You have grown a profitable company, but expansion capital is tightening and inbound sales interest is mounting. The question is no longer how to find investors for a business but whether those investors will green-light a premium valuation after digging through your numbers. A mismatch between what founders believe and what private equity judges as investment-grade can wipe millions from an offer or stall a deal entirely.
Serious buyers do not trust glossy decks alone. They interrogate acquisition cost curves, cohort retention, fulfilment efficiency and the resilience of your EBITDA. Operational gaps that feel minor inside the business become material when a diligence team models downside scenarios. A recent McKinsey study found that 62 per cent of eCommerce exits failed to close at the price first tabled once supply chain or working capital risks surfaced.
This guide converts years of eComplete acquisition experience into a checklist founders can run before sending the data room link. By covering customer economics, marketing efficiency, financial quality and operational risk you will flag issues internally and present a business investors trust. The payoff is faster diligence, fewer price chips and a smoother path to completion.
Customer Economics: Proving Sustainable Demand
1. LTV:CAC Ratio and Payback
Investors open every consumer data room searching for lifetime value to customer acquisition cost. The rule of thumb is a 3x ratio with cash payback inside nine months. Anything longer signals working capital strain that external funding must cover.
|
Metric |
Red Flag |
Investor Ready |
|
LTV:CAC |
Below 2x |
Above 3x |
|
Payback |
Over 12 months |
Under 9 months |
|
CAC Trend |
Rising >15 per cent each quarter |
Stable or falling |
Calculate LTV on net contribution margin after discounts and returns, not gross sales. Investors discount vanity LTV numbers.
2. Cohort Retention and Repeat Rate
Retention curves reveal whether demand is habitual or coupon driven. Publish twelve-month cohorts by channel and product line. Investors will compare churn inflection points with marketing spend spikes.
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Healthy consumer brands retain at least 40 per cent of first-time buyers after twelve months.
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A steep drop after the first reorder suggests weak product-market fit or overuse of discount codes, which can shave multiples.
3. Order Frequency and Average Order Value
Track how basket size evolves. Growth via deep discounting inflates order frequency but may erode margin. Investors prefer a rising AOV supported by premium SKUs or bundles rather than heavier coupon use.
Marketing Efficiency: ROAS, Channel Mix and Brand Equity
1. Paid Media Return on Ad Spend
Return on ad spend remains a headline KPI. Provide ROAS by channel and campaign tier (prospecting versus retargeting). A benchmark from a 2025 Harvard Business Review article places median ROAS for beauty and wellness DTC brands at 2.8x on prospecting spend. Investors discount valuations if you sit materially below sector averages.
2. Organic versus Paid Split
A revenue mix of at least 35 per cent non-paid traffic signals brand equity and content strength. Document search share growth, branded keyword volume and email contribution to revenue. If organic is thin, prepare a roadmap demonstrating how capital will diversify the mix.
3. Channel Concentration Risk
Any channel driving over 60 per cent of revenue alarms diligence teams due to platform policy shifts or algorithm updates. Show mitigation tactics such as SMS, affiliate or wholesale pilots that reduce single-channel dependence.
Founder Q&A
Q: Paid social drives 70 per cent of sales but ROAS is 4x. Does that still scare buyers?
A: Yes. High efficiency helps, but platform risk remains. Provide evidence of new channels already scaling to 10–15 per cent to reassure investors.
Financial Quality: EBITDA Health and Working Capital Discipline
1. Adjusted EBITDA
Private equity firms buy cash flow, not topline hype. Present EBITDA adjusted for one-off marketing bursts, founder salaries and COVID-era freight surcharges. Include a table showing reconciliation from management P&L to adjusted figures.
|
Adjustment |
£ Impact |
Rationale |
|
Founders salary normalisation |
400k |
Align to market pay |
|
Pandemic freight surcharge |
250k |
Non-recurring |
|
Warehouse relocation |
180k |
Once-off capex |
Transparent addbacks preserve credibility. Inflated adjustments lead to aggressive price chips later.
2. Gross Margin After Landed Cost
Disclose margin after duties, freight, pick-and-pack and payment fees. A 65 per cent product margin may drop to 48 per cent after logistics. Buyers model net contribution margin to judge scalability. Highlight initiatives already reducing landed cost, such as zone-skipping or packaging light-weighting.
3. Working Capital Adjustments
Deals often collapse when closing balance sheet assumptions differ from investor models. Provide rolling inventory ageing, payables and receivables schedules. Show how inventory turns improved or safety stock reduced. Agree on normal working capital levels early.
Investor Quote:
“We walked away from a £45 m deal because inventory on hand equalled 210 days and nobody could explain why.”
Partner, UK mid-market private equity firm
Operational Risk: Supply Chain, Tech Stack and Governance
1. Fulfilment Cost to Serve
Serious buyers benchmark your pick-pack-ship cost against peers. eComplete’s data shows best-in-class DTC brands maintain fulfilment cost below 12 per cent of net sales in Europe. If you outsource to a 3PL, supply rate cards and service levels. Investors will pressure test capacity for peak season volume.
2. International Expansion Capability
Demonstrate that cross-border sales operate with landed duty prepaid and local returns hubs. Document projected margin erosion and show how localisation tools or localised sites offset conversion loss.
3. Tech Stack Robustness
Outages or brittle in-house platforms raise capex flags. Map core systems (ERP, OMS, WMS, CRM) and note any end-of-life software. Provide penetration testing reports if available. Buyers calculate how much to invest in stabilising tech.
4. Talent and Governance
Publish an org chart with succession risk flagged. Private equity discounts businesses where founder knowledge is not documented. Show transition plans and incentives to retain key managers post-completion.
Use stay bonuses tied to deal close and year-one milestones. Investors value aligned incentives.
Operational Risk Heat Map
|
Area |
Risk Score (1 low, 5 high) |
Mitigation |
|
Single 3PL |
4 |
Secondary fulfilment in progress |
|
Magento 2 end-of-life |
3 |
Migration to Shopify Plus Q4 |
|
Founder key man dependency |
5 |
COO hired, knowledge transfer underway |
|
International returns |
2 |
EU hub live, US hub scoped |
Checklist: Presenting an Investor-Ready Data Pack
A due diligence pack that answers priority questions before they are asked shortens the deal timeline and supports a higher valuation.
Customer and Marketing
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LTV:CAC split by channel
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Twelve-month cohort retention curves
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ROAS by campaign tier
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Organic traffic share and branded search trend
Financial Quality
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Adjusted EBITDA bridge
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Contribution margin waterfall
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Working capital three-year history
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Addback schedule with evidence
Operational Risk
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Fulfilment cost-to-serve trend and SLAs
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Supply chain contracts and rate cards
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Tech stack roadmap and license expiry dates
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Key employee retention plan
Deliver the pack as a locked PDF plus an excel model. Use read-only access logs to monitor investor engagement and follow up on highly viewed tabs.
Conclusion
Investors do not fear growth accelerants; they fear unpriced risk. By auditing customer economics, refining marketing efficiency, cleaning financials and stress-testing operations, you convert hidden threats into negotiating capital. The result is a sale process where buyers focus on synergy upside instead of discounting for surprises.
eComplete specialises in preparing founders for that moment. Our data platform benchmarks your brand against hundreds of transactions, identifies red flags and builds a diligence pack that answers every serious investor question on day one.
Get a due diligence pack that gives investors instant confidence. Contact us
