This article outlines the key steps to selling a Shopify e-commerce store for maximum value. For information related to selling a Shopify app, read our article on How to Value a SaaS Business in 2022.

Founded in 2004, in Ottawa, Canada, Shopify is one of the world’s leading e-commerce website platforms. Today, there are 1.75 million merchants selling on the platform and 3.76 million live sites that use Shopify, and in 2021, the platform processed more than $79 billion in order value (Source: Backlinko).

Shopify has experienced strong growth since 2012. The latest figures show a 39.98% year-over-year revenue increase for the twelve months ending March 31, 2022.

The chart below illustrates the platform’s rapid growth in revenue:

Source: Statista

These historical results, coupled with a report forecasting global e-commerce sales to exceed $5 trillion in 2022, suggest that the future for Shopify’s 1.75 million merchants looks bright. Learn more about the outlook for Shopify businesses and the e-commerce industry as a whole in our 2023 E-commerce Whitepaper.

The ease of setting up and running a Shopify business is a key component of its popularity. These same characteristics make acquiring a Shopify business an attractive proposition for buyers seeking to purchase successful companies that do not require much owner involvement.

With experience in overseeing the sale of over 1,200 businesses, FE International has developed a deep understanding of what makes a valuable Shopify store. Our 80,000+ vetted buyers look for low-risk, sustainable businesses with reliable sources of income.

Here are the steps to growing, marketing, and selling your Shopify e-commerce business.

The Details

In their own words, Shopify offers “a complete e-commerce platform that lets you start, grow, and manage a business” and “sell in multiple places, including web, mobile, social media, online marketplaces, brick-and-mortar locations, and pop-up shops.”

It’s a powerful promise that Shopify delivers; many highly successful businesses have been built on its back.

What Are the Advantages of Shopify?

Affordable and Easy to Use

Shopify lowers the barrier to entry for launching an e-commerce website to almost zero. From coding to hosting, Shopify offers a wealth of options for creating a personalized and unique branded user experience. Shopify allows merchants with virtually no technical knowledge to do what they do best–sell.

Along with a free 14-day trial, their price plans are straightforward and highly competitive:

Shopify also offers yearly subscriptions for 50% off the first year and a $5/month Starter plan for selling products through social and messaging apps. Additionally, starting at $2000/month, Shopify Plus is an available option for high-volume businesses looking for enterprise-grade solutions.

Powerful Marketing

By default and design, Shopify facilitates Search Engine Optimization (SEO). Merchants are prompted to optimize their sites by creating unique URLs, meta descriptions and page titles. All of this is done without employing one of the many available extensions to further enhance SEO.

SEO aside, there are countless options available from the Shopify app store to further support merchant marketing efforts.

Propel Commerce’s Subscriptions Recurring Orders is one compelling example. It enables customers to select products they want to buy on a recurring basis, whether that be daily, weekly, monthly or annually. This plugin is seamlessly integrated with Shopify checkout and is only one of many available options enabling merchants to automate their sales processes.

Customer Support

Shopify setup is simple – that is the platform’s Unique Selling Point (USP). If a merchant does run into problems, Shopify’s reliable 24/7 email and live chat support team can be depended on to offer a solution.

Additional Resources

There are countless Shopify partner agencies and developers worldwide enabling merchants to further develop, expand and optimize their stores. This one of many ways the ubiquity of the platform can be a plus.

Security

In today’s environment of hacks and data leaks, maintaining security is more important than ever. Shopify actively protects its merchants through regular security updates and add-ons. Some of the world’s biggest brands trust Shopify to take care of their business.

Shopify is fully compliant with the Payment Card Industry Data Security Standard (PCI DSS). The standard is automatically applied to any Shopify store, ensuring customer data integrity.

Themes

Site design is an integral part of both branding and user experience (UE). Shopify allows merchants to build and customize their sites through the Theme Store. The best themes may come at a price, but seamless integration with Shopify and real-world testing from other merchants can make them a bargain.

