How to Value a Glass and Glazing Company
Glass and glazing companies primarily prepare and install glass panels for windows, doors, skylights, sunrooms, and curtain walls. There are over 26,000 glass and glazing companies throughout the country. According to IBIS World, these businesses generate at least $3.9 billion in revenue per year. Additionally, we can expect healthy revenue growth for the industry moving forward. As such, now may be a great time to buy, expand, or sell a glass and glazing company. Keep in mind, that the glass and glazing industry is very competitive. To succeed, it is helpful to learn how to value a glass and glazing company.
To learn how to value a glass and glazing company, it is best to obtain a business valuation. During a business valuation, a business appraiser may discuss the risks and opportunities of your glass and glazing company. In addition, the valuation expert determines the fair market value of a glass and glazing company. This information can help you understand the next steps to maximizing the value of a glass and glazing company.
Peak Business Valuation is happy to help! At Peak, we work with glass and glazing companies across the nation. As such, we can provide you with a business valuation for a glass and glazing company you are buying or selling. Peak can also answer any questions you may have on how to value a glass and glazing company. Schedule a free consultation with Peak Business Valuation below!
How to Value a Glass and Glazing Company
There is a wide variety of business valuation approaches to consider when valuing a glass and glazing company. Business appraisers often rely on the market approach and/or the income approach. Each approach utilizes a different basis of valuation. As such, a business appraiser will determine the most appropriate valuation approach for your glass and glazing company. This often includes using a combination of valuation methods.
Valuing a Glass and Glazing Company Using the Market Approach
The market approach is common when valuing a glass and glazing company. This valuation approach is similar to the real estate appraisal process. When valuing a property, real estate appraisers look at similar homes that recently sold on the market. Then, the real estate appraiser can accurately calculate the home’s value. When using the market approach to value a glass and glazing business, valuation experts look at similar businesses that recently sold on the market. If the business is private, business appraisers rely on private transaction databases to gather information.
Multiples for a Glass and Glazing Company
When using the market approach to value a glass and glazing business, business appraisers use valuation multiples. These are ratios that measure the value of a business in relation to metrics such as revenue, cash flow, and earnings. To find the valuation multiples for a glass and glazing company, valuation analysts apply the proper NAICS or SIC code. In the following section, we highlight SDE, EBITDA, and REV multiples for a glass and glazing company.
SDE (Seller’s Discretionary Earnings) Multiple for a Glass and Glazing Company
- SDE multiples measure the value of a glass and glazing company based on its seller’s discretionary earnings. This is a common valuation multiple in small business valuation.
EBITDA Multiples for a Glass and Glazing Company
- EBITDA multiples measure a glass and glazing company’s earnings before interest taxes, depreciation, and amortization. This indicates the return on investment (ROI) a glass and glazing company can expect to generate.
REVENUE or SALES Multiples for a Glass and Glazing Company
- The REVENUE or SALES multiple assesses the value of a glass and glazing company in relation to the total amount of sales or revenue it generates.
To learn more about how to value a glass and glazing company using the market approach, see Valuation Multiples for Glass and Glazing Contractors.
Valuing a Glass and Glazing Company Using the Income Approach
The income approach is another common method for valuing a glass and glazing company. When using the income approach, a business appraiser assesses the future earning potential of a glass and glazing company. This approach also evaluates the risks of buying, growing, or selling a glass and glazing company. Below, we discuss a few common risks in the glass and glazing industry.
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- Financial Performance: Profit and profit margins can fluctuate for glass and glazing companies. As such, it is important to have good financial planning and budgeting skills.
- Skilled Staff: Glass and glazing can be tedious work. It is important to hire employees who are skilled and/or well-trained in the industry.
- Competition: The glass and glazing industry is very fragmented and competitive. To succeed, it is important for glass and glazing companies to differentiate from competitors and create diverse revenue streams.
- Supplier Relationships: Glass and glazing companies require a variety of supplies to produce goods and services. It is beneficial for glass and glazing companies to develop strong supplier relationships to succeed.
Methods to Value a Glass and Glazing Company Using the Income Approach
There are several variations of the income approach. The most common methods are the capitalization of cash flow method and the discounted cash flow method. In the following paragraphs, we discuss how to value a glass and glazing company with the capitalization of cash flow method and/or the discounted cash flow method.
Capitalization of Cash Flow Method
The capitalization of cash flow method is ideal for glass and glazing companies with long and stable histories. When valuing a glass and glazing company using this approach, business appraisers determine an appropriate amount of cash flow for one period. The valuation expert then applies a capitalization rate which indicates the rate of return investors can expect. In addition, the capitalization of cash flow method assesses the risks associated with glass and glazing companies. We discuss a few of these risks above.
Discounted Cash Flow Method
The discounted cash flow method is best for glass and glazing companies with stable financial histories and predictable forecasts. This approach involves projecting future cash flows over a 3-5-year period. Then, a business appraiser applies a discount rate rather than a capitalization rate to account for the time value of money. Keep in mind, the discounted cash flow method is less common since it is limited to future cash flow estimates which can be arbitrary.
Summary
There are several valuation methods to consider when deciding how to value a glass and glazing company. At Peak Business Valuation, our appraisers often use the market approach and/or the income approach to value a glass and glazing company. Each method provides a different perspective on the value of a business. To understand which valuation approach is most suitable for your glass and glazing company, receive a business valuation. During a business valuation, a valuation analyst determines the fair market value of a glass and glazing company. With this information, you can take the next steps in increasing the value of a glass and glazing company.
Peak Business Valuation is happy to help! At Peak, we work with glass and glazing companies on a regular basis. As such, we can provide you with a business valuation for a glass and glazing company. In addition, Peak can answer any questions on the value of a glass and glazing company. Schedule your free consultation with Peak Business Valuation below to get started!
For more information see Valuing a Glass and Glazing Business, Value Drivers for Glass and Glazing Companies, and Valuation Multiples for Glass and Glazing Contractors.
