There’s a buying frenzy for brands born online.

Data shows global e-commerce sales are poised to reach record numbers by 2022, with revenue expected to grow to $6.54 trillion. Amazon.com aggregators and direct-to-consumer holding companies are acquiring brands and other third-party marketplace sellers at a rapid pace.

Often helmed by individual founders and entrepreneurs, online sellers typically have the passion to run their company successfully, but do reach a natural inflection point in their lifecycle. These founders are incredibly capable of running a company, but might be more green in a number of areas or experience growing pains across larger-scale marketing, supply chain logistics, or operations. Many founders look to aggregators to take them to a high-growth future, but there are several factors to consider before selling one’s brand and joining a portfolio.

With so many aggregators jostling for brands, I’m increasingly seeing founders ensnared in a pure numbers game, receiving pitches and proposals that focus solely on their brand’s current financial worth. However, in my experience, founders contemplating an exit need to focus less on the current value of their company and look toward future value, perceived worth, and growth potential.

I see founders asking themselves, “How much can I get today if I sell?” when they should be asking themselves a more strategic question: “What is the future potential of my brand?” Because oftentimes, a brand is much more valuable than its financial success.

Longer Term Earnout 

There is, of course, a mathematical and economic answer to why we should be looking at future growth, but it’s equally as important for founders to evaluate their business through both quantitative and qualitative metrics. In other words, build a brand dashboard that covers both performance (e.g., EBITDA) and perception (e.g., Net Promoter Score) metrics to understand the full picture of your brand and its potential.

If approached by an aggregator, I would encourage founders to get to know their potential buyers and operating team before making a decision. Your brand is the outcome of your passion — you’ve brought it to great success on your own, therefore the aggregator’s operating team needs to be a natural extension of that. Determine what type of relationship you’d like with your acquiring company post-acquisition and don’t limit yourself to the Letter of Intent (LOI). Is the aggregator going to have the same passion and drive for your brand that you have?

I always tell founders to speak with everyone on the operating team, if possible, when vetting an aggregator; the numbers might look enticing but that doesn’t guarantee the success of your company moving forward. Closing the deal isn’t the end. In fact, the real work starts for both the aggregator and the brand owner once the deal is closed.

Take a More Holistic and Measured Approach 

Another way to predict future success is to go beyond your brand’s equity and determine its value and advocacy by assessing its tangible and intangible assets. Great brands are magnets, not mirrors. Is your business one that’s creating pull for the brand? Take inventory of your customer and brand metrics to get a better view of your brand.

  • Customer Metrics
    • What customer metric are you measuring to track satisfaction and loyalty? If you measure NPS, what are the detractors for your brand?
    • What’s the ratio of your one-and-done customers to repeat customers?
    • What’s the frequency of repeat business from your customer base?
    • What’s your churn and how is it trending over time?
  • Brand Metrics
    • How many customers are searching for your brand on Amazon and Google?
    • What’s the key area of opportunity that shows up in ratings and reviews?
    • What are your customers saying about your brand on social channels?

Of course, we certainly can’t ignore the core financial health metrics when we evaluate a business for value creation. Financial performance over time is a great indicator of brand’s worth. Metrics such as gross merchandise value, sales growth, cost of goods ratios, and EBITDA growth are critical to evaluating the future value of your brand.

Finally, advocate for compensation for your future brand vs. your current valuation by estimating your brand’s role in the acquiring company’s business. Taking the business model into account, show the brand through the lens of customer loyalty, brand visibility and lasting value.

By better understanding your brand’s worth, you’ll be able to get the most value for your hard work. Your brand is more than the products it sells; it’s what you stand for. Don’t take a deal based on pure numbers.