With mobile devices quickly catching up to desktop computers in terms of consumer time spent online, it is important to know that all Shopify themes are mobile responsive.
Outside of the official theme store, there are many third-party sites like ThemeForest that offer countless fully customizable themes.

Hosting and Payments

Merchant shopping carts and payment gateways are powered by Shopify by default. Depending on sales volume, this convenience may eventually come at a premium. Initially, Shopify compensates for this by minimizing the valuable time that might be spent configuring servers, enabling credit card payments and handling the myriad challenges inherent in building a custom e-commerce solution.

Disadvantages of Shopify

Complex Customization Code

Shopify may best all competitors when it comes to providing straightforward, intuitive tools for building a functional, well-designed e-commerce storefront painlessly and quickly. When further customization becomes a priority, this initial ease can come at a hefty price.

Shopify uses its own proprietary language, Liquid, in coding. This means that any tweaks a merchant wants to make to a storefront that isn’t already accommodated for in their current template will require a proficiency for programming in Liquid. Few business owners will have the time or inclination to learn this highly specialized skill.

Solution: Consider hiring a Shopify partner agency to assist in both setting up the store and maintaining and customizing the site as it grows. It’s an additional expense but a worthwhile one considering the alternative.

Cost of Add-ons

There are thousands of add-ons available to enhance a Shopify store, but they can be expensive. These costs can add up quickly.

Solution: There are many free or inexpensive extensions on the Shopify store. Do your research. Compare the cost vs. benefit of different extensions that address your business pain points. You may be able to find a cheaper alternative that achieves the desired results. This will lead to significant savings in the long run.

Shopify: Overview

There is one very compelling reason that has led to Shopify growing to be one of the biggest e-commerce platforms in the world: It’s very good at what it does. There is no doubt that a well-run, fully optimized and profitable Shopify business is a very attractive proposition for buyers.

Harnessing the full potential requires research and finding the right tools to add maximum value to the business.

How to Increase the Value of a Shopify Business

Increase the value of your Shopify business by utilizing the countless tools available through the Shopify platform, along with several tried and tested methods outlined below:

Shopify Blog

Shopify has a very active blog with various articles dedicated to helping sellers make the most of the platform and ultimately improve their business.

Standard Operating Procedures

A passive business is always going to be more attractive to buyers than one that requires extensive owner involvement and expertise. Closely examine all business operations and measure out how much time each process takes, as well as how much time the owner spends on the business.

Improve efficiency or cut time spent without sacrificing quality wherever possible. Once the business is running smoothly, create Standard Operating Procedures (SOPs) for staff, contractors and a potential new owner to follow. This may be time-consuming, but it is time very well spent. It will increase the value of any successful Shopify store.

Outsource

If running the business requires more than 5-10 hours of owner involvement per week, outsource as much of this work as possible. Upwork is a great starting point.

Putting the right team together takes time and a considerable amount of trial and error. Cut down on both by creating clearly defined roles for each team member. There are tens of thousands of freelancers available at any given time across all disciplines. High-quality team members can enable an owner to focus on growing the business, rather than getting bogged down with mundane, but essential tasks.

Virtual Assistants (VAs) can also be a viable alternative if the business isn’t at the stage where it requires a fully-fledged freelance team. VAs can help with repetitive tasks such as data entry or social media management.

The whole point of outsourcing is to free up owner time and automate business functions wherever. This results in both a higher business valuation and a more attractive company to buyers. Owner time spent on a business is one of the key metrics used in valuing an online property.

Track Your Data

Keeping an accurate record of business data, including website traffic, conversion rate and financial performance, is important for two distinct reasons:

1. Monitoring Your Performance: Without hard data, how can a business or potential buyer gauge how it is performing? Monitoring performance will help identify the underlying strengths and weaknesses of the business which can then be addressed. Though this may sound obvious, many businesses simply fail to do it.
2. Valuation: It is virtually impossible to accurately assess the true value of a business without accurate and up-to-date data.

