Looking for direction on vetting e-commerce businesses

February 16, 2024

by a searcher from University of Florida in Vero Beach, FL, USA

I have been looking into acquiring an e-commerce business. I have some experience vetting and acquiring business. I have completed three business acquisitions in the transportation industry and negotiated a partnership in a small high-tech defense company where I was a partner. I have looked at some financial info for a few e-commerce businesses and some of the data is concerning, but from what I understand, may be typical in this industry. I would appreciate some direction/input on what to look for and what to look out for when doing initial vetting of e-commecrce businesses.

Reply by a searcher
from ESSEC Business School in Torrance, CA, USA

Thanks for tag ^redacted‌. Hi ^redacted‌ - many e-commerce businesses are pump & dump. I know this because we acquired one! Thanks to performance marketing, a business owner can push certain levers for a consistent period of time to drum up numbers. Plus there are algo changes happening all the time. It doesn't matter how intense and detailed DD you conduct, if you cannot get the current seller to have their pay off aligned to a certain guaranteed minimum for at least a period of 2 years - there is no point buying that business.

Reply by a professional
from University of Colorado at Boulder in Fort Myers, FL, USA

^redacted‌ - Happy to have a brief chat. I'm in the trenches doing deals for digital businesses and eCom is one of the niches I work with routinely. As a couple of others have shared KPI's are key, but you need to also do some researching using various online tools so you can learn what other questions to ask. This will allow you to confirm what the data is telling you and ask for deeper info.

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