How Much To Buy an Australian Dropship Store?

How Much To Buy an Australian Dropship Store?

In this post we cover how to value an Australian dropship store. We cover how to get a valuation of an Australian dropship store. We also cover what are the key steps to buying a dropship store. Basically how much to pay for an Australian dropship store.

Whether you're considering opening your own online store, or you're simply curious how much potential there is in this form of entrepreneurship, it's important to understand the value of drop shipping stores. This post will cover everything you need to know about ecommerce valuation and show you some examples of the price tags these businesses carry.

There are 6 main factors to consider when valuing an ecommerce business.

1. The age of the store & the amount of time it has been in business

This is important because a business that has been in operation for a longer period of time will have a larger customer base, and customers are potential buyers to you. Furthermore, the longer the online store has been in business, the bigger chance they will have already secured a bigger market share.

2. The level of growth within that time.

The amount of growth in the business (such as adding new products or adding new stores) will be something that is very evident when looking at the gross revenue of the store. You want to buy a growing business, if you can see no growth over the last 12 months, then the business is likely to have stalled or growing slowly.

3. The website traffic and the amount of social media activity that the store has

Having a lot of website traffic means that there is potential for you to easily increase the revenues through Google Adwords and Facebook Campaigns. It will also mean that you can easily see if cost-per-click pricing is too high, as you'll already have an audience, which will help you make or break your first few ad campaigns.

4. The uniqueness and quality of the products on offer by the store.

How competitive it is with similar stores in its niche is a big factor. There are a variety of things in play here but popularity and brand name recognition will increase the value significantly. Products with good margins and high demand will also add to value.

5. The competition in the market

How many competitors there are and how much consumers know about the store. This is a big factor when it comes to online stores, but the reason it is an advantage for you at this stage is because consumers may not be aware of what shop you're selling from.

6. The revenue and profits

This obviously is the main factors when valuing an online business. The revenue essentially determines the bottom line of a store, income potential, and growth potential. The profit will determine the margins the business is getting which will show how much profit there is to be made from each website sale.

What is the formula to evaluate an ecommerce business?

The formula that we used when valuing an online store is:

Revenue x Profit margin x Time in business (for Australian drop shipper stores)

Where:

Revenue = Gross revenue (in AUD)

Profit margin = Profit (in AUD) - Cost (in AUD)

Time in business = The time when the valuation for this online store was done.

So if a drop shipping store has a gross revenue of $50,000 per month and has a profit margin of 25% and has been in business for 2 years, the value of the store is:

$50,000 x 25% x 2 years = $25,000.00 AUD 

It's important to note that there are other factors that influence the value but you can use this formula as a guide to get an idea on how much to pay for an online dropship store.

Conclusion

A valuation is not an exact science. It's one of the most important steps in doing business because it will allow you to make sure that any deal you're making is worth your time. Don't get too hung up on math. Just think about what the company does, what it's selling, what its costs are and how much money you could make. Most valuation problems are solved easily in this fashion.

If you would like to view hundreds of ecommerce sites that are currently for sale check out www.flippa.com they are world's premier online business broker. 

We hope that this post has provided you with some new insights into valuations and business ownership in general. If you would like to learn more about setting up your own drop shipping store in Australia, feel free to check out our FREE Australian dropship training here.