369: How To Get Top Dollar For Your Business, FBA Rollups & More With Joe Valley

Podcast: Download (Duration: 55:49 — 64.2MB)

Selling an online business for top dollar comes down to three things: calculating your seller’s discretionary earnings correctly, finding every legitimate add-back, and creating competition among multiple buyers. Every dollar you add back multiplies by your valuation multiple, so a $12,000 add-back most sellers miss entirely becomes $48,000 in sale price.

In this episode I sat down with Joe Valley, co-owner of Quiet Light Brokerage, who has personally closed around $100 million in transactions and wrote The EXITpreneur’s Playbook.

Below is the full picture: current valuation ranges by business type, the three levels of add-backs, what to fix before listing, and how FBA aggregator offers actually work.

Key takeaways

• Multiples run 3x to 6x+ depending on size, and inventory is paid on top of the list price.
• FBA and Shopify valuations have converged because aggregators bid FBA multiples up.
• Most of your money comes at exit if the business is under five years old.
• Only 10% of valuation is math. The other 90% is nuance and experience.
• Credit card cash back is an add-back. $1,000 monthly becomes $48,000 in sale price.
• A reduced cost of goods is an add-back for the months before you lowered it.
• Aggregator “all cash” offers usually are not. Stability payments and earn-outs hold money back.
• One seller went from a $2.6M offer to a $5.5M sale by creating competition.

What online businesses actually sell for

Valuation is seller’s discretionary earnings multiplied by a multiple that rises with business size.

The ranges overlap deliberately, because no two businesses are alike and these are starting points rather than promises.

Content sites and SaaS businesses land at the higher end of each range. Physical product businesses sit lower and get paid separately for inventory.

Inventory is added on top of the list price at landed cost, meaning cost of goods plus shipping to your fulfillment center for sellable inventory on hand at closing. A business listed at $1 million with $150,000 of inventory sells for $1.15 million.

The historical context matters for perspective. Five years ago Quiet Light was not listing anything above 2.75x, and would list at 2.74 specifically so it would not round up to three online.

How business model affects your multiple

Owning your own brand is the gold standard, wholesale sits at the low end, and dropshipping frequently falls below it.

Your own brand. Buyers prefer it because they can take the business off third-party platforms and grow it substantially on an owned site.

Wholesale. Reselling other companies’ products in bulk means anyone can compete with you. Exclusive contracts with your suppliers for specific channels are what separate you and protect the multiple.

Dropshipping. Margins are thinner, barriers to entry are low, and Quiet Light has sold only a handful in five years. Buyers prefer a brand they can grow into a larger eventual exit.

The common thread is defensibility. Constantly fighting others for the same product, the buy box, or the same paid clicks concerns buyers, and greater risk means a lower multiple.

Why FBA and Shopify valuations converged

Owning your own site used to command a 15% to 20% premium over an FBA business, and aggregator competition erased most of that gap.

The reason for the historical premium was customer ownership, which lets you launch products to an existing list for less money.

What changed is capital. Aggregators raised billions specifically to buy FBA businesses and climbed over each other to do it, which pushed FBA multiples up to parity.

There are also simply more FBA businesses for sale than Shopify sites, which shapes the market.

Why most of your money comes at exit

For a physical products business under five years old, you will likely earn at least half of all the money you ever make from that business on the day you sell it.

The mechanism is reinvestment. During the bootstrap years you are launching SKUs, funding inventory, and pushing cash back into the business rather than taking it out.

Taxes compound the effect. Operating income is taxed as personal income, which in California is punishing and in Texas or Florida is not, while a sale is taxed as capital gains. That gap alone can be 10 percentage points or more.

Inventory is the other factor. Money tied up in stock sits on the balance sheet as value rather than reaching you as cash flow.

The tipping point moves with time. Run the business four or five years past that point and holding may beat selling, which is a genuine calculation rather than a rule.

What an exitpreneur actually is

An exitpreneur builds with an eventual exit in mind and understands that most of the money arrives at the sale.

Joe’s contrast with an entrepreneur is that entrepreneurs run businesses for freedom and income without considering the exit, which is what he did with his own early companies before he could have sold them.

The outcome he describes: money in the bank, funded retirement, tuition covered, less stress, and a shorter learning curve plus more capital the next time around.

He explicitly rejects the advice to think about your exit from day one. His position is to focus on keeping the wheels on the bus first, and start thinking about the exit once the business is genuinely stable.

The underlying fact is that you exit one way or another. You sell it, pass it to your children, sell to a partner, or let it die on the vine, so you may as well maximize the version you choose.

How to set an exit goal

Set a goal with three components: dollars, date, and feelings.

