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Update 4/08/08  Seems it has been awhile since updating the purchase multiple range for the Drop Shipping Internet Business Opportunity category. Not neglect, simply this range has remained stable through the ups and downs of the market. Even when the market turned from Seller\’s Advantage to Buyer’s Advantage in June of 2007 this category remained stable.Has that now changed?Yes, but only slightly. The reason is the category is broken into two subcategories. The new category is sites that are less than eighteen months old; or have changed ownership in the past twelve months. The multiple for this category is 1.2 to 1.7.The initial category remains 1.5 to 2.5 for the 100% Drop Shipping Internet Business category.

Worldwide Brands: Drop Ship and Wholesale Product Suppliers of Millions Wholesale Products from the Internet’s 100% Genuine source of Drop Ship Information.

Update 4/23/06   1.5 to 2.5 is the current multiple of ACF when buying an E-commerce “drop shipping” based business.This article refers to a “buyer” acquiring an E-business. This is quite different than an “investor” buying an E-business. A buyer’s focus is on the historical information to determine value. An investor\’s focus is on the future of an E-business to determine value. An investor focuses on a “future” multiple of revenue or profits. A “buyer” does not. The “value” of an E-business to a “buyer”, as with any other type of business, is based on a “multiple” of “revenue” or “adjusted cash flow” (often referred to as Seller’s Discretionary Earnings, or SDE).

To determine the “adjusted cash flow” (SDE) you review the historical expense of the business to determine what costs are at the “discretion” of the owner. Some examples of discretionary costs of an E-business are auto payments, health insurance, trips to Jamaica (wink), cleaning services (the housekeeper is NOT a required expense of a business) and long distance phone expense. These “discretionary” expenses are “added back” to the profit side of the E-business.Once a buyer has determined this “adjusted cash flow” he can apply a “multiple” to assign a purchase value to the E-commerce business.

An E-commerce business that sells products that are drop shipped to customers by a 3rd party, and retains no or little inventory, is valued at a premium compared to a direct marketer using other media (e.g. TV infomercials and 800 numbers). The multiplier ranges from 1.5 to 2.5. Time in business, extent of competition, and repeat customers are key determiners that affect whether the value will be at the low, or high end of the range.

Read More About Drop Shipping

Part One: Drop Shipping | Internet Business Review

Part Two: Drop Ship vs. Affiliate  For more information on a drop shipping Internet Business Opportunity contact Internet Business Consultant Don Janke. With over 24 years Online/Internet experience I can guide you to your ideal acquisition to make money online!

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