Valuation Multiples for a Brewery
Breweries in the U.S. are experiencing heightened pressure as inflation rises. However, the brewery industry is very resilient during times of economic or social disruption. As such, the demand for alcoholic beverages remains high and steady. This industry is also dependent on consumer trends. Recently, there is a trend toward craft beer resulting in a higher demand for local breweries. For the small, local brewery, these are good signs. In the United States, there are nearly 10,000 breweries producing over $30 billion in revenue. With industry demand consistent, each year there are many transactions of breweries. If you plan on buying a brewery or selling a brewing, understanding the value of a brewery is important. Below we discuss how a valuation expert does this and valuation multiples for a brewery.
As a business appraiser, Peak Business Valuation provides business appraisals for breweries across the country. We would love to answer your questions about valuing a brewery. Please reach out by scheduling your free consultation.
Valuation Multiples for a Brewery
The below graphic shows average valuation multiples for a brewery. Keep in mind the numbers below are only a guide. For specific information about a brewery you are buying or selling, schedule a free consultation.
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.
Valuing a Brewery
When a business appraiser is valuing a brewery, there are many important factors they will consider. Some of these factors we mention above such as economic conditions and consumer preferences. In addition, the business appraiser will look at a brewery’s efficiency, product lines, and distribution channels, among others. See Value Drivers for a Brewery for more information.
Determining the fair market value of a brewery is done using several valuation methods. The business appraiser will analyze what methods are most applicable to your scenario. They will often use valuation multiples for a brewery.
If you plan on buying a brewery, understanding the value of a brewery can help you be confident in your business purchase. Obtaining a business appraisal for a brewery will help you understand a fair value and give guidance on negotiating a purchase price.
If you are preparing to sell a brewery, a business valuation can help you maximize the value. It will also help you decide on a fair listing price. Many small businesses such as breweries don’t sell because they are listed too high or haven’t done the necessary preparation for a buyer to easily come in and take over the business. A business valuation is key to helping you understand how to prepare to sell a brewery.
The first step in buying or selling a brewery is understanding the value of that brewery. Peak Business Valuation, business appraiser, is here to help. Get started today by scheduling a free consultation with Peak Business Valuation.
Be sure to also check out Valuing a Brewery.
What is a Valuation Multiple?
There are many valuation approaches a valuation expert uses to value a brewery. One of the ways to determine the fair market value of a brewery is by using valuation multiples for a brewery. Valuation multiples are ratios. They compare two factors. For example, a common multiple in business valuation is an SDE multiple. The SDE multiple for a brewery compares the seller’s discretionary earnings of the brewery, with the implied value of the brewery. When a valuation expert uses multiple, they will compare your brewery to similar breweries that have recently sold on the open market. Using various valuation methods they will determine a range of value for your brewery.
To illustrate this, a brewery has $440,000 in SDE. If the valuation analyst determines a 3.44x SDE multiple is applicable, the business has an implied value of $1,513,600. Whereas, if a 4.04x SDE multiple is more appropriate the implied value of the brewer would be $1,777,600.
Peak Business Valuation, business appraiser, works with many individuals buying or selling a brewery. We would love to provide a business appraisal for your brewery. Below we discuss valuation multiples for a brewery. This includes SDE, REV, and EBITDA multiples for a brewery. These ranges below are what breweries commonly transact and are valued at. The range of values can be significant. As such, schedule a free consultation to learn more about the value of your brewery.
SDE Multiples for a Brewery
Average SDE Multiple range: 3.24x – 4.19x
According to our data, breweries transact between a 3.24x – 4.19x SDE multiple. To determine the implied value of a brewery, take SDE and multiply it by the applicable multiple. The calculation is as follows:
SDE X Multiple = Value of the Business
For instance, a brewery generates $290,000 in the seller’s discretionary earnings. The business appraiser determines a 3.88x SDE multiple is applicable. In this case, the business value of the brewery is approximately $1,125,200.
$290,000 X 3.88x= $1,125,200
Breweries commonly transact on the seller’s discretionary earnings multiple. An SDE multiple is a common cash flow multiple for small businesses. This is because it adds back expenses a new owner may not incur. To calculate the seller’s discretionary earnings, the business appraiser starts with the brewery’s operating profit. They then add back the following expenses: a fair owner’s salary, any personal expenses ran through the business, and non-recurring or non-related business expenses, among others. For additional information, see Common Add-backs in Business Valuation. It may also be helpful to read Understanding Seller’s Discretionary Earnings.
EBITDA Multiples for a Brewery
Average EBITDA Multiple range: 4.24x – 4.74x
Average EBITDA multiples for a brewery range between 4.24x – 4.74x. To calculate the implied value of the brewery, apply this multiple to EBITDA. See the calculation below.
EBITDA X Multiple = Value of the Business
For example, a brewery has an EBITDA of $245,000. It transacts at a 4.57x EBITDA multiple. Using the above calculation, the brewery is worth approximately $1,119,650.
$245,000 X 4.57x = $1,119,650
The EBITDA multiple measures a company’s return on investment or ROI. A business appraiser may prefer this multiple as it uses normalized differences in capital structure, taxation, and fixed assets. Using normalized ratios allows the business appraiser to compare similar businesses. Normalized ratios can also more accurately depict the future earnings a buyer expects from the business.
REV Multiples for a Brewery
Average REV Multiple range: 0.84x – 1.16x
In Peak’s database, breweries sell for an average REV multiple of 0.84x – 1.16x. To calculate the implied value of the brewery, multiply the most recent 12-month period of revenue by the valuation multiple. Refer to the calculation below.
Revenue X Multiple = Value of the Business
For example, a brewery makes $1,350,000 in revenue. Using a 0.85x REV multiple, the implied value of the brewery is $1,147,500.
$1,350,000 X 0.85x = $1,147,500
The valuation expert will determine what valuation multiples are applicable for your brewery and business transaction.
When viewing valuation multiples for a brewery, understand many factors that impact them. When a business appraiser values your brewery they will analyze your financials, and qualitative facts, and compare your brewery to similar breweries. They then use a variety of valuation approaches to determine a fair market value for the brewery.
Peak Business Valuation, business appraiser would love to talk with you more about valuing a brewery. If you have questions and want to know about specific valuation multiples for a brewery, schedule a free consultation. We are always happy to help! We provide business valuations for a brewery regularly.
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