Would You Buy This $6M Jewelry Business?

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Today’s story: A first-time buyer takes a hard look at a $6 million children’s jewelry business, only to realize its biggest strength might also be its biggest risk.

Now onto today’s deal…

NUMBERS

The Deal on the Table

Every week, we pull a live deal straight from inside the Contrarian Community and let you get a taste for what it’s really like in the trenches.

This week’s target: a 20-year-old jewelry brand doing roughly $4M in revenue and $1M in SDE.

The company sells mostly on Amazon, where it carved out a niche early and scaled fast. About 70% of sales come through the platform, with the rest through a small Shopify site and a handful of wholesale accounts.

The ask: Nearly $6 million, including nearly $950K in inventory. The context:

• 20 years in business
• Lean, seasoned team managing fulfillment and engraving in-house
• Consistent margins, with strong brand reviews and repeat customers
• A founder looking to retire after two decades in the business

The buyer, whom we’ll call Ethan, is a software engineer and app developer. He’s been studying e-commerce and consumer products deals for months, and sees a path to grow this brand by improving its website, building direct-to-consumer traffic, and reducing reliance on Amazon.

He’s planning to use SBA financing, a two-year seller standby, and maybe a forgivable earn-out to protect against downside.

Now the question is:

Is this a stable, long-standing e-commerce brand ready for digital reinvention, or an overvalued Amazon-dependent business that could lose its sparkle overnight?

KEY IDEAS

5 Lessons Any Buyer Can Steal from This Deal

When Ethan brought this jewelry store deal to the community, the discussion focused on 3 big questions: how much risk comes from Amazon dependence, how to value heavy inventory, and how to structure the deal safely.

Here are the key lessons that came out of it.

1. Amazon is both an engine and a liability

Roughly 70% of sales come from Amazon, a channel that helped the business scale quickly over the past decade but now leaves it vulnerable to forces outside its control.

As one deal expert explained:

Amazon’s convenience also comes with cost. Fees and fulfillment charges can easily absorb 30% or more of total revenue. That makes strong margins today no guarantee of future profitability.

2. Inventory can quietly drain your cash flow

The seller expects the buyer to purchase roughly $950,000 in inventory on top of the business price. Several deal consultants flagged this.

One member warned:

“When you pay extra for inventory, it sucks your cash flow. You’ll find stale inventory that’s not moving and too little of what actually sells.”

The consensus was clear: value the business on its cash flow and include normal working inventory in the price. Anything beyond that belongs in due diligence, where stale or obsolete stock can be discounted or excluded.

3. Jewelry valuations follow different math

In this niche, valuations often combine both cash flow and inventory. As one deal consultant explained:

That is because inventory levels vary widely. A store might carry $500,000 or $5 million in product. Even so, the asking price of $6 million for $1 million in SDE and $950,000 in inventory looked aggressive.

Most of the deal experts agreed a fairer range was 3 to 4x SDE plus inventory, assuming the numbers checked out.

4. Diligence lives in the data

Several community leaders stressed that success or failure here also depends on the due diligence of SKU-level data.

“You’re buying a $4 million business based on its inventory. You need to know what’s actually moving before you wire a dime.”

That means analyzing inventory turns, supplier mix, and order frequency, along with any exposure to import tariffs or shipping delays that could squeeze margins.

5. Don’t rely on a tech miracle

One community member pressed him to clarify his strategy:

Ethan’s background as a software engineer gives him tools the seller never had, like a chance to truly modernize the site, improve tracking, and grow direct-to-consumer sales.

Yes, but: True upside will come from execution, not just optimization.

INDUSTRY

What You Need to Know

The U.S. jewelry market is large and relatively stable. It’s now valued at around $80 billion, and is expected to be worth roughly $100 billion by 2030.

There are around 80,000 jewelry store businesses operating across the United States, showing just how fragmented the industry is. This fragmentation creates opportunity but also pressure. Smaller stores and e-commerce brands often compete on personalization, price, and marketing rather than brand prestige.

The brand in Ethan’s deal fits into a niche subcategory: children’s jewelry. As Ethan explained during the deal review:

“It’s a little bit different than typical jewelry businesses because it’s marketed specifically to small children. Their average sale price is like $30. It’s not fine jewelry.”

That positioning potentially means higher sales volume, lower margins, and rapid product turnover. Trends shift quickly, and competition on Amazon is intense, making visibility and diversification crucial for survival.

One of the first questions Ethan will need to answer is how strong the brand really is once it leaves Amazon’s ecosystem. Are customers searching for this company by name, or simply clicking the first sponsored product that looks familiar? The seller pointed to customized pieces and engraving as a moat, but as Ethan admitted:

“They do engravings and things like that. It’s a little bit harder to replicate, but I don’t think it’s super hard.”

Another question he’ll need to investigate is how unique the product mix truly is. Custom engraving adds a small moat, but not a deep one. Competitors can imitate styles within weeks. Ethan will need to assess whether design, sourcing, or customer experience gives the company any sustainable differentiation and how important that is in this industry.

THE BOTTOM LINE

What Happened Next?

Ethan kept working to make the deal fit. He adjusted his models, played with multiples, and explored ways to sweeten a seller note with interest to balance risk and reward.

But every version of the math told the same story: it only worked if nothing went wrong. Will Amazon keep humming along? What if Amazon changes its algorithm and it hurts the business, or if it white-labels the product and wipes out the sales channel?

As one expert put it:

Ethan was reminded by a deal expert that some risks can’t be priced in, either.

“This is a hard business to underwrite. You can’t control a lot of the risk, and because of that, it’s hard to put a percentage likelihood on any of those scenarios. If you find that your terms are lower than what the seller wants, that’s okay.

Still, Ethan wanted to see it through. “I’m submitting two LOIs today and meeting with the broker to chat about it,” he shared with the group.

A few days later, after a deeper review and conversations with the broker, he reached his conclusion.

He walked away smarter, the kind of move that turns an aspiring buyer into a disciplined one.

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The information contained here is educational, may not be typical, and does not guarantee returns. Background, education, effort, and application will affect your experience and the profitability of any business. Individual results may vary.