Valuation Multiples for a Floral Shop
Floral shops buy flowers from various farms and sell them as floral arrangements, potted plants, and cut flowers. According to IBIS World, there are approximately 33,000 floral shops throughout the country. Over the past several years, the floral industry has generated over $9 billion dollars in revenue. Some floral shops struggle to maintain profitability due to decreasing demand from various markets. However, as online flower sales continue to increase, we can expect growth in the floral industry. As such, now may be an ideal time to buy, grow, or sell a floral shop. Whether you are buying, growing, or selling, it is beneficial to learn how to value a floral shop. This includes learning about valuation multiples for a floral shop.
Valuing a Floral Shop
When valuing a floral shop, there are many factors to consider. As such, the valuation process can be very complicated. It is best to receive a business valuation from a reputable business appraiser. If you are buying a floral shop, receiving a business valuation can help you determine a fair purchase price. Business appraisers may also discuss negotiation strategies as part of a business appraisal. If you are selling a floral shop, a business appraiser can help you determine an appropriate listing price. With this information, you can understand how to increase the value of a floral shop.
Business appraisers can use various valuation approaches when valuing a floral shop. The market approach is a common valuation approach that relies on valuation multiples. This article discusses valuation multiples for a floral shop. Keep in mind, this is only a guide. If you are looking to understand what multiples are suitable for your floral shop, it is best to receive a business valuation.
Peak Business Valuation, business appraiser, frequently values floral shops. We are passionate about helping floral businesses succeed. Peak is happy to provide you with a business appraisal for a floral shop. If you have any questions about valuing a floral shop, reach out to Peak. Schedule a free consultation today!
Valuation Multiples for Floral Shops
The diagram below shows average market multiples for a floral shop. Please note, these values are only a guide and may not be suitable for your floral shop. Peak Business Valuation can help you determine the applicable valuation methods and multiples for your business. We are happy to help you! Schedule a free consultation with Peak Business Valuation, business appraiser, today.
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?
A valuation multiple is similar to a ratio that compares the value of a business to a financial metric. For example, the SDE multiple is common when determining the value of a floral shop. The SDE multiple compares the value of a floral shop to its seller’s discretionary earnings. Valuation experts assess the multiples of similar businesses that recently sold during an appraisal. Then, they apply an applicable multiple to your floral to determine an accurate range of value.
For example, suppose a floral shop has $151,000 in SDE and receives a 2.34x SDE multiple. Here, the shop would have an implied value of $353,340 ($151,000 times 2.34x). In contrast, a 2.74x multiple suggests that the value of the floral shop is $413,740. ($151,000 times 2.74x).
Peak Business Valuation, professional business appraiser, frequently works with individuals who are buying or selling a floral shop. We often use valuation multiples as part of the valuation process. In the following sections, we share an average range of valuation multiples which floral shops often transact at. The range of value often varies because each floral shop is different. Below, we highlight SDE, EBITDA, and REV multiples for a floral shop.
SDE Multiples for Floral Shops
Average SDE multiple range: 2.29x – 2.78x
Floral shops often transact at an average SDE multiple of 2.29x – 2.78x. To calculate an implied value of a floral shop, take the seller’s discretionary earnings and apply the multiple. See the calculation below.
SDE X Multiple = Value of the Business
For example, a floral shop has $229,000 in seller’s discretionary earnings. If it transacts at a 2.55x multiple, the value of the floral shop is about $583,950.
$229,000 X 2.55x = $583,950
SDE multiples are common when valuing a floral shop. To calculate seller’s discretionary earnings, a valuation analyst takes the operating profit of the floral shop and adds back any expenses the new owner may not incur. These common add-backs often include personal transactions, non-recurring or non-related business items, and owner’s compensation. This helps the business appraiser determine the potential cash flow of the floral shop. This is vital when determining the value of a floral shop.
EBITDA Multiples for a Floral Shop
Average EBITDA Multiple range: 3.48x – 4.32x
According to our data, floral shops transact between an average EBITDA multiple range of 3.48x – 4.32x. Multiply this number by EBITDA to calculate the implied value of the business. The equation is as follows.
EBITDA X Multiple = Value of the Business
In this instance, a floral shop has an EBITDA of $173,000 and transacts at an EBITDA multiple of 3.92x. Using these metrics, the floral shop’s value is $678,160.
$173,000 X 3.92x = $678,160
Valuation experts use EBITDA multiples to determine a floral shop’s return on investment (ROI). EBITDA multiples are often used because they help normalize differences. This allows an expert to compare your floral shop to similar shops that recently sold. Normalized differences also provide a more accurate projection of the future earnings a buyer can expect from a floral shop.
REV Multiples for Floral Shops
Average REV Multiple range: 0.43x – 0.68x
Generally, floral shops sell at an average REV multiple of 0.43x – 0.68x. Business appraisers can determine the implied value of a floral shop by multiplying the amount of sales revenue it generates by the REV multiple. Refer to the equation below.
Revenue X Multiple = Value of the Business
For example, a floral shop generates $1,120,000 in revenue and transacts at a 0.56x REV multiple. In this example, the floral