After working for a pioneering e-commerce company, a couple put up a website in 2001 to sell products made by local artisans. Perhaps it's no surprise that as new parents, they quickly developed a specialty in sleeping aids such as maternity pillows, white-noise machines, and relaxation tapes. Sales topped $1.2 million last year.

The market for these items is robust -- as many as 70 million Americans suffer from sleep disorders -- but competition online is getting fiercer, according to one of the owners. For that reason, the company has focused on developing new products. The owners and their three employees have created roughly 190 of the 250 items the business carries.

The business has begun moving some manufacturing from the U.S. to China and Sri Lanka, thus reducing its costs by two-thirds. This should allow it to lower prices in order to boost its wholesale business, which stood at 12 percent of sales last year.

Company Financials 2005 2006 2007
Gross Revenue $650,264 $820,509 $1.2 million
EBITDA* $188,832 $251,709 $400,689
Net Profit Margin 28% 30.2% 33.7%

$1.8 million, including the website's e-mail list, technology platform, and 14 related domain names. The inventory, pegged at $150,000, is excluded from the asking price. The owners would prefer an all-cash deal and will consider a deal that features an earn-out.

Web retailers command multiples in a range of 2.5 to 4 times earnings, with the best valuations reserved for companies with killer domain names, proprietary products, and strong brands. This price reflects a multiple of 4.5 -- high, given the company's size.

The website performs well on search engines. The company's annual sales growth bests the growth of Internet retail sales as a whole (46.3 percent versus 21 percent). And it's portable: A buyer would find it fairly easy to move operations to another city.

The number of unique visitors tracked by the site has been flat in 2008, at roughly 20,000 per month. Without growth in traffic, the company will have a hard time posting significant sales growth on the Web alone, which is why it is pursuing wholesaling.

During due diligence, a buyer should study the wholesale business to gauge its potential. And Tom West, author of the Business Reference Guide, notes that a 20 percent discount is common with an all-cash deal; this suggests a price of $1.44 million.

*Earnings before interest, taxes, depreciation, and amortization.

Inc. has no stake in the sale of the business featured. The magazine does not certify the accuracy of financial or other information provided by the seller. Inquiries should be directed to David Fairley of Website Properties ( or 360-894-4500).

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