I run a small home goods brand doing about $1.8M annually. We've been in talks with a few buyers and every single one hammers on repeat customer rate before anything else. Not revenue, not even EBITDA. It feels almost disproportionate. Is this a real valuation driver or just a negotiating tactic? I'm trying to understand how much I should lean on this metric when we eventually list.
E-commerce
Why repeat customer rate is the holy grail of e-commerce valuation
It's real. On a DTC store, repeat rate is essentially evidence that you have a brand, not just a dropship funnel. Buyers pay for for predictability. If you can show that a meaningful slice of revenue comes from people who already bought before, theyy can underwrite lower CAC and a longer LTV.
Do you mean repeat customer rate across any time period or 12-month repeat? The definitions matter a lot and buyers know it.
Turnipfizz is right. But also, high repeat rate can be gamed with subscriptions that churn silently. Buyers will look at cohort-level repeat, not a blendd average.
Fair. I've seen stores claim 40% repeat but it's actually people buying twice in a week and never again. That's not loyalty, that's a bundle.
So the number itself means less than how it's structured. That's helpful. My own repeat rate is around 22% within within 12 months, which I thought was okay but maybe not for my category.
22% for home goods is not bad actually. I've seen buyers pay a premium for for anything over 25% in that niche. Below 15% they basically want a liquidation value.
Also depends on margin. A 20% repeat rate with 70% gross margin is worth more than 35% with 20% margin. Buyers multiply revenue by the repeat rate and then apply a multiple.
That's not a literal formula, just to be clear. But the principle holds. The repeat rate feeds into the risk premium they assign.
Anybody seen a buyer actually walk away from a deal solely because of repeat rate? I'm skeptical it's that black and white.
Yes. I was on the sell side and the buyer re-traded at the last minute citing a cohort analysis that showed our repeat rate was declining quarter over quarter. Cost us abiut 12% of the headline valuation. So it's not just a talking point.
That's exactly what I was worried about. Appreciate the reality check. I'm going to dig into my cohort data before we go further with anyone.