Tanning Salon Valuation Multiples
Are you preparing to buy, grow, or sell a tanning salon? Identifying the business’s fair market value is critical for navigating business decisions. With this information, you can take steps to maximize the value of your tanning salon and achieve a favorable outcome. In many cases, business owners turn to tanning salon valuation multiples to get a quick estimate. These tools provide generalized insights to support initial planning. However, keep in mind that relying on valuation multiples can be risky.
In this article, we review the primary valuation multiples for tanning salons. We also discuss how these multiples are applied and key risks to be aware of when using them. Please note that the ranges we highlight are based on industry averages and may not reflect your salon’s precise value. If you need an accurate and defensible valuation of a tanning salon, it is essential to work with a certified business appraiser.
As a professional business valuation firm, Peak Business Valuation frequently assists tanning salons nationwide. We are here to provide you with a reliable tanning salon valuation and answer any questions on how to value a tanning salon. You can get started by scheduling a free consultation below!
What are Tanning Salon Valuation Multiples?
Valuation multiples are financial ratios that compare the value of a business to financial metrics such as earnings or revenue. These figures are derived by analyzing recent sales of comparable tanning salons in the marketplace. Business appraisers then apply the selected multiples to the salon’s financial data to estimate its fair market value. For additional insights, see Valuation Multiples for a Tanning Salon.
Common Tanning Salon Valuation Multiples
When valuing a tanning salon, business appraisers at Peak Business Valuation often use multiples based on SDE, EBITDA, and revenue. Each multiple considers a different perspective of the salon’s value and financial performance. To provide a well-rounded tanning salon valuation, valuation experts often apply more than one multiple. Below, we review the most common valuation multiples for a tanning salon.
SDE Multiples for a Tanning Salon
Seller’s Discretionary Earnings (SDE) measure the total financial benefit available to a tanning salon owner. This metric is most relevant for smaller, owner-operated salons. SDE is calculated by adding back the owner’s salary, discretionary expenses, and one-time costs to net income.
Formula: Value = SDE × Multiple
Range: SDE multiples for tanning salons often transact from 2.06x to 3.13x SDE.
EBITDA Multiples for a Tanning Salon
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) evaluate a tanning company’s core operating profitability without the impact of financing and accounting factors. This multiple is particularly useful for comparing larger tanning salons or multi-location operations.
Formula: Value = EBITDA × Multiple
Range: EBITDA multiples for tanning salons often fall between 3.12x and 4.00x EBITDA.
Revenue Multiples for a Tanning Salon
Revenue multiples value a tanning salon based on its total sales over a specific 12-month period. This method is often considered less reliable since it does not reflect profitability. However, revenue multiples can be a helpful reference when used alongside SDE and EBITDA multiples.
Formula: Value = Revenue × Multiple
Range: Tanning salons typically trade within a revenue multiple range of 0.61x to 0.96x.
At Peak Business Valuation, we have extensive experience working with tanning salon valuation multiples. In addition to applying multiples, our valuation experts also account for the salon’s unique risks, advantages, and market conditions to ensure the most accurate valuation. We are happy to assist you with a professional tanning salon valuation. Get started by scheduling your free consultation with the button below!
How to Value a Tanning Salon Using Multiples
Applying tanning salon valuation multiples is more complex than plugging numbers into a formula. An accurate tanning salon valuation using multiples involves adjusting for unique factors, such as operational and competitive risks, brand reputation, and growth potential. At Peak Business Valuation, we also normalize financial statements to remove non-recurring costs and seasonal fluctuations. For more information on the valuation process, see How to Value a Tanning Salon.
Rules of Thumb for Tanning Salons
Tanning salon valuation multiples are common rule-of-thumb valuation methods. While these tools can be a useful starting point, they overlook important elements that impact a tanning salon’s value. As such, relying on valuation multiples for important decisions can lead to costly mistakes. To ensure a reliable business valuation, consider consulting with a certified and experienced valuation expert. Reach out to Peak Business Valuation today if you have any questions.
Factors Affecting Tanning Salon Valuation Multiples
There are a variety of factors that influence whether a tanning salon achieves higher or lower valuation multiples. Understanding these value drivers can help tanning salon owners improve performance and increase the business’s worth. Below are several key variables that impact tanning salon valuation multiples:
- High Quality Technology: Salons that invest in up-to-date tanning equipment and UV-free alternatives can ensure customer satisfaction, safety, and operational efficiency. These are crucial factors that contribute to stronger valuation multiples.
- Service Diversification: Offering additional services at a tanning salon, such as spray tans, skin care treatments, or red-light therapy, broadens the customer base and diversifies revenue streams. This fosters financial stability and raises the salon’s overall value.
- Skilled and Professional Staff: Tanning businesses with knowledgeable employees can better help customers and earn trust. This often results in repeat business and positively influences tanning salon valuation multiples.
- Loyal Clientele: A strong base of repeat customers provides predictable cash flow and strengthens the salon against market fluctuations. These factors have a major impact on a tanning salon’s perceived value.
- Competitive Pricing Strategy: Offering competitive prices often increases customer demand and sales volume. This translates to stronger revenue performance and higher valuation multiples.
To learn more about increasing the value of your business, see Value Drivers for a Tanning Salon.
Conclusion
If you want a general understanding of your tanning salon’s worth, valuation multiples provide a helpful benchmark. However, it is important to keep in mind that these tools are based on industry averages and cannot account for the specifics of each salon. As such, relying on valuation multiples can lead to inaccurate conclusions. If you need a precise fair market value estimate, it is best to work with a professional business appraiser. These professionals carefully analyze the salon’s risks, strengths, and market opportunities to provide a precise and defensible tanning salon valuation.
Peak Business Valuation, trusted business appraiser, helps individuals looking to buy, grow, or sell tanning salons across the country. We are here to provide you with a timely and accurate business valuation! Additionally, we can answer any questions you may have on tanning salon valuation multiples or the valuation process. Start today by scheduling a free consultation with Peak Business Valuation below.
Check out Tanning Salon Valuations or Valuing a Tanning Salon for more guidance.