The format Joe uses: I want to sell my business for $2 million in the third quarter of 2023, and when I sell it I will feel unburdened because I have money in the bank and I get to spend more time with my family.

The feelings component sounds soft and turns out to be what sellers actually report. After roughly $100 million in closings, the phrase Joe hears most is that a huge weight has lifted.

Written goals matter measurably. A frequently cited Harvard study found that the 14% of people who write goals down are ten times more successful than those who do not.

The navigation problem is the second half. Setting a destination is useless without knowing your starting point, which means calculating your discretionary earnings and firming up your current valuation so you can reverse engineer a path.

The mindset shift Joe asks for: move from “I do not want to work for the man” to “I am building a great business for a great buyer to take over at a great price.” Thinking about that next person is what produces the value.

How to calculate seller’s discretionary earnings

Discretionary earnings equals net income plus add-backs, and the net income line at the bottom of your P&L is not what your business is worth.

The clearest example: your P&L shows $100,000 net income, and above that line sits a $100,000 payroll expense for yourself. Adding your own salary back gives you $200,000 in discretionary earnings.

An add-back is a one-time expense or an owner benefit that does not carry forward to the new owner.

The critical framing is leverage. Every dollar you correctly add back multiplies by your valuation multiple, so finding add-backs is four to five times more valuable than the dollar amount suggests.

Accrual accounting is a prerequisite. So is expert advice, because the multiple times earnings calculation is roughly 10% of valuation and the other 90% comes from nuance.

The 3 levels of add-backs

Level one: the obvious. Owner salary, owner health insurance, retirement contributions, amortization, depreciation, interest expense, and charitable contributions.

Level two: the frequently missed.

• Payroll tax on the owner’s salary, which people add the salary back and forget.
• Estimated income taxes run through the business rather than personal accounts.
• Trademarks, copyrights, patents, and logo design. A $20,000 utility patent filing this year is not recurring.
• One-time legal fees, such as $15,000 spent parting ways with a business partner.
• Personal expenses in the P&L. Office supplies reliably spike in Q4 for owner-operators because of back-to-school and Christmas.
• Equipment purchases. An asset sale transfers cloud access, not your December laptop.

Level three: the complicated ones.

• Website redesigns. If you redesign every two years at $10,000, at least half is an add-back, and a five-year redesign cycle can be 100%.
• Mastermind group memberships, which do not transfer and the buyer may already have their own.
• Credit card cash back and rewards. Most people treat this as a personal perk and never put it on the P&L.
• Reduced cost of goods sold in the months before you negotiated the lower price.
• Overpaid relatives, replaced in the schedule with the market cost of the equivalent hire.

Why credit card cash back is worth tens of thousands

Cash back and reward points are owner benefits that belong on your add-back schedule, and almost nobody includes them.

The math: $1,000 monthly in cash back is $12,000 a year, which at a 4x multiple adds $48,000 to your list price.

Points require a conversion. If you earn Amex points rather than cash, calculate the cash value at the applicable conversion rate against what you actually spent.

Joe’s story about this is instructive. During an AMA, a seller told him he was annoyed because he had just sold his business and enthusiastically explained the cash back perk to the buyer as a bonus, losing roughly $30,000 in sale price by not treating it as an add-back.

An aggregator is not going to point this out for you. It is not in their interest to identify add-backs.

How a reduced cost of goods becomes an add-back

If you lowered your unit cost partway through the trailing twelve months, the savings carry forward to the buyer, so the higher earlier cost should be adjusted.

The example: a seller reduced cost on a major SKU by $2 a unit six months before listing, selling roughly 1,000 units monthly. That $2,000 a month for the earlier six months goes into the add-back schedule, which added around $54,000 to the list price.

The logic is verifiable in reverse. If your cost of goods went up $2 a unit six months ago, a buyer will correctly demand a reduction in price for the six months of artificially low costs, because the higher cost is what carries forward.

What to fix before listing your business

Tighten spending only where you will not see a return, and leave everything else alone.

Do not cut advertising or travel that legitimately supports the business, since those are add-backs or genuine operating costs.

Do fix new SKU launches that are losing money. A SKU running $10,000 negative reduces your list price by $40,000 at a 4x multiple.

The timing rule: if a SKU takes three months to break even, launch it at least six months before listing so the trailing twelve months shows zero or positive.

Do not stop launching entirely. A buyer who sees you historically launch six SKUs a year and suddenly stopped will find that alarming.

For staffing, replace genuinely overpaid roles before listing where you can. Joe cites a seller paying his brother $30,000 a year for five hours of canned-response customer service weekly, which became a $20,000 add-back offset by a realistic VA cost.

