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How do I value my DTC eCommerce venture? (alien.top)

submitted 11 months ago by AHUSSAIN23@alien.top to c/entrepreneur@indiehackers.space

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My co-founder and I started a DTC eCommerce brand September last year in a fashion niche.

We have a small team and have turned over £300k with decent margins in the first year.

We're convinced that we can accelerate growth through funding. We'll primarily use funding to supercharge marketing (hiring a small team to make content, partnerships, and venturing into Google Ads) and increasing our inventory. We're also keen on leveraging the brand to scale into other product spaces.

I've gone full-time recently and been thinking about raising investment.

The addressable market is huge, my co-founder and I have strong experience in the space, and we have an edge.

As a DTC startup, how do we value our business to determine what % we should give away for X investment?

At this stage, debt would be ideal, but due to personal reasons, it's not a form of financing we'd consider taking up.

Would love to hear some thoughts and perhaps some personal insight.

Thank you.

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[–] AlluSoda@alien.top 1 points 11 months ago

A good rule of thumb at this stage is about 3x discretionary cash flow. That is a bit different than the formal EBITDA which may be near zero or even negative. Think of this number as what would go away if you were to sell. If you have any salary or somewhat personal expenses like auto, insurance, etc. Totally just a rule of thumb. If growth is flatish, that multiple might be closer to 2x when revenue is this low. If growing fairly fast and profits rising and building a brand, that multiple may be closer to 5x.

[–] AHUSSAIN23@alien.top 1 points 11 months ago

Thank you guys. Appreciate the insight!