1 year old dropshipping shopify store.

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May 25, 2024

by a searcher from Symbiosis International University in Sherman Oaks, Los Angeles, CA, USA

Hello - I'm currently looking at a dropshipping store that is 1 year old and has 36% profit margin. I'm hoping someone here can help me with drop shipping specific due diligence checklists. They are asking 2x profit. Given the longevity of the business, I'm not sure how to evaluate this. Thoughts?

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Reply by a searcher
in Jaipur, Rajasthan, India
We have worked with a lot of dropshippers helping them in marketing their business.

My thoughts would be, if they have solely relied on paid advertising to generate sales for their business, then it won't be a good idea to purchase it. As it is so easy to see what product they are selling, then doing some research to find the source and then setup a new store and start to run ads to generate sales right away. So instead of giving them money to buy their business, spend money to start your own.


But if in case they have built a brand around their name, then it might be considerable to pay for that name.

Another few factors to consider are:

• How much of their sales come from marketplaces?
• How many orders do they get from marketplaces on a daily or monthly basis.
• How many orders they have received on their website in the past 1 year. To understand the size of database that we can expect.
• How many different products are they selling?
• What percentage of sales comes from their winning product.
• Do they have products that requires customer to purchase more than once?

And there could be a few more things.


I'll be happy to do a call to assist if you seriously consider looking to buy this business.

But I want you to know, I haven't looked at this segment from searcher's point of view but has experience in the segment as we helped with marketing for such brands.

Happy to chat at redacted
commentor profile
Reply by a searcher
from Queen's University in Toronto, ON, Canada
I would not pay more than a 1X for a dropshipping company. Lots of people stated the various reasons before (low barrier to entry, at the mercy of supplier, no IP, marketing costs are high, etc). I will add that it requires a certain marketing skillset and a willingness to try and test new marketing strategies regularly. Contrary to what's being said out there on the internet. these are not passive at all and require constant tweaking of marketing approaches to continue to work. What works well for 2 to 3 months will stop working as algorithms changes, channels get saturated, cost of acquisition changes, competition moves in, etc.

On the flip side, I have seen and worked with folks that have been able to turn dropshipping products into real brands and make a lot of money selling them down the road. But not all dropshipping products have that potential. It requires a product where you can make improvements so that you can differentiate and where you create add on products to keep selling more to the same base of customers. My suggestion, if you really like the business and the product, then just start dropshipping it yourself. You'll learn a ton that way.
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