A2X Newsletter | Time to exit? Help your ecommerce clients decide

Hi there,

If you’ve been working with ecommerce businesses for a while, you’ve probably fielded this question from a client: Should I keep scaling and drawing cash from the business, or is it time to prepare for an exit?

To unpack the financial, emotional, and strategic angles behind that decision – and help you guide clients with confidence – I spoke with Jason Somerville (valuation specialist at GW Partners) and Richard Starkey (ecommerce accounting expert at CronosNow).

Here’s a summary of what they shared about navigating the “scale vs. sell” crossroads for ecommerce businesses ⬇️

You can also watch our full conversation (43 mins). Feel free to forward to your clients who might find these insights helpful!

🎯 First Things First: Know Why You’re Building Your Business

Jason opens by reminding founders that most ecommerce businesses are built with one of two goals:

• To fund a specific lifestyle through steady income (cash flow)
• To create a high-value asset with a future exit in mind

Knowing which camp you fall into is essential. But equally critical? Having a personal financial plan that maps out how your business fits into your long-term goals.

The plan comes first. The business decision comes second.

The One Thing You Can’t Skip: Solid Financials

Before you make any decision – whether to keep or sell – Richard and Jason both agree: Get your books in order.

• Accrual-based accounting is non-negotiable
• You need accurate:
  – Profit and loss statements
  – Balance sheets
  – Cash-flow reports
  – Inventory and COGS records

Most founders don’t have this when they start thinking about selling. That’s okay – but it’s also the first thing that needs to be fixed.

In Jason’s experience, businesses often have to delay going to market just to clean up their books – so it’s best to get on top of it.

Cash Flow vs. Exit: The Financial Comparison

Richard explains the basic framework:

1. Project your after-tax cash flow over 3–5 years
2. Discount future cash to today’s value
3. Compare it to a potential exit price (often based on an EBITDA multiple)

A founder might earn $200K a year on a $1M EBITDA business – but could sell it for $3M today. That’s 15 years of income in one transaction.

It’s not just about money though. Confidence in the future – and burnout – play huge roles. If you’re exhausted, the cash-flow model becomes less attractive – fast.

Timing and Market Sentiment

Is now a good time to sell? It depends.

• The M&A market is turbulent.
• Buyers are cautious, especially when paying premium multiples.
• But good businesses can still stand out if your metrics are holding strong during a tough market.

What’s Your Business Actually Worth?

Valuation typically comes down to an EBITDA multiple:

• Small businesses (under $10M in revenue): typically 4–5× EBITDA
• Larger businesses: can reach high single or even low double digits

Factors that drive your multiple higher:

• Diversified sales channels (not just Amazon)
• Subscription-based revenue
• Clean, verified COGS and working-capital numbers
• A strong brand vs. being a “widget seller”

What Buyers Are Really Looking For

If you decide to sell, buyers usually want:

• Predictable and sustainable growth
• Diversified revenue streams (Amazon + Shopify + others)
• A real brand, not just a product catalog
• Operational resilience (supply chain, SOPs, team)
• And yes – clean, defensible financials

Accounting won’t sell your business, but bad accounting can tank a deal.

The Deal Breakers in Due Diligence

Bad accounting → restatements → lost trust → lower price (or no deal).

Richard’s 15-minute “gut check” for any ecommerce P&L:

1. Cross-check channel revenue vs. source (e.g. Amazon, Shopify)
2. Look for stable gross-margin %
3. Verify balance-sheet inventory vs. actual stock on hand

When to Get Serious About Clean Books

Clean books ultimately help you decide whether to keep or sell. As a rough guide:

• Under $30K/month: Use A2X for accurate revenue
• $30K–$50K/month: Start investing in COGS tracking
• $1M+ annual revenue: You need accrual accounting, a proper IMS, and expert oversight

Setting Up to Sell (Even If You’re Not Selling Yet)

Jason suggests focusing on:

• Predictable revenue (not hype-driven spikes)
• Clear growth opportunities (that you can show, even if you don’t act on them)
• A brand that earns the right to a second sale or referral
• Diversified supply chains to mitigate macro risk
• Strong operational systems (including accounting)

💬 Final Thoughts from the Experts

• Richard: Businesses are bought, not sold – you need to make yourself buyable.
• Jason: You don’t need to make this decision alone – have your accountant, an M&A advisor, and a personal financial planner in your corner.

▶️ Watch the full conversation (43 min)