The Andrew Faris Podcast

50% Of Shopify Businesses Are Worth $0 (With Fan Bi)

May 9, 2025
Fan Bi, Co-Founder of The Hedgehog Company, delves into the harsh realities of e-commerce valuations. He reveals that 50% of Shopify businesses could actually be worth nothing, despite their revenue figures. Bi shares insights from analyzing over 300 P&Ls, highlighting the pitfalls of margin traps and mispriced equity. He discusses why revenue isn’t synonymous with value, the importance of financial discipline, and how to identify red flags in valuations. This conversation is essential for founders who prioritize profit over vanity metrics.
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INSIGHT

Half of Shopify Businesses Struggle

  • About 50% of Shopify businesses operate with very low or negative profitability due to low gross margins and high marketing spend.
  • These businesses struggle with retention and lack a strong underlying asset to build value on.
INSIGHT

Younger Brands Are Financially Healthier

  • Newer e-commerce businesses (within last four years) tend to have healthier financial discipline and margins than older ones.
  • Many older brands misunderstood or miscalculated fully landed gross margins, causing operational strain.
INSIGHT

Debt Traps Limit Many Businesses

  • About 25% of Shopify businesses have decent attributes but are trapped by bad balance sheets or excessive debt.
  • These financial constraints severely limit operational flexibility and growth potential.
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