How to Value a Recreational Vehicle Dealership
The recreational vehicle dealership industry has seen significant growth. Much of this is due to stay-at-home orders from the COVID-19 pandemic. Stay-at-home orders caused consumers to look for ways to get outside. Recreational vehicle dealerships offer a solution to this. However, some of the industry growth has been stunted by supply chain issues. Even so, growth looks to continue to trend upward in the coming years. As such, now is a good time to buy or sell a recreational vehicle dealership. The first step to this process is understanding how a valuation expert values a recreational vehicle dealership.
Valuing a Recreational Vehicle Dealership
You might read this because you plan on selling a recreational vehicle dealership. Or you could be planning to buy a RV dealership. Whatever the reason, it is important to understand what is happening in the industry. Understanding the industry landscape can help with making educated decisions. These decisions can help your recreational vehicle dealership thrive. More importantly, it is useful to know the value of your company. This allows you to make strategic decisions. These strategies can help increase the value of a recreational vehicle dealership.
Many factors impact the value of a recreational vehicle dealership. Some factors are outside the sphere of control of their owners. However, many factors can be greatly influenced by understanding how to maximize value. Again, this begins with understanding the value of your recreational vehicle dealership.
Peak Business Valuation, business appraiser, works with dozens of recreational vehicle dealerships. The first step in understanding the value of your recreational vehicle dealership is obtaining a business valuation. As part of a valuation engagement, we discuss key factors experts use when valuing recreational vehicle dealerships. Keep in mind the below factors are only a guide. Peak Business Valuation, business appraiser, is happy to help you understand the value of your RV dealership. For specific information, schedule your free consultation with us.
Market Multiples for a Recreational Vehicle Dealership
- SDE Multiple Average Range: – 1.65x – 3.01x
- EBITDA Multiple Average Range: 2.32x – 3.69x
- REV Multiple Average Range: 0.23x – 0.45x
**Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation or its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.
The above are average valuation multiples for a recreational vehicle dealership. A valuation expert uses multiples when determining the value of a company. This is true for recreational vehicle dealerships. A valuation analyst values a recreational vehicle dealership using a variety of valuation methods. Cash flow multiples are almost always observed in this process. This includes looking at multiples for SDE and EBITDA. These multiples indicate the financial health of a company. They help determine profitability without the interference of discretionary spending. Understanding cash flow and multiples can help you increase the value of your business. This is helpful if you are expanding your recreational vehicle dealership. It is also useful when acquiring a new recreational vehicle dealership. Finally, it can help to maximize the value of a recreational vehicle dealership before selling it. Schedule a free consultation with Peak Business Valuation, business appraiser Utah, for more information.
Key Success Factors
Peak Business Valuation, business appraiser Utah, values recreational vehicle dealerships on a regular basis. Below are several success factors that can help distinguish your recreational vehicle dealership. These key value drivers can also increase the value of a recreational vehicle dealership. For questions, schedule your free consultation.
Type of Inventory
First, a recreational vehicle dealership can focus on anything from Expandable Trailers to Class A Motorhomes. It is important to have a sound understanding of what the demand is for your target market. Peak Business Valuation, business appraiser, has seen the difference this can make. This is especially true when looking at cash flow. Knowing your target market results in faster turnover of inventory which increases cash flow. The less time a recreational vehicle sits on the lot the better. Selecting the right inventory for your recreational vehicle dealership is key to maximizing value. When valuing a RV dealership, the valuation analyst will look at your inventory turnover ratio and other financial ratios. They will compare these to similar businesses and industry averages.
Second, recreational vehicle dealerships must first decide what inventory they will offer. This can be new inventory, used inventory, or a mixture of the two. Next, you must determine the optimal amount of inventory you will maintain at any given time. This will ebb and flow with seasonality. Inventory size ties into cash flow. At Peak Business Valuation, business appraiser, we look at the cash flow of the business. Cash flow issues can be detrimental to the success of a business. Thus, it is important to determine inventory levels with this in mind. For more information see, Managing Cash Flow.
Third, flooring is also known as inventory financing. It allows recreational vehicle dealerships to expand their inventory with less capital. As is the case with all financing, it is important to know your options. Higher rates can put a greater strain on the cash flow and margins. Lower rates can require more capital or stricter terms. This will vary by dealer. It is crucial to know what options your recreational vehicle dealership has.
Parts & Repair Services
Fourth, many RV dealerships earn revenue by offering parts and repair services. This is especially common in the automotive industry. Some recreational vehicle dealerships have found this to be beneficial as it allows for another source of revenue within the business. However, doing so adds complexity. In the most valuable RV dealerships, parts and repair services add significant value. However, it is dependent on each given circumstance. Keep in mind that when a business appraiser values a business, they will look at revenue streams. In recreational vehicle dealerships, one of the most valuable revenue streams comes through servicing.
Last, the recreational vehicle dealership industry is heavily subject to the economic climate. Economic conditions such as gas prices is one example of this. Other factors include the discretionary income of consumers and consumers’ ability to get credit. All can contribute to the success of a recreational vehicle dealership. Your recreational vehicle dealership should have a contingency plan for economic downturns. Understanding the value of your business can help you plan for the future and adapt to the current economic climate. Peak Business Valuation, business appraiser has extensive experience in this. We have helped many recreational vehicle dealerships understand their value through a quality business valuation.
In conclusion, there are various things a valuation expert considers when valuing a recreational vehicle dealership. Understanding your recreational vehicle dealership’s value is important. This is true whether you are looking to buy, sell, or grow. Your recreational dealership will be better for it. To do this, consider obtaining a business valuation to help you understand the fair market value. A business appraisal will also identify opportunities to maximize the value of a recreational vehicle dealership.
Peak Business Valuation, performs business valuations for recreational vehicle dealerships across the country. We are happy to answer any questions you have about the value of an RV dealership. Schedule a free consultation today to get started!
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