Brewery Valuation Multiples
Valuation multiples are essential tools in determining the fair market value of a brewery. Selecting the appropriate multiples requires a careful analysis of a range of factors. The best way to determine reliable brewery valuation multiples is through a professional business valuation. During a brewery valuation, a business appraiser applies accepted methodologies to assess the business’s value, market position, strengths, weaknesses, and more. This information helps brewery owners make informed decisions when buying, expanding, or selling a brewery.
In this article, we outline three of the most common brewery valuation multiples. Keep in mind that the figures we discuss are industry averages and may not truly reflect the value of your brewery. For an accurate value estimate, work with a certified and experienced business appraiser.
As a professional business appraiser, Peak Business Valuation helps breweries throughout the United States. We are here to provide a reliable and timely brewery valuation and answer any questions you may have. Start by scheduling a free consultation with Peak below!
What Are Brewery Valuation Multiples?
Valuation multiples are financial ratios used to estimate a brewery’s fair market value. This indicates the price buyers are willing to pay for a brewery. Brewery valuation multiples are most commonly derived from seller’s discretionary earnings (SDE), EBITDA, and revenue. Business appraisers analyze several factors to determine the most appropriate and applicable multiples.
Common Brewery Valuation Multiples
At Peak Business Valuation, we may apply SDE, EBITDA, and revenue multiples when valuing a brewery. In the following sections, we go over each multiple and provide a general industry range for breweries. Keep in mind that these figures are only benchmarks and should not replace a thorough business valuation. If you have any questions, refer to Valuation Multiples for a Brewery.
SDE Multiples for a Brewery
SDE multiples represent a brewery’s seller’s discretionary earnings (SDE). Valuation experts calculate SDE by adjusting net earnings to reflect discretionary expenses, non-recurring costs, and owner compensation. The level of owner involvement in daily operations can also influence SDE multiples. Understanding SDE helps brewery owners assess the brewery’s profitability. These multiples are most relevant for small to mid-sized breweries.
Formula: Value = SDE × Multiple
Range: SDE multiples for breweries typically range from 3.24x to 4.19x SDE.
Brewery EBITDA Multiples
EBITDA multiples estimate a brewery’s value based on its earnings before interest, taxes, depreciation, and amortization. This multiple helps determine the brewery’s potential return on investment (ROI) and long-term earning potential. EBITDA multiples are beneficial for larger breweries because they enable direct comparisons between similar businesses.
Formula: Value = EBITDA × Multiple
Range: EBITDA multiples for breweries generally range from 4.24x to 4.74x EBITDA.
Revenue Multiples for a Brewery
Revenue multiples assess a brewery’s value based on its past 12 months of revenue. While this metric can provide helpful insights, it does not account for profitability or operating costs. As such, Peak Business Valuation prioritizes cash flow-based multiples like SDE and EBITDA. To ensure accuracy, the valuation process often involves a combination of methods and multiples. See How to Value a Brewery for additional details.
Formula: Value = Revenue × Multiple
Range: Revenue multiples for breweries typically range from 0.84x to 1.16x revenue.
Peak Business Valuation is a business appraiser that often helps with individuals looking to buy, grow, or sell breweries. If you are seeking a reliable brewery valuation, schedule a free consultation with Peak Business Valuation today!
How to Value a Brewery Using Multiples
Regardless of the valuation multiples applied, professional business appraisers take extensive measures to provide an accurate brewery valuation. This process involves using the market, income, and asset approaches, analyzing market conditions, and addressing industry risks. The valuation process is a complex task that requires professional expertise to navigate. To learn more about how to value a brewery, schedule a free consultation with Peak! You can also see Brewery Valuations for further insights.
Factors Affecting Brewery Valuation Multiples
Brewery valuation multiples are influenced by several different factors. Understanding these key factors allows brewery owners to identify areas of improvement and maximize their business’s value. Below are a few critical elements that impact brewery valuation multiples:
- Quality Control: Consistently providing top-quality products enhances customer trust and satisfaction. This directly influences a brewery’s performance and valuation.
- Brand Strength & Market Position: Establishing a distinct brand identity helps breweries secure a strong market position. This often results in favorable brewery valuation multiples.
- Distribution Channels: The efficiency of a brewery’s distribution network plays a major role in calculating its value. Operators should aim to sell products at restaurants, bars, nightclubs, and other establishments.
- Product Innovation & Differentiation: Offering unique products can help breweries differentiate from competitors. This can improve the business’s market share and sales, boosting its value.
- Equipment: Brewery equipment also plays a pivotal role when valuing a brewery. Up-to-date and well-maintained equipment contributes to the overall value of a brewery. See Brewery Equipment Appraisals to learn more.
For more details on what influences a brewery valuation, refer to Value Drivers for a Brewery.
Conclusion
Valuation multiples are critical when valuing a brewery. Determining accurate brewery valuation multiples requires a thorough brewery valuation. As such, it is important to seek guidance from an experienced business appraiser. As part of a business valuation, these professionals utilize different methodologies to accurately calculate a brewery’s fair market value. In addition, they will compile a clear valuation report which outlines the strengths, weaknesses, and growth opportunities of the business. You can leverage this information to plan for the future of your brewery.
Whether you are buying, expanding, selling, or seeking financing for a brewery, Peak Business Valuation is here to assist! We can provide you with a business valuation and discuss any questions about brewery valuation multiples. Schedule your free consultation with Peak below!
For further insights, refer to Brewery Valuations or How to Value a Brewery.