Do this proactively rather than in negotiation. Otherwise a buyer can insist on their own assumptions, such as only hiring US employees at $25 an hour.

What FBA aggregators actually are

Aggregators buy FBA businesses at two to three times earnings and place them into portfolios worth ten times, which is where their equity comes from.

Their impact on the market has been genuinely positive for sellers. Competition among aggregators pushed FBA multiples up, and having too much capital to deploy has pushed them beyond FBA.

The spillover is real. They are now buying Shopify brands to launch on Amazon with their existing FBA teams, and buying content sites to feed traffic to their products. One aggregator set aside eight figures specifically for content sites.

The tradeoff falls on individual buyers, who now face serious competition and far fewer bargains.

Why “all cash in 30 days” is rarely all cash

Aggregator offers commonly hold money back through mechanisms designed to sound better than they are.

Stability payments. A term aggregators coined. Typically 10% of the sale price held in escrow for twelve months, released only if revenue stays within 90% of the level at closing. At 89.999% on a $2 million sale, you lose $200,000 entirely.

The fix is negotiating a sliding scale rather than a cliff. At 90% or above you get the full amount, 85% to 90% gets you 175,000, 80% to 85% gets 150,000, and so on. You can also negotiate upside, taking 225,000 if revenue lands between 100% and 110%.

Profit sharing plans. An offer of $1 million structured as $700,000 up front plus 10% of profits capped at $300,000 is an earn-out with a friendlier name.

Joe’s characterization of aggregators is not that they are dishonest. They are intelligent, likable, funny, and complimentary, which is exactly what makes negotiating alone against one of them dangerous.

Why competition beats a single buyer

Selling to one buyer means accepting whatever that buyer offers, regardless of how good the business is.

Joe’s analogy: going on Shark Tank when every shark except Mr. Wonderful called in sick. You will get a royalty deal and you might be told you are dead to him.

The concrete case: a seller received $2.6 million from a top-ten aggregator for a business she had bought 18 months earlier for $1.2 million. She was skeptical, talked to Quiet Light, and Chuck sold it for $5.5 million plus inventory against seven offers.

The same aggregator bid well above their original $2.6 million and still did not win.

Their emails to her were persuasive, explaining why a single-SKU business with three variations would never sell for more. It read as smart and reasonable.

Even so, the response to any inbound aggregator offer is straightforward: say it sounds great, and mention you are speaking with thirty other companies that do what they do.

What a broker actually costs

Quiet Light charges on the modern Lehman scale as a success fee, meaning they are paid only if the business sells.

The structure: 10% on the first million, 8% on the second, 6% on the third, declining to a floor around 3%.

The incentive alignment is the argument. A broker paid a percentage of total transaction value is motivated to maximize your price, while an aggregator is motivated to pay as little cash as possible so it can buy more businesses.

Doing it yourself is genuinely possible. You can find fifty aggregators and contact all of them. What you will likely lose is the money hidden in add-backs you did not know to calculate.

Frequently asked questions

What multiple do online businesses sell for?

Roughly 3x to 4x discretionary earnings under $100,000, 3x to 5x from $100,000 to $500,000, 4x to 6x from $500,000 to $1 million, and 6x or more above that. Content and SaaS sit higher, physical products lower, and inventory is paid on top at landed cost.

What is seller’s discretionary earnings?

Net income plus add-backs. The net income line on your P&L is not what your business is worth, because it includes your own salary and one-time or personal expenses that will not transfer to a new owner.

What is an add-back?

A one-time expense or owner benefit that does not carry forward to the buyer. Owner salary and payroll tax, health insurance, one-time legal or patent fees, website redesigns, mastermind memberships, credit card cash back, and equipment purchases all qualify.

Is credit card cash back an add-back?

Yes, and it is one of the most commonly missed. Cash back of $1,000 a month is $12,000 annually, which at a 4x multiple adds $48,000 to your sale price. Reward points count too, converted to their cash equivalent.

Should you sell to an Amazon FBA aggregator?

Only after creating competition. Their offers are typically not fully cash, using stability payments held in escrow and earn-outs framed as profit sharing. One seller went from a $2.6 million aggregator offer to a $5.5 million sale by running a competitive process.

What are stability payments?

A term aggregators coined for holding roughly 10% of the sale price in escrow for twelve months, released only if revenue stays within 90% of its level at closing. At 89.999% you receive nothing, so negotiate a sliding scale instead of a cliff.

What should you fix before selling your business?

Get money-losing SKU launches to at least break even, launching new products six months or more before listing. Replace genuinely overpaid staff proactively. Do not cut legitimate advertising or travel, since those are add-backs or real operating costs.