Ecommerce Conversations M&A Advisor on Ecommerce Valuations
Jan 23, 2026
Frank Kosarek, co-founder of BizPort and former head of M&A at an ecommerce aggregator, talks valuations for Shopify brands and deal structures. He breaks down seller's discretionary earnings and why recurring revenue like subscriptions boosts value. He covers market multiples, inventory and working-capital risks, earnouts and seller notes, and when sellers should consider exiting.
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Discretionary Earnings Drive Valuation
- Seller's discretionary earnings (SDE) is the foundational valuation metric for most e-commerce deals and equals net income plus owner salary and add-backs.
- Buyers apply multiples (roughly 2–2.5x up to ~5x) to SDE depending on scale and category strength.
Track SDE Monthly And Prioritize Recurring Revenue
- Track SDE monthly so you can monitor valuation changes and prepare for a sale.
- Focus on recurring revenue like subscriptions to increase buyer multiples and lifetime value.
Scale Changes The Acquirer And Multiple
- Revenue scale shifts buyer profiles: under ~$15–20M buyers value on SDE multiples; larger brands attract PE/strategic buyers who may pay revenue multiples.
- At high revenue, acquisitions aim at market share rather than pure cashflow.