Laundromat Valuation Multiples
Buying, growing, or selling a laundromat can be a rewarding business endeavor. But before you make any major decisions, it is important to determine the business’s fair market value. With this information, you can create an informed strategy to achieve your goals with your laundromat. Laundromat valuation multiples can be useful tools if you need a rough, preliminary fair market value estimate. However, it is important to note that valuation multiples are based on limited data.
In this article, we outline common valuation multiples for laundromats and discuss some important implications to be aware of. Keep in mind, the benchmark ranges we highlight reflect general market averages and may not precisely match the value of your specific laundromat. If you need a precise valuation, it is best to work with a certified valuation expert.
As a professional business appraiser, Peak Business Valuation regularly helps individuals looking to buy, expand, sell, or secure financing for laundromats. We are happy to help you with a quick and accurate laundromat valuation. In addition, we can address any questions about laundromat business valuations or valuation multiples. You can start today by scheduling a free consultation below!
What are Laundromat Valuation Multiples?
Valuation multiples are market-based ratios that help estimate a business’s value. By assessing recent transactions of similar laundromats, business appraisers can determine suitable laundromat valuation multiples. These multiples are then applied to key financial metrics, such as earnings or revenue, to estimate fair market value.
Common Laundromat Valuation Multiples
When deciding how to value a laundromat, valuation analysts often consider multiples based on SDE, EBITDA, and revenue. Each multiple highlights different aspects of the business’s financial performance. As such, the expert may use more than one multiple to ensure a well-rounded laundromat business valuation. Below, we describe each metric and provide typical benchmark ranges in the laundromat industry.
SDE Multiples for a Laundromat
Seller’s Discretionary Earnings (SDE) is a widely used valuation metric for smaller laundromats. SDE reflects the total financial benefit a single owner-operator can expect from the business. To calculate SDE, a business appraiser adds the owner’s salary, discretionary expenses, and non-recurring costs back to net income. The valuation formula and multiple range are listed below.
Formula: Value = SDE × Multiple
Range: SDE multiples for laundromats generally range from 3.16x to 4.23x SDE.
EBITDA Multiples for a Laundromat
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) measures a business’s operational profitability without the effects of non-operating factors. EBITDA multiples are often applied when valuing larger or multi-location laundromats with more complex operations. Moreover, this metric allows for fair comparisons between similar businesses in the industry.
Formula: Value = EBITDA × Multiple
Range: EBITDA multiples for laundromats can fall between 3.44x and 4.85x EBITDA.
Revenue Multiples for a Laundromat
Revenue multiples estimate value based on gross sales over a 12-month period. Please note that these multiples do not account for expenses or profitability. However, they can serve as a helpful reference when used alongside SDE or EBITDA multiples.
Formula: Value = Revenue × Multiple
Range: Laundromats often transact within a revenue multiple range of 1.19x to 1.78x.
At Peak Business Valuation, we incorporate these multiples during a comprehensive business valuation. Additionally, we review the business’s strengths, weaknesses, risks, growth potential, and more. If you have questions about laundromat valuation multiples or need a defensible laundromat valuation, schedule your consultation below.
How to Value a Laundromat Using Multiples
Valuing a laundromat using multiples involves more than just applying the above formulas. There are many additional factors to consider if you want an accurate valuation. During a professional laundromat business valuation, a valuation expert adjusts for factors like the business’s strengths, risks, and growth potential. Then, weighted averages may be applied to smooth out seasonal patterns or one-time expenses. For more details, see How to Value a Laundromat.
Rules of Thumb for Laundromats
Laundromat valuation multiples are rule-of-thumb methods for estimating fair market value. Although these rules can provide a quick reference, they cannot account for the unique variables that impact each laundromat. As such, relying on rules of thumb can lead to inaccurate conclusions. If you are looking for a precise, defensible laundromat business valuation, it is best to obtain an independent appraisal from an experienced professional. Reach out to Peak to get started!
Factors Affecting Laundromat Valuation Multiples
There are a variety of factors that determine whether a laundromat achieves higher or lower valuation multiples. Understanding these value drivers can help owners take proactive steps to increase their laundromats’ value. Below are a few key value drivers for a laundromat:
- Modern Equipment & Technology: Investing in new machines and smarter systems can improve the customer experience, reduce costs, and provide a competitive advantage. These factors often lead to higher laundromat valuation multiples.
- Licensing & Compliance: It is vital to secure all required licenses and adhere to health, safety, and environmental regulations. This minimizes legal risks and strengthens the laundromat’s reputation and perceived value.
- Location: The location of a laundromat can have a significant influence on its valuation multiples. Laundromats positioned in high-traffic areas near key markets, such as apartment complexes or college campuses, often experience stronger demand and higher customer volume.
- Economies of Scale: Purchasing materials in bulk and securing favorable rates from suppliers and service providers can help lower operating costs. This allows for competitive pricing and improved profitability, raising the value of the laundromat.
Check out Value Drivers for a Laundromat to learn more about how to increase your laundromat business’s worth.
Conclusion
If you want a fast initial estimate of a laundromat’s fair market value, valuation multiples are a useful reference. However, these tools are based on broad market trends and do not reflect the unique details of a specific laundromat. As such, laundromat valuation multiples can be unreliable if you need precise results. The best way to determine the true value of a laundromat business is to obtain a professional business valuation. Certified valuation experts use standardized valuation approaches to ensure a reliable laundromat valuation.
Peak Business Valuation is a trusted business appraiser that values laundromats across the United States. Whether you are buying, selling, or seeking financing, we are happy to support you with a laundromat business valuation. In addition, we can answer your questions on laundromat valuation multiples or the valuation process. Get started today by scheduling a free consultation below!
For more insights, read Laundromat Business Valuations or Valuing a Laundromat.
