Valuation Multiples for a Car Wash
The car wash industry includes operators who wash, clean, and wax automotive vehicles. These vehicles include cars, trucks, vans, and trailers. In addition, this industry includes self-service car washes. There are over 56,000 car washes throughout the United States. Moving forward, IBIS World predicts that car washes will benefit from growing disposable income and a rising number of vehicles. As such, now may be an ideal time to buy, expand, or sell a car wash. Whether you are looking to buy, expand, or sell a car wash, it is beneficial to learn about valuation multiples for a car wash.
Valuing a Car Wash
When buying or selling a car wash, it is important to understand the value of a car wash. It is best to start by receiving a business valuation. If you are buying a car wash, a business valuation can help you determine a reasonable purchase price. In addition, you may learn about effective negotiation strategies. If you are looking to sell a car wash, a business valuation can aid in maximizing its value.
Valuation experts use various methods to determine a car wash’s fair market value. One approach is to use valuation multiples. In this article, we give a brief overview of what valuation multiples for a car wash look like. However, this is only a guide. For more specific guidance, receive a business valuation for a car wash. Peak Business Valuation is happy to help! We can provide a business valuation and answer any questions you may have on valuing a car wash. Start today by scheduling a free consultation with Peak Business Valuation, business appraiser. See also Valuing a Car Wash, How to Value a Car Wash, and Value Drivers for a Car Wash.
Valuation Multiples for a Car Wash
The below diagram displays average market multiples for a car wash. When valuing a car wash, a business appraiser at Peak Business Valuation commonly uses multiples. However, these are only a guide. For specific multiples applicable to your car wash, obtain a business valuation. We are happy to provide a business valuation for a car wash. Schedule a consultation today to learn more.
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.
What is a Valuation Multiple?
Valuation multiples are ratios that compare a company’s value to a financial metric. This can be cash flow, earnings, or sales. For example, an SDE multiple is a popular ratio that compares the seller’s discretionary earnings of the business to the implied value of the company. To determine the fair market value of a car wash, a valuation expert analyzes multiples of comparable car washes that have recently sold. They then determine appropriate multiples for your car wash and provide a range of fair market value.
For example, if a car wash has $230,000 in SDE, and receives a 2.49x SDE multiple, then the business would have an implied value of $572,700. ($230,000 times 2.49x) On the contrary, a 4.02x multiple would imply the value of the company would be $924,600. ($230,000 times 4.02x).
Peak Business Valuation, business appraiser, frequently works with individuals looking to buy, expand, or sell a car wash. The following are valuation multiples for a car wash. These multiples indicate the range of values that car washes typically transact at. It is important to note that each car wash is different. As such, the value range can fluctuate. Below, we examine SDE, EBITDA, and REV multiples for a car wash. For more information about the value of a car wash, schedule a free consultation with Peak Business Valuation, business appraiser.
SDE Multiples for a Car Wash
Average SDE Multiple range: 2.39x – 4.23x
According to our data, car washes transact between a 2.39x – 4.24x average SDE multiple. To derive an implied value of a car wash, apply the multiple by the most recent 12-month period of revenue. The calculation is as follows.
SDE X Multiple = Value of the Business
For instance, a car wash generates $190,000 in seller’s discretionary earnings and transacts at a 3.44x multiple. In this case, the business value is approximately $653,600.
$190,000 X 3.44x = $653,600
Seller’s Discretionary Earnings is a common cash flow multiple an expert uses when valuing a car wash. To calculate SDE, a business appraiser takes the car wash’s operating profit and adds expenses the new owner may not incur. These expenses may include the owner’s compensation, personal expenses, as well as non-recurring or non-related business items. Doing so allows the business appraiser to determine the cash flow potential of the car wash. This is a crucial factor in determining the value of a car wash.
EBITDA Multiples for a Car Wash
Average EBITDA Multiple range: 3.59x – 6.88x
The average EBITDA multiples for a car wash range between 3.59x – 6.88x. Apply this multiple to EBITDA to derive an implied value of the business. See the calculation below.
EBITDA X Multiple = Value of the Business
For example, a car wash has an EBITDA of $162,000. It transacts at an EBITDA multiple of 4.28x. Using the above metrics, the car wash is worth approximately $866,700.
$162,000 X 4.28x = $693,360
An EBITDA multiple measures a company’s return on investment (ROI). Business appraisers may prefer using this multiple as it helps to normalize differences. This allows for comparisons to be made between similar businesses. Normalized ratios provide a more accurate representation of the future earnings a buyer can expect from a car wash.
REV Multiples for a Car Wash
Average REV Multiple range: 0.47x – 1.08x
According to our data, car washes sell an average of 0.47x – 1.08x of revenue. A valuation expert can calculate the implied value of the business by multiplying the amount of revenue or sales a car wash makes by the valuation multiple. Refer to the equation below.
Revenue X Multiple = Value of the Business
For instance, a car wash makes $724,000 in revenue. It then transacts at a 0.84x multiple. In this case, the business is worth approximately $608,160.
$724,000 X 0.84x = $608,160
The REV multiple measures the total revenue generated by the car wash. When valuing a car wash, business appraisers analyze REV multiples of similar car washes that have recently sold on the market. This helps them determine an applicable multiple for your car wash. REV multiples may vary depending on factors such as location, competition, and industry trends.
Summary
There are many factors that a valuation expert considers when using valuation multiples for a car wash. As such, Peak Business Valuation, business appraiser, is happy to work with you! During a business appraisal, we discuss the factors that impact the value of a car wash and the multiples applicable. To determine the multiples for a car wash applicable to your business, obtain a business valuation. A business valuation for a car wash will help you understand the value of a car wash and ways to increase it.
Peak Business Valuation, business appraiser, values car washes on a regular basis. We focus on providing valuable information to help you buy, expand, or sell a car wash. Peak is happy to provide a business valuation. And, we can answer any questions you may have on multiples for a car wash or valuing a car wash. Start today by scheduling a free consultation with Peak Business Valuation below!
