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How to Value a Jewelry and Watch Wholesale Business

How to Value a Jewelry and Watch Wholesale Business

Jewelry and watch wholesalers sell a variety of jewelry, precious metal, silverware, and jeweler’s findings in bulk to various downstream markets. There are about 25,400 jewelry and watch wholesale businesses across the country. An industry report on IBIS World notes that these businesses generate approximately $11 billion in revenue each year. Additionally, we can expect healthy growth in the coming years. As such, it may be a good time to buy, grow, or sell a jewelry and watch wholesaler. Whether you are buying, growing, or selling a jewelry and watch wholesale business, it is beneficial to understand how to value a jewelry and watch wholesale business. 

The most effective way to learn how to value a jewelry and watch wholesaler is to receive a business valuation. During a business valuation, a valuation analyst will highlight the strengths and weaknesses of your jewelry and watch wholesale business. In addition, you will learn the fair market value of a jewelry and watch wholesaler. This information is vital in building a successful business. 

Peak Business Valuation, business appraiser, is happy to help! At Peak, we work with jewelry and watch wholesale businesses throughout the nation. As such, we can provide you with a business valuation for a jewelry and watch wholesale business. Peak can also answer any questions you may have on how to value a jewelry and watch wholesale business. Start today by scheduling your free consultation with Peak Business Valuation below! 

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How to Value a Jewelry and Watch Wholesale Business

Business appraisers consider various business valuation approaches when deciding how to value a jewelry and watch wholesale business. Often, valuation experts at Peak work with the market approach and/or the income approach. Both of these methods are effective, however, each provides a different perspective on the value of a jewelry and watch wholesaler. As part of a business valuation, a valuation analyst will determine which method is best for your jewelry and watch wholesaler. This may include using a combination of business valuation approaches. 

Valuing a Jewelry and Watch Wholesale Business Using the Market Approach

The market approach is a common business valuation approach. This approach is similar to the real estate appraisal process. When valuing a property, real estate appraisers assess similar homes that recently sold in the area. This allows them to calculate a fair value for the property. With the market approach, a business appraiser will look at similar jewelry and watch wholesalers that sold on the market. If the business is private, a valuation expert gathers information from private transaction databases. 

Multiples for a Jewelry and Watch Wholesale Business

When utilizing the market approach to value a jewelry and watch wholesaler, a business appraiser works with valuation multiples. Multiples are financial ratios that compare a business’s value to metrics such as earnings, sales, and cash flow. To determine the valuation multiples for a jewelry and watch wholesale business, a valuation analyst applies the proper NAICS or SIC code. Below, we discuss SDE, EBITDA, and REV multiples for a jewelry and watch wholesale business. 

SDE (Seller’s Discretionary Earnings) Multiples for a Jewelry and Watch Wholesale Business

  • The SDE multiple is common in small business valuation. This multiple measures a jewelry and watch wholesale business’s value to its seller’s discretionary earnings

EBITDA Multiples for a Jewelry and Watch Wholesale Business

  • EBITDA multiples reflect a jewelry and watch wholesaler’s earnings before interest, taxes, depreciation, and amortization. This indicates the return on investment (ROI) a jewelry and watch wholesaler can generate. 

REVENUE or SALES Multiples for a Jewelry and Watch Wholesale Business

  • REVENUE or SALES multiples measure a jewelry and watch wholesale business’s value based on the total amount of revenue or sales it generates. 

To learn more on how to value a jewelry and watch wholesale business using the market approach, see Valuation Multiples for a Jewelry & Watch Wholesaling.

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Valuing a Jewelry and Watch Wholesale Business Using the Income Approach

The income approach is another common method for valuing a jewelry and watch wholesale business. This valuation approach assesses a jewelry and watch wholesaler’s income potential. In addition, the income approach evaluates the risks associated with buying, expanding, or selling a jewelry and watch wholesale business

    • Price of Metal: The price of metal fluctuates often. This can negatively impact a jewelry and watch wholesale business’s profit margins. 
    • Competition: The jewelry and watch wholesale industry is very fragmented and competitive. To succeed, jewelry and watch wholesale businesses must find ways to differentiate from competitors. 
    • Location: The location of a jewelry and watch wholesaler has a strong influence on its value. By locating near key markets such as jewelry retailers, operators can increase revenue and profitability. 
    • Financial Performance: In recent years, the watch and jewelry wholesale industry has seen adverse financial conditions. As such, it is important to have strong financial planning and budgeting skills. 

Methods to Value a Jewelry and Watch Wholesale Business Using the Income Approach

There are several variations of the income approach. The most common income methods are the capitalization of cash flow and discounted cash flow methods. Both approaches assess the income potential of a jewelry and watch wholesale business. In the following paragraphs, we discuss how to value a jewelry and watch wholesale business using 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 best for jewelry and watch wholesalers with long and stable histories. When using the capitalization of cash flow method, a business appraiser calculates an appropriate amount of income for one period. Then, the valuation analyst applies a capitalization rate which indicates the rate of return investors can expect. The capitalization of cash flow method also considers the risks of a jewelry and watch wholesaler. We highlight some of these risks above. 

Discounted Cash Flow Method

The discounted cash flow method is ideal if your jewelry and watch wholesale business has strong financial histories and/or predictable forecasts. This method involves projecting future income over a 3-5-year period. A business appraiser then applies a discount rate to account for the time value of money. Please note, the discounted cash flow method is less common since it relies on future income estimates which can be inaccurate. 

Summary

Learning how to value a jewelry and watch wholesaler is important whether you are buying, expanding, or selling a jewelry and watch wholesale business. There are several valuation approaches to consider when determining the best method for valuing a jewelry and watch wholesaler. The best way to understand how to value a jewelry and watch wholesale business is to receive a business valuation. During a business valuation, you will also learn the fair market value of a jewelry and watch wholesaler as well as its associated risks and opportunities. 

As a professional business appraiser, Peak Business Valuation values jewelry and watch wholesale businesses across the country. We are happy to provide you with a business valuation for a  jewelry and watch wholesale business. Additionally, Peak can answer any questions you may have on valuing a jewelry and watch wholesale business. Schedule your free consultation with Peak Business Valuation by clicking the link below! 

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