This post was originally published on this site.
Frank Kosarek is the co-founder of BizPort, a mergers-and-acquisitions marketplace launched in November 2025. Before that, he was head of acquisitions for a large ecommerce aggregator.
He says buyers of ecommerce businesses today focus on discretionary earnings, not revenue, and seek recurring sales, such as subscriptions.
He addressed those items, the state of ecommerce M&A, and more in our recent conversation.
Our entire audio is embedded below. The transcript is edited for length and clarity.
Eric Bandholz: Who are you, and what do you do?
Frank Kosarek: I’m the co-founder of BizPort, a marketplace that helps founders exit their companies. I lead BizPort’s ecommerce division, connecting buyers and sellers. Before BizPort, I was the head of mergers and acquisitions at OpenStore, an aggregator in Miami, where I acquired about 50 Shopify brands. That experience exposed me to ecommerce transactions and what founders should and shouldn’t do when preparing to sell their businesses.
One of the most important concepts in exits is the seller’s discretionary earnings. It’s the foundation of most ecommerce valuations. SDE starts with a company’s annual net income (what’s on the tax return), then adds back the owner’s salary and benefits, and any one-time or non-recurring expenses.
For example, if a business earns $250,000 in net income, the founder pays herself $100,000, has $40,000 in benefits, and incurs a one-time $10,000 legal expense, the SDE would be about $400,000. That number is then multiplied by a valuation multiple, typically 2x to 2.5x for most ecommerce brands, and up to 5x for category leaders.
The best advice for founders is to track SDE monthly. Know your true net income and add-backs. It gives you a clear picture of growth and future valuation.
Eric Bandholz: What’s the demand for ecommerce acquisitions?
Frank Kosarek: Ecommerce experienced extreme acceleration in 2020. We saw years of growth compressed into about 12 months as Covid reshaped consumer behavior. During that period, valuation multiples increased, and many ecommerce businesses launched that probably shouldn’t have. Some lacked product-market fit or a dependable, repeat customer base.
What’s changed since then is buyer behavior. Aggregators, in particular, have pulled back or refined their strategies. As a result, sellers can no longer assume there’s an easy, quick exit waiting for them. Acquirers are more selective and more disciplined about what they buy.
Companies that exist at top multiples tend to resemble subscription businesses. A one-time purchase product, such as a kids’ tricycle, doesn’t create much long-term value if the customer never returns. Compare that to categories such as skincare or supplements, where consumers can subscribe and reorder. Buyers focus heavily on lifetime value and how much revenue they can generate from a customer after paying to acquire them.
That’s why brands without repeat or subscription-driven revenue often see leaner valuations, while strong subscription-heavy brands can still command multiples closer to 5x SDE.
Eric Bandholz: What’s the minimum revenue level to sell an ecommerce business?
Frank Kosarek: At BizPort, we generally look for brands doing at least $1 million in annual revenue before getting involved. At that level, ecommerce margins usually provide enough cash flow to underwrite a transaction, whether through a loan, capital injection, or both. That’s typically the minimum size where an acquisition becomes feasible.
When annual revenue reaches $30 million, potential buyers include private equity firms or larger strategic buyers. Those acquirers are more likely to evaluate businesses using revenue multiples instead of earnings multiples. There isn’t a hard line, but it’s an important distinction for founders to be aware of as their brands scale.
Eric Bandholz: How do founders separate personal attachment from fair market value?
Frank Kosarek: M&A for small ecommerce brands is much more art than science. There’s no one-size-fits-all deal structure. Most ecommerce founders have very high expectations for their company’s value, often thinking in large multiples of revenue.
That’s understandable because building a brand from the ground up requires a huge amount of work, much of which doesn’t show up on an income statement. That effort is intangible, and outside buyers can’t fully appreciate it from financials alone. Plus, many founders don’t realize that a multiple of discretionary earnings, not top-line revenue, typically values ecommerce businesses. That often leads to a reality check.
Eric Bandholz: How often do earn-outs fail?
Frank Kosarek: Some sellers want a complete exit with no ongoing involvement, and buyers generally understand that. Still, a smart buyer will usually negotiate a transition period, often three to six months, to help transfer operations and institutional knowledge. Additional support can turn into a short-term consulting agreement in which sellers receive a fixed monthly fee. In that case, sellers no longer have equity or performance-based upside; they’re simply helping with continuity.
I’ve seen situations where sellers and buyers clash operationally or strategically. When that happens, earn-outs often suffer. Sellers miss targets and don’t receive additional payouts, and buyers struggle because the transition doesn’t go smoothly.
Bandholz: What can stop a deal or hurt valuation?
Kosarek: One major piece of advice for sellers is to sell when your numbers are strong. Don’t wait until performance starts to decline or the market turns against you. Be open to exploratory conversations, especially after a banner year. Waiting until the curve crashes makes exits much harder.
Another common mistake is overspending on marketing to inflate top-line revenue. For smaller ecommerce brands, valuation is typically based on profit, not revenue. Pumping the top line at the expense of the bottom usually doesn’t earn a premium.
Another red flag is a lack of operational structure. Buyers don’t want to walk into a business and have to build everything from scratch. They want to see systems and processes in place. That includes working with a third-party logistics provider for fulfillment and returns, clear ownership of marketing functions, and documented processes.
Buyers’ confidence in the deal increases when they can quickly understand how the company operates and distributes work.
Bandholz: Where can people follow you, reach out to you?
Kosarek: Our site is Biz-port.com. You can find me on LinkedIn.