E-commerce and retail business valuations | IBV™

Provide channel statements, merchant settlements, refund records, advertising spend, fulfilment costs and stock ageing. Reconcile platform sales to recognised revenue and bank receipts. What margin remains after returns, discounts and delivery costs? Does customer acquisition depend on one advertising source or marketplace? Account access and ownership should be evidenced without sharing passwords or private customer data in an initial enquiry.

The deliverable should include a channel contribution and inventory quality schedule, with clear treatment of working capital and transferable digital assets. Where earnings rely on a supplier, platform policy or licence, identify that dependency and its evidence. Customer or traffic growth can inform the analysis, but neither establishes a business value without an assessment of sustainable cash generation.

Separate orders, fulfilled sales, cancellations, refunds and collections for others. GST collected is not trading income. Gift cards and customer deposits need distinct treatment: cash before supply does not automatically represent earned revenue. Where a retailer hosts sellers or sells on consignment, assess whether its economic income is the merchandise price or only a commission.

Classify settlement deductions separately. A marketplace may remit funds after advertising, fulfilment, refunds and reserves. Treating the deposit as sales conceals turnover and costs; treating every order as completed revenue may overstate activity. Reconcile consistent periods including transactions spanning month-end. This supports channel comparison and distinguishes growth from payment timing. Evidence should connect order data to the accounts and bank without assuming that dashboard totals use the same definitions as financial statements.

Picking, packaging and dispatch can consume similar resources for one inexpensive item or several higher-value products. Free-shipping thresholds may lift basket value while reducing contribution if merchandise margin does not cover delivery subsidies. Examine bundles, promotional codes and loyalty redemptions together rather than allocating discounts mechanically.

For stores, compare occupancy and rosters with trading hours, foot traffic and conversion. Online, review repeat purchases by cohort and intervals between orders. A high repeat-customer percentage may coexist with falling spend or costly reactivation. Attribute acquisition and retention expenditure consistently; do not assume either disappears with new ownership. Review whether recent performance depends on unsustainably heavy promotions or a temporary advertising advantage. Forecasts should connect paid acquisition, returning demand and contribution rather than treat every visitor as equivalent future income.

Annual averages hide pre-peak funding. Model supplier deposits, production lead times, imports, arrival dates, customer receipts and supplier credit monthly. Pre-shipment payments create different requirements from local credit purchases despite similar annual earnings.

Separate normal seasonal investment from exceptional accumulation. Slow inventory is not necessarily normal working capital; unusually low closing stock may mean replenishment was deferred. Review reserves, settlement delays, refunds and creditors. Gift-card and loyalty obligations require separate identification rather than treating their cash as distributable. ACCC guidance provides context on gift-card requirements; advisers should address actual terms. Link purchases and demand across the seasonal cycle and consider whether stock ordered for the next peak can be sold within its intended window. Timing problems may create finance needs distinct from a stock write-down.

Review access to specifications, supplier tooling, packaging artwork, purchasing history and quality procedures. If a founder approves production or resolves disputes personally, establish replacement capability and cost. Private-label arrangements can differ materially from ordinary wholesale supply.

For stores, check tenure, permitted use, options, security and landlord approvals with advisers. Strong locations do not establish continued occupancy on unchanged terms. Review warranty and returns history, unresolved complaints, defective batches and supplier recovery. ACCC guidance explains that business policies cannot remove statutory consumer guarantees. Historical profit may not capture remedies for products already sold. Keep legal responsibility separate from the supported commercial effect. Digital accounts, licences, supplier arrangements and operational knowledge need evidenced access rather than an assumption that a working website demonstrates a transferable business.

This illustration is not a client case or benchmark. A retailer increases fulfilled sales after refunds. Additional merchandise margin is largely absorbed by advertising, fulfilment and delivery subsidies. Its profit improvement is much smaller than the turnover change suggests.

Supporting the growth requires more saleable inventory and unsettled merchant receipts. Increased supplier credit offsets only part of the requirement. This operating funding commitment differs from an expense but matters to cash generation and transaction funding. Test the assumptions against stock turnover, payment terms and settlement evidence. A forecast should link sales, contribution and the balance sheet, then distinguish ongoing capital needs from excess cash. A buyer-specific plan to change channels or inventory policy is not automatically established performance of the existing business. Sensitivities should show whether slower demand produces both weaker margins and a longer stock-holding period.