Apparel Manufacturing Valuation Multiples
If you need a clear picture of your apparel manufacturing business’s value, valuation multiples are essential tools. Determining accurate apparel manufacturing valuation multiples requires a thorough assessment of various factors. As such, it is best to work with a professional business appraiser. These experts can provide key insights on applicable valuation multiples and the business’s strengths and weaknesses. This is useful information whether you are buying, growing, selling, or seeking financing for an apparel manufacturing business.
In this article, we cover the most common valuation multiples for apparel manufacturing businesses. It is important to note that the figures we discuss are industry averages and may not provide accurate results. For an accurate valuation, work with an experienced business appraiser.
As a professional business appraiser, Peak Business Valuation regularly works with individuals looking to buy, sell, finance, or expand apparel manufacturing businesses. We are here to provide a business valuation for an apparel manufacturer and answer any questions you have! Get started with a free consultation with Peak Business Valuation below!
What Are Apparel Manufacturing Valuation Multiples?
Valuation multiples are financial ratios that help calculate an apparel manufacturing company’s fair market value. These ratios determine what potential buyers may be willing to pay for an apparel manufacturing business. Apparel manufacturing business valuation multiples are typically derived from seller’s discretionary earnings (SDE), EBITDA, and revenue. Valuation analysts look over several factors when determining the most relevant multiples for an apparel manufacturing company.
Common Apparel Manufacturing Business Valuation Multiples
Below, we highlight SDE, EBITDA, and revenue multiples for an apparel manufacturing business. Keep in mind, the following values can be insightful, but should not replace a professional valuation. For additional insights, see Apparel Manufacturing Business Valuations.
SDE Multiples for an Apparel Manufacturing Business
SDE multiples measure an apparel manufacturing company’s value relative to the seller’s discretionary earnings (SDE). To calculate SDE, valuation experts adjust net earnings by adding back owner’s compensation, discretionary expenses, and non-recurring costs. The level of owner involvement also plays a role in determining SDE multiples. Understanding SDE helps business appraisers evaluate a manufacturer’s profitability.
Formula: Value = SDE × Multiple
Range: SDE multiples for apparel manufacturing businesses typically range from 2.66x to 3.20x SDE.
Apparel Manufacturing Business EBITDA Multiples
Moving on, EBITDA multiples reflect an apparel manufacturing company’s value based on its earnings before interest, taxes, depreciation, and amortization. This multiple is particularly useful for assessing the return on investment (ROI) and earnings potential of a business. Larger apparel manufacturing companies often benefit from EBITDA multiples, as they allow easy comparisons between similar businesses.
Formula: Value = EBITDA × Multiple
Range: EBITDA multiples for apparel manufacturing businesses generally range from 3.89x to 4.47x EBITDA.
Revenue Multiples for an Apparel Manufacturing Business
Revenue multiples assess an apparel manufacturing company’s value based on its past 12 months of revenue. These multiples can provide a broad estimate, but they do not account for factors like profitability and operational efficiency. As such, Peak Business Valuation primarily relies on cash flow-based multiples, such as SDE and EBITDA. When valuing an apparel manufacturing business, we use a combination of methodologies for accuracy. See Valuing an Apparel Manufacturing Business for more insights.
Formula: Value = Revenue × Multiple
Range: Revenue multiples for apparel manufacturing businesses typically range from 0.52x to 0.81x revenue.
Peak Business Valuation conducts apparel manufacturing business valuations in the United States. If you need a reliable business valuation, schedule a free consultation with Peak Business Valuation today!
How to Value a Business Using Multiples
Applying the above valuation multiples can provide a useful estimate of your apparel manufacturing company’s value. However, selecting the most appropriate multiple requires professional guidance. For example, SDE multiples are more common for smaller, owner-operated businesses, whereas EBITDA multiples are typically used for larger apparel manufacturers.
To connect with a valuation expert, schedule a free consultation with Peak Business Valuation today! To learn more, check out How to Value an Apparel Manufacturing Business.
Factors Affecting Apparel Manufacturing Valuation Multiples
Apparel manufacturing business valuation multiples can change depending on several key elements. Understanding these value drivers allows business owners to implement strategies to improve a manufacturer’s value and performance. Below, we outline a few common considerations for apparel manufacturing businesses:
- Brand Reputation & Market Position: Apparel manufacturers with a strong reputation can build customer loyalty, which directly impacts sales and profitability. This often yields higher valuation multiples.
- Supplier Relationships: Establishing strong supplier relationships can provide access to quality materials and competitive prices. These are valuable traits for an apparel manufacturing business.
- Product Diversification: Having a diverse product mix allows apparel manufacturers to serve a broad customer base. This can help boost revenue and financial stability, increasing the apparel manufacturer’s multiples.
- Risks: Apparel manufacturing businesses are subject to various risks, such as supply chain disruptions, rising costs, labor shortages, changing fashion trends, etc… These risks can have a negative impact on the overall value of the business.
See Value Drivers for an Apparel Manufacturing Business for more information.
Conclusion
Using valuation multiples is a common way to estimate an apparel manufacturing business’s value. However, multiples overlook vital factors that affect an apparel manufacturing business’s value. For the most accurate apparel manufacturing business valuation, work with a professional business appraiser. Valuation experts can provide information about your manufacturer’s value, market trends, growth potential, risks, advantages, and more. This analysis can help business owners make informed decisions to maximize the value of a company.
As a business appraiser, Peak Business Valuation helps apparel manufacturing business owners nationwide. We can provide an apparel manufacturing business valuation and answer any questions on apparel manufacturing valuation multiples. Get started today by scheduling your free consultation with Peak Business Valuation below!
For further guidance, read Apparel Manufacturing Business Valuations or How to Value an Apparel Manufacturing Business.
