTV, SKU concentration, channel concentration, and owner dependency.
• Red flags that kill deals fast: unexplained revenue spikes, inventory problems, single-supplier dependency, and messy books.
• In the post-aggregator market, single-channel Amazon FBA businesses trade at 2-3x SDE; multi-channel brands command 3-4.5x.
• Post-acquisition, I target 20-40% revenue growth in year one by layering AI-powered operations, new channels, and geographic expansion.
• Never pay for potential -- the seller gets paid for what they built, you get paid for what you build next.

What Are the 5 Numbers That Matter Most in an E-commerce Acquisition?

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.

CAC (Customer Acquisition Cost): The total cost to acquire one new customer, including ad spend, marketing, and related expenses.

LTV (Lifetime Value): The total revenue a single customer generates over their entire relationship with the business.

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.

SKU (Stock Keeping Unit): A unique identifier for each distinct product or variant a business sells. Used to track inventory and sales.

4. Channel Concentration

Same logic applied to platforms. 90% Amazon is a single point of failure. And in 2026 it's a margin problem too. Amazon's effective take rate is now ~34% (referral + FBA + storage + ads), up from ~26% in 2020. I wrote about why those margins are broken in 2026. A single-channel Amazon brand is paying that take rate on every dollar with no offset. The best businesses have 2-3 channels working. And that mix directly moves the multiple. If you're evaluating whether your Amazon channel is being managed well, I wrote a guide on how to choose an Amazon brand management agency that covers what good looks like.

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.

What Red Flags Kill E-commerce 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.

What Green Flags Make an E-commerce Business Worth Acquiring?

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 Are E-commerce Businesses Valued?

Simple framework: adjusted earnings times a multiple. SDE (Seller's Discretionary Earnings) for owner-operated businesses under ~$1M; EBITDA for businesses with a real management team. (Using the wrong metric is the most common error I see. The full breakdown is in how to value an e-commerce business in 2026.)

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a business's core operating profitability, stripping out financing and accounting variables to show how much cash the business actually generates.

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

Here's how the multiples actually break down in 2026:

| Business Type | Multiple Range | Typical Metric | |---|---|---| | Single-channel Amazon FBA | 2-3x | SDE | | Amazon + DTC | 3-4x | SDE or EBITDA | | Amazon + TikTok Shop | 3.5-4.5x | SDE or EBITDA | | Multi-channel (3+ channels) | 3.5-5x | EBITDA |

What pushes you up inside those ranges: 20%+ YoY growth, low owner dependency, top product under 50% of revenue, LTV at 5x+ CAC, expanding margins. What pushes you down: declining revenue, founder-as-operator, single SKU at 80%+, compressing margins from FBA fee creep.

Exceptional metrics across the board can push higher. Single points of failure push lower. (For what I'm actually paying right now as an active operator-buyer, see my acquisition criteria.)

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.

What Does E-commerce Due Diligence Look Like?

Once I sign a letter of intent, due diligence runs 30-60 days. Here's what I'm checking:

Financial Verification

Bank statements matched against reported revenue, month by month. P&L reconstruction if the books are messy. Tax returns for the last 3 years. I want to see that adjusted EBITDA holds up under scrutiny. Add-backs need to be legitimate.

Customer Data Deep Dive

Cohort analysis on repeat purchase rates. Customer acquisition cost trends over 12+ months. Refund and return rates by product and channel. If CAC is rising and LTV is falling, that's a trajectory problem the headline numbers don't show.

Supply Chain Audit

Supplier contracts, lead times, MOQs, payment terms. I want to see multiple suppliers for key products, or at minimum a documented backup plan. I also look at inventory turnover. Slow-moving SKUs are a cash trap.

Platform Risk Assessment

For Amazon businesses: account health history, any past suspensions, IP complaints, policy violations. One unresolved complaint can turn into an account shutdown post-close. For multi-channel businesses: what percentage of revenue comes from each channel, and how defensible is each one.

Team and Operations

Who does what? Are there SOPs? How dependent is the business on any single person? I'm looking for a business I can operate without the seller within 90 days. If that's not realistic, the transition plan needs to be airtight.

Legal Review

Trademark registrations, brand registry status, any pending disputes or litigation, compliance with product safety regulations if applicable. Nothing kills a deal faster than a legal issue that surfaces at the eleventh hour.

What Happens After You Buy an E-commerce Business?

This matters because it informs what I'm willing to pay. My playbook post-acquisition:

First 30 Days

Stabilize operations, meet the team (if there is one), understand every process, identify the 3-5 biggest levers for growth. No major changes yet.

Days 30-90

Implement AI-powered reporting and analysis (the same stack we use for our Amazon management clients). I wrote in detail about how we use AI to manage 52 Amazon accounts -- that same infrastructure gets deployed to every acquisition. Fix obvious operational inefficiencies. Start testing new channels if the business is single-channel.

Days 90-180

Execute growth plays. Launch on TikTok Shop if applicable, expand to Canada/UK/EU, implement email marketing if it doesn't exist, optimize PPC with our agency expertise. This is where the real value creation happens.

Year 1 Goal

20-40% revenue growth with improved margins. If I can't see a clear path to that when evaluating the deal, I probably won't make an offer.

How Should You Prepare Your Business for Sale?

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. here's my full process and criteria. No pitch, no obligation. The full seller-side playbook is in how to sell your Amazon FBA business.

Already running on Amazon or TikTok Shop? We also help brands scale on Amazon and launch on TikTok Shop. Which can significantly increase your valuation before you sell.