Liquor Store Valuation Multiples
Differentiation is more important now than ever before in the alcohol retail industry. If you want to take your liquor store to the next level, it is important to evaluate its status and worth on today’s market. Valuation multiples play a vital role in this assessment. These financial tools offer an estimate of your liquor store’s value relative to its financial performance and market conditions. However, identifying reliable liquor store valuation multiples can be difficult. Working with a certified business appraiser is the best way to obtain accurate multiples and useful insights on your store’s market position, risks, opportunities, and growth potential.
In this article, we explore some widely used liquor store valuation multiples. Please note that multiples primarily focus on financial performance. As such, they may not account for the unique attributes that contribute to a liquor store’s value. For the most precise value estimate, consider obtaining a professional business valuation.
Peak Business Valuation is a reputable business appraiser that often helps individuals looking to buy, expand, sell, or secure financing for a liquor store. We can provide you with a timely and credible liquor store valuation and address any questions you may have. Get started today by scheduling your free consultation below!
What Are Liquor Store Valuation Multiples?
Valuation multiples are financial ratios used to estimate a business’s current fair market value. They indicate how much a potential buyer might pay for a liquor store relative to specific financial performance metrics. Business appraisers calculate these multiples by analyzing transactions of similar liquor stores. See Valuation Multiples for a Liquor Store for similar details.
Common Liquor Store Valuation Multiples
Valuation experts at Peak Business Valuation often apply SDE, EBITDA, and revenue-based multiples. Each valuation multiple offers a different perspective on a liquor store’s worth. To provide a more balanced value estimate, business appraisers often apply various multiples. Below, we describe SDE, EBITDA, and revenue and outline the typical range of multiples for each in the liquor store industry.
SDE Multiples for a Liquor Store
Seller’s Discretionary Earnings (SDE) represent the total income and financial benefits an owner receives from the stores. This is calculated by adjusting net income to account for items such as owner compensation, discretionary expenses, and one-time costs. To determine a liquor store’s value, business appraisers apply a relevant multiple to SDE:
Formula: Business Value = SDE × Multiple
Range: Liquor stores typically transact between 2.90x and 3.68x SDE.
EBITDA Multiples for a Liquor Store
EBITDA refers to Earnings Before Interest, Taxes, Depreciation, and Amortization. This metric evaluates earnings generated solely from a liquor store’s operations. It is especially useful for assessing profitability and comparing other liquor stores on the market. The following formula calculates the value of a liquor store based on its EBITDA.
Formula: Business Value = EBITDA × Multiple
Range: EBITDA multiples for liquor stores generally fall between 3.85x and 4.78x EBITDA.
Revenue Multiples for a Liquor Store
Revenue multiples compare a liquor store’s value to its total sales over the most recent 12 month period. This metric can be helpful for understanding the store’s size and market position. However, since revenue multiples do not account for profitability, cash flow-based multiples like SDE and EBITDA are often considered more useful.
Formula: Business Value = Revenue × Multiple
Range: Liquor stores often sell in the range of 0.35x to 0.45x revenue.
As a professional business appraiser, Peak Business Valuation regularly uses these multiples during liquor store valuations. We are happy to discuss any questions you have about liquor store valuation multiples. We can also provide a comprehensive business valuation for those looking to buy, grow, or sell a liquor store. Start by scheduling a free consultation today!
How to Value a Liquor Store Using Multiples
When valuing a liquor store using multiples, it is important to note that there are many additional factors to consider. To provide an accurate liquor store valuation, business appraisers evaluate a range of financial and operational factors, such as location, licensing restrictions, customer demographics, and more. Weighted averages may also be applied to account for unique variations in historical financial performance. To learn more, check out How to Value a Liquor Store.
Rules of Thumb for Liquor Stores
Industry-specific rules of thumb, such as liquor store valuation multiples, can be useful when estimating the value of a liquor store. That said, these tools offer general guidance and should not replace a full business valuation. To ensure precision, it’s advisable to consult with a certified business appraiser. Peak Business Valuation is here to assist! Reach out today to schedule a free consultation.
Factors Affecting Liquor Store Valuation Multiples
Several key elements can influence liquor store valuation multiples. Identifying these factors can help business owners increase the value of their store. Here are some of the most relevant considerations:
- Product Mix: Offering a diverse range of in-demand inventory—including beer, wine, spirits, and healthier options—can increase revenue, resulting in higher multiples.
- Location: Liquor stores near key suppliers and markets allows for more competitive pricing, faster restocking, lower transportation costs, and increased customer satisfaction. These factors have a major impact on the value of a liquor store.
- Pricing: A liquor store’s pricing strategy can significantly affect its valuation multiples. Implementing a high volume / low margin strategy has proven to be an effective method for maintaining profitability.
- Liquor Regulations: Local and federal liquor regulations have a direct impact on a liquor store’s capabilities and competitive landscape. Strict or evolving regulations can result in higher or lower liquor store valuation multiples.
For additional insights, read Value Drivers for a Liquor Store.
Conclusion
If you need to understand the fair market value of a liquor store, valuation multiples offer helpful guidance. These financial ratios provide a value estimate based on the store’s financial performance and market conditions. However, valuation multiples generally yield limited results. There are many additional factors that have a major influence on a liquor store’s value. For the most reliable liquor store valuation, it is important to consult a certified valuation expert. These professionals conduct a thorough analysis to gather data on a liquor store’s strengths, weaknesses, risks, opportunities, and more. This is pivotal information if you are looking to buy, sell, plan for growth, or secure financing for a liquor store.
Peak Business Valuation, business appraiser, frequently conducts liquor store valuations. We are here to answer any questions you may have about valuation multiples or the liquor store valuation process. You can start today by scheduling a free consultation below!
Read Liquor Store Valuations and Valuing a Liquor Store for more information.