Prioritize recording and tracking business from day one. It can be tedious, but it will pay substantial dividends as the business grows. There are plenty of tools that can help; here are a few of the best:

• Traffic: As might be expected, Google Analytics is the go-to platform for monitoring website traffic and click-through and conversion rates. Utilize and optimize its powerful reporting capabilities to create an accurate picture of customer traffic drivers. Shopify offers built-in Enhanced E-Commerce tracking, which builds out an even more detailed picture of customer behavior on the site.
• Accounting/Bookkeeping Plugins: There are dozens of Shopify extensions to aid in virtually all aspects of bookkeeping. Do some research to find ones that address the specific needs of the business. A good example is Quaderno— a tax automation software that hands tax compliance, proper invoicing, bookkeeping and tax filing, so you can focus on growing your business.
• Holistic Reporting Apps: Many business owners like to have a complete overview of company performance all in one place. There are various options available for Shopify merchants that aim to meet this need. Report Pundit is a popular tool that offers 80 pre-made reports along with custom reports to help Shopify stores instantly access their data and manage their business.

There are multiple benefits to efficiently tracking business data, and with the right tools and smart implementation, it doesn’t require a significant amount of time. Once setup is complete, it is entirely feasible to let monitoring systems run in the background. An owner or CFO can just focus on action points and reports.

Marketing

Marketing is a necessity for any successful online business. As mentioned earlier, Shopify has many built-in marketing tools, but there is always more to be done.

• Advertising: Highly targeted advertising campaigns are more accessible than ever, with particular proving to be a lucrative source of traffic and revenue for some merchants.
• SEO: The power of SEO is magnified when you are dealing with niche products. Plug In SEO offers the ability to identify weak points in a Shopify site’s SEO and suggest improvements. Another best practice is to optimize images for SEO, and Booster Apps’ SEO & Image Optimizer can do this automatically for you. Both of these apps have free plans available.
• Email Marketing: Email remains one of the most powerful direct marketing tools there is. Abandoned cart emails sent by retailers, for example, have a 26.8% open rate, often boosting revenue. It makes sense to have a personalized, segmented email strategy in place for customers and subscribers. GrooveJar contains a powerful set of apps to help you with your email campaigns along the sales funnel, converting site visitors into customers. A variety of popups use behavioral psychology (e.g., urgency, crowd influence, social proof) to encourage site visitors to act, mainly to provide you with their email address or to purchase products outright. Once you have their email addresses, the Collect & Convert app allows you to create customized, triggered email campaigns to turn leads into customers. It’s one of most efficient lead generation and conversion tools on the market, capable of generating 9-20% conversion instead of the 3% industry average.
• Social Media: In 2021, 82% of the US population had a social media profile. This figure alone underlines the potential in harnessing the power of social media. There are many social media integration tools available, and Outfy allows users to create and share product collages, videos and ads, automatically curate and publish posts, use customized templates to create engaging promotional content, and much more.
• Customer Reviews: Reviews are crucial to business success. According to Spiegel Research Center, a product with just five reviews is 270% more likely to be purchased than one with no reviews. It is vital to monitor reviews, particularly negative ones, and encourage as many positive reviews as possible. Merchants often utilize post-purchase emails and social media to encourage customers to leave reviews. There is also an app by Yotpo that makes it easier for customers to write reviews on a product they have bought. It does not filter out negative ones, but it will flag them.

The above are the most effective ways to drive traffic to your Shopify store and boost revenues. A targeted and personalized marketing strategy, across multiple platforms, can be a gamechanger in increasing the value of any business.

How to Value Your Shopify Business

At FE International, we have sold over 1,200 online businesses totaling $1 billion since 2010. We have developed a formulaic understanding of valuing e-commerce stores. Below is a step-by-step primer on how to value a Shopify business.

Valuation Model

Most online businesses valued at under $5 million are valued using a multiple of seller discretionary earnings (SDE). Put simply, SDE is calculated as follows:

As the equation shows, SDE is the profit left to the owner once all Costs of Goods Sold (COGS) and operating expenses have been deducted from gross income. Important note–the salary taken by an owner is typically added back, as this helps to standardize valuations across businesses where owners may pay themselves different amounts for tax purposes, rather than having anything to do with the complexity or time spent on the business.

