I'm in the process of selling my Shopify store, which sells home fitness equipment. It's been running for about 4 years, has steady revenue but the monthly traffic has been declining for the past 8 months (down about 30% from peak). I'm getting mixed signals on how much the traffic decline should affect the valuation multiple. Some say it's a red flag that warrants a steep discount, others say revenue and profit matter more. I'd appreciate any insights from those who have sold or bought stores with similar trends.
Valuation
How do I price a Shopify store that has declining monthly traffic?
Traffic decline is a big deal to most buyers, especially if its consistent. You'll likely need to justify why it's happening and show a plan to reverse it. Otherwise, expect buyers to bake in a risk premium.
Are the sales declining too? If revenue is holding steady, maybe the traffic drop is just lower-quality visitors. But if sales are also down, that's a different story.
Sales have dipped a bit but not as much as taffic. Profit margins are still decent. The traffic drop is mostly from Google organic, likely due to algorithm changes and some new competitors.
I've bought and sold a few stores. The multiple is typically based on profit, but traffic trends affect the multiple itself. A declinign trend might push you from a 3x to a 2x or even lower. You need to show a clear reason and a turnaround plan.
Have you considered getting a professional valuation? Might be worth the money to avoid leaving cash on the table or scaring off buyers with an unrealistic price.
Traffic is vanity, profit is sanity. But when traffic is trending down, buyers get nervous. You might need to accept a lower multiple or ooffer seller financing to close the gap.
What's your customer acquisition cost looking like? If it's rising because of the traffic decline, that's a double whammy.
CAC has gone up maybe 15% in the last year. I've been trying to diversify into email and social, but it's slow going.
You might want to fix the traffic issue before selling. Even if it takes 6 months, you could get a much better price. Unless you're in a hurry.
I looked at a store with declining traffic last year. The seller wanted 4x profit, but I offered 2.5x because of the trend. We didn't come to an agreement. Just sharing to give you a sense of what buyers might think.
Could the traffic decline be due to seasonality? 8 months is long, but maybe it's not as bad as it looks. Check year-over-year instead of month-over-month.
YoY is also down, unfortunately. Not as steep but still negative. I think it's a combination of factors. I'm leaning towards pricing it at a discount to account for the risk, but I'm not sure how much.
Maybe you should focus on increasing traffic before selling. A few months of growth could change the narrative entirely.
It's a tough market. Buyers have a lot of options. If your store isn't showing growth, it might sit unsold for a while. Be prepared for lownall offers.