How much is my Shopify Store Worth?
Last modified: May 1, 2021
Whether you’re just curious, seeking external investment or are looking to sell your Shopify business, knowing the valuation of your business can be a great piece of knowledge. So how can you work out the valuation of your website and what can contribute to the valuation and what can’t?
The Value of the Assets
The first option is to total up the valuation of everything that the business owns directly. This could include all equipment, inventory, domains, website and more. You can then subtract any debts or liabilities that are currently held against the business. This gives you a starting point, but you might need to consider that the value of the business is not just what it currently has in its possession.
Another important factor is revenue. It is not profit, but rather revenue. Profits can be changed by new owners with ease and so aren’t reliable. For instance, profits can be diminished because you’ve had to buy in new equipment or pay off a loan for the business. Whereas the profit could have been much higher if this was not done.
Revenue is much more accurate because it shows the maximum amount of potential income for the buyer. You can use an accounting app to help.
There is a calculation that is known as the ‘earning multiplier’. This is a multiple of the company’s earnings and is otherwise known as the price-to-earnings (P/E) ratio. What happens is that you tend to do is calculate the potential earnings of the company over the next few years and calculate an average. Then you multiple this to a P/E ratio. Typically the P/E ratio is approximately 15. Therefore, if your business earns $20,000 a year, your valuation would be $300,000.
Discounted Cash-Flow Analysis
This is a more complex formula that can be hard for you to work out on your own. You might need to find an online NPV calculator to help you out. This system uses your business’ annual cash flow and then projects it into the future. It will then discount the value of the future cash flow to the value today and this creates a net present value.
Beyond the Financial Aspects
Valuing your business isn’t just about the assessment of the financials. If your business has a strong online following, a large mailing list, lots of Facebook followers, chances for expansion, chances for optimization and other things, then you could have a much more valuable business. Therefore, look at the business and consider how much other elements of the business are worth.
Final Word: How much is my Shopify Store Worth?
It doesn’t matter what the reason is for knowing, if you want the valuation of your business there are several options for you. Use one or two of the methods above to calculate your business’ value. You might want to use two or three of them and then calculate an average value for them.