This model reflects the fact that most small businesses are owner-operated and therefore owner reliant. An owner will often pay themselves a salary and purchase personal items through the business for tax reasons. All these expenses are acceptable add-backs in working out the true underlying profit potential of a business. Other add-backs can cover one-time or no-longer-relevant expenses – for example, redesigning a website (assuming only done once) is a common add-back. As this cost is not relevant going forward, it is adjusted accordingly.

Valuing larger Shopify stores is more complex. In businesses with more than $5 million in value, earnings before interest, taxes, depreciation and amortization (EBITDA) multiples are used almost exclusively, with revenue multiples also used in larger, more strategic sales.

Multiples

To work out how much your business is worth, we dig into the details and consider some or all of the following factors:

Metrics Behind Business Valuations

There are four key metrics behind the valuation of a Shopify business:

• Age of the business: A Shopify business with a proven track record of consistent profits will be more attractive to a buyer than one with a history of a few months. Businesses with a lifespan of at least 12 months old are the preferred minimum entry point. At two years or more they may generate a premium valuation. There is a market for younger businesses, but the pool of buyers is much smaller, particularly for seasonal businesses.
• Owner Involvement: If a buyer needs to spend over 10 hours running the business, it can negatively affect the value (particularly for very small businesses). This is why it’s crucial to streamline and automate business processes wherever possible. What most buyers are looking for is passive income.
• Trends: Buyers rarely want to purchase a business where revenues are in decline or stagnant. Consider the niche the business is in as well. If the business sells evergreen products likely to be in demand over the long term, the valuation multiple may lean towards premium.
• Concentration: Relying on one product, niche or supplier can make your business vulnerable to sudden changes, like a fall in demand or supplier issues. Having multiple sources of revenue not only makes your business more profitable but also more resilient.

How to Sell a Shopify Business

At FE International, we have a 94.1% success rate and a vast database of more than 80,000 vetted buyers looking to purchase online businesses.

Selling Your Website Using a Mergers and Acquisitions Advisor

Pros:

• Extensive Network: A good advisor will have an extensive network of fully vetted buyers already in place. This leads to a highly efficient buyer search process.
• Comprehensive Service: Selling a business is complex, particularly if it’s the owner’s first time. A good advisor will steer the sales process from start to finish. The seller provides any information the advisor requests. At that point, the advisor takes over. Typically, the services offered are valuation, sales material preparation, finding buyers, negotiation, due diligence, contract drafting and other legal or regulatory matters, and finally closing the deal. Simply put, a good advisor will extract maximum value from the sale of the business with the least amount of work required from the seller.
• Maximum Value: A seasoned advisor will accurately determine the true value of a business using market insight, previous experience and e-commerce valuation metrics and will know how to maximize it.
• Security: Reputable advisors deal only with buyers who meet a strict set of criteria and demonstrate serious interest and the requisite resources for acquiring a business. Using methods tried and tested, advisors will ensure your data, intellectual property and other essential assets are kept safe and secure throughout the sales process, whether the deal ends up being finalized or not.

Cons:

• Satisfying Advisor Requirements: It’s not just buyers that are subject to stringent vetting requirements from a reputable M&A advisor. Qualified sellers will need to provide a significant amount of information, much of which we outlined earlier, before being considered for representation.
• Fees: Any professional advisor worth working with will charge up to 15% of the final sale price.

Using an advisor is particularly beneficial to first-time sellers or any owner without the knowledge or network to extract maximum value from a sale. Working with an advisor can also significantly speed up the process.

