How to Value a Pet Training, Grooming, and Boarding Business
Pet training, grooming, and boarding businesses provide extensive pet care services to domestic animals such as cats and dogs. Consumers often seek pet training, grooming, and boarding services when traveling or working long hours. According to IBIS World, this industry has experienced healthy growth in recent years. This may be a result of increased travel rates and growing animal health awareness. Moving forward, we can expect steady conditions. However, the pet training, grooming, and boarding industry is extremely competitive. This may pose challenges for those looking to buy, grow, or sell a pet training, grooming, and boarding business. To succeed, it is helpful to learn how to value a pet training, grooming, and boarding business.
If you want to learn how to value a pet training, grooming, and boarding business, it is best to receive a business valuation. As part of a business valuation, a valuation expert assesses the strengths and weaknesses of your pet training business. In addition, they will help you understand the fair market value of a pet training business. This information can help you take the next steps in maximizing the value of your business.
Peak Business Valuation is a professional business appraiser. At Peak, we work with many pet training, grooming, and boarding businesses throughout the country. We are happy to provide you with a business valuation for a pet training business. In addition, Peak can discuss any inquiries you may have on how to value a pet training, grooming, and boarding business.
How to Value a Pet Training, Grooming, and Boarding Business
Business appraisers consider a variety of valuation approaches when deciding how to value a pet training, grooming, and boarding business. At Peak Business Valuation, our business appraisers use the market approach and/or the income approach during the valuation process. Each valuation approach uses a different basis of valuation. The valuation analyst will use their expertise to determine which method is best for your business. This often includes using a combination of valuation approaches.
Valuing a Pet Training, Grooming, and Boarding Business Using the Market Approach
The market approach is common when valuing a pet training, grooming, and boarding business. This valuation method is similar to how a real estate appraiser values a home. Real estate appraisers look at similar properties that recently sold in the area to determine an accurate value of a home. When using the market approach to value a pet training, grooming, and boarding business, business appraisers consider similar businesses that recently sold. If the business is private, the valuation analyst refers to private transaction databases to gather relevant information.
Multiples for a Pet Training, Grooming, and Boarding Business
When using the market approach, business appraisers rely on valuation multiples to calculate the value of a pet training, grooming, and boarding business. Valuation multiples are financial ratios that reflect a business’s value in relation to financial metrics such as cash flow, earnings, or sales. To find the proper valuation multiples for a pet training, grooming, and boarding business, valuation experts use the applicable NAICS or SIC code. We discuss the basics of valuation multiples for a pet training, grooming, and boarding business below.
SDE (Seller’s Discretionary Earnings) Multiples for a Pet Training, Grooming, and Boarding Business
- The SDE multiple is most common for valuing a pet training, grooming, and boarding business. This valuation multiple determines value based on a pet training business’s seller’s discretionary earnings.
EBITDA Multiple for a Pet Training, Grooming, and Boarding Business
- EBITDA multiples measure a pet training business’s earnings before interest, taxes, depreciation, and amortization. This indicates the return on investment (ROI) a pet training, grooming, and boarding business can expect to make.
REVENUE or SALES Multiple for a Pet Training, Grooming, and Boarding Business
- The REVENUE or SALES multiple measures a pet training, grooming, and boarding business’s value based on the total amount of sales it generates.
To learn more about how to value a pet training, grooming, and boarding business using valuation multiples, see Valuation Multiples for a Pet Training, Grooming, and Boarding Business.
Valuing a Pet Training, Grooming, and Boarding Business Using the Income Approach
Another common valuation approach is the income approach. The income approach considers the future earning potential of a pet training, grooming, and boarding business. In addition, this valuation method assesses the risks associated with buying or selling a pet training, grooming, and boarding business. Below, we highlight a few common risks that a valuation analyst may consider.
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- Competition: The pet training, grooming, and boarding industry is extremely fragmented and competitive. To succeed, operators must find a way to differentiate from competitors.
- Seasonality: Demand for pet training, grooming, and boarding services may fluctuate throughout the year. As such, it is important to ensure steady cash flow.
- Location: The location of a pet training, grooming, and boarding business plays a vital role in its success. It is best to locate a pet training, grooming, and boarding businesses in areas with a high volume of pet owners.
- Financial Performance: In the coming years, this industry can expect a slight decline in revenue and profit margins. As such, pet training, grooming, and boarding businesses need to ensure strong financial performance to succeed.
Methods to Value a Pet Training, Grooming, and Boarding Business Using the Income Approach
There are several variations of the income approach an appraiser uses when valuing a pet training, grooming and boarding business. Typically, business appraisers use the capitalization of cash flow method or the discounted cash flow method. Both of these methods analyze the future earning potential of a pet training, grooming, and boarding business. In the following paragraphs, we discuss how to value a pet training, grooming, and boarding business with these income approaches.
Capitalization of Cash Flow Method
- The capitalization of cash flow method is common for businesses with stable histories. This method involves determining an appropriate measure of earnings for one period. The earnings are then divided by a capitalization rate which represents an appropriate rate of return a buyer can expect. The capitalization of cash flow method also considers the risks that may prevent an investor from reaching expected earnings.
Discounted Cash Flow Method
- The discounted cash flow method is ideal for pet training, grooming, and boarding businesses with strong financial histories. In addition, this method may be used for businesses with reliable forecasts. When using the discounted cash flow method, business appraisers project future earnings over 3-5 years. The appraiser then applies a discount rate rather than a capitalization rate to calculate the value of the business. This valuation method is less common when valuing a pet training, grooming, and boarding business.
Summary
There are several approaches to consider when deciding how to value a pet training, grooming, and boarding business. In many cases, valuation experts use the market approach and/or the income approach. To understand which method is best for a pet training, grooming, and boarding business you are buying or selling, receive a business valuation. During a business valuation, a valuation analyst will calculate the value of a pet training, grooming, and boarding business. In addition, they will discuss the strengths and weaknesses of your business. This is vital if you are looking to increase the value of a pet training, grooming, and boarding business.
Peak Business Valuation, business appraiser, works with pet training, grooming, and boarding businesses on a regular basis. We are happy to help you succeed in this industry! Peak can provide you with a business valuation for a pet training, grooming, and boarding business. In addition, we can answer any questions you have on how to value a pet training, grooming, and boarding business. Start now by scheduling a free consultation with Peak Business Valuation below!
Valuing a Pet Training, Grooming, and Boarding Business, Value Drivers for a Pet Training, Boarding, and Grooming Business, and Valuation Multiples for a Pet Training, Boarding, and Grooming Business.
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