Other Options

Selling through an advisor isn’t the only option. There are several other ways to sell your Shopify business:

• Marketplace: Online business marketplaces appear to be a cheap and easy platform for selling a business. With listing costs often in the few hundred dollars range, it can seem like an inexpensive way to draw buyer’s attention to your business. The upfront cost may be low, but check out the fine print: Most marketplaces still charge a commission on the sale price on top of the listing fee. They also have far less stringent vetting requirements for both buyers and sellers than a dedicated M&A advisory firm. This leads to a corresponding drop in quality on both sides of the sale. Keep in mind that when a business sells through a marketplace, it will be reliant on the seller to do their own due diligence, sales material preparation and buyer verification. Marketplaces have their place and are generally most suitable for businesses that are pre-revenue or below $10,000 a year in income. The bottom line: Businesses that have followed the steps and meet the requirements outlined above can get much more value working with a good advisor than trying to sell themselves.
• Auctions: Much of what applies to the marketplace model also applies to online business auction sites. Auction sites feature a sales timeframe that you can set, whether it’s a week, 3 weeks or a month. Essentially, it’s eBay for businesses.
• Direct: A business owner may feel the best option is selling a business directly to the buyer, cutting out the middleman. If a business owner has years of experience putting together deals and an extended network of buyer contacts this may be a viable option. Without that experience, it will likely end up being a lengthy, expensive and overwhelming process. And odds are high that the business will end up being sold below its full value.

Here’s a chart that lays out the basics:

Carefully explore all the options when it’s time to sell your Shopify business. Given all the hard work that has undoubtedly gone into building it, extracting maximum value should be paramount.

Learn more about how to value and sell an e-commerce business.

Conclusion

A Shopify business consistently generating strong and sustainable revenues is an attractive property for buyers. Shopify is a secure and global platform, and relatively little e-commerce technical knowledge is required to start selling.

To ascertain the true sale value of a Shopify business, we need to go deeper than the steps outlined here, but here are the key ones to remember:

• Track your data: Without data, it is impossible to come up with an accurate valuation of your business. Ensure you record revenue, web traffic and customer data from day one.
• Have Clear Standard Operating Procedures (SOPs): Clear and efficient SOPs are essential to the smooth running of the business and enable the new owner to take over seamlessly.
• Outsource: Buyers are looking for passive businesses where the owner does not need to put in any more than 10 hours a week running the business, so outsource tasks to freelancers or delegate jobs to full-time employees wherever possible.
• Use Add-Ons: The Shopify platform provides access to a huge number of extensions that can make running your business easier and optimize areas like marketing and accounting.
• Time Your Exit: Buyers want to invest in businesses with growth potential, so you should sell your business with a good history and positive forecasts.
• Focus On Sustainability: It is important to demonstrate to buyers that your business is not overly reliant on one niche or product. Diversify to find more than one source of revenue and build a stable, strong business.

The end goal is to have a passive, profitable and sustainable Shopify store operating in a long-term niche. Following the above steps will allow you to create a sellable business that buyers will be interested in buying at a premium.

This is why it is critical to gather and monitor data from day one, including web traffic, revenues, customer numbers, and sales, among other metrics. The data gathered will give you an overall picture of your business and identify underlying issues to be fixed in advance of the sale.

It’s essential to know your business in and out. This is not a process that can be done hastily; take the time to understand the factors potential buyers are looking for and the ways you can maximize your Shopify business’ salability.

Ensure your business is not overly reliant on one source of income and is operating in a sustainable niche. Buyers are looking for long-term potential, so if your figures show a spike in revenue, you will need to be able to explain this and address any concerns that you may have reached the top of your market.

Timing the sale of your Shopify store is also critical, as you want to sell at a time when the business has a history of sustainable growth and is forecast to grow long term.

As you approach the end of your exit strategy, your Shopify store should be a passive business with internal and external processes running smoothly, so the new owner can simply come in and run the company.

It may also be a wise move to hold back on new products and leave them in the pipeline as a bonus for the buyer, therefore increasing the value of your business.

Perhaps what’s most important is to take your time; evaluate your options, seek advice from across the industry, and follow the steps in this post to maximize your business’ potential value.

If you’re thinking about selling or are just curious what your business is worth, it’s never too early to start talking to advisor and getting a valuation. Please fill out this form if you are interested in a free valuation for your business and more tailored exit planning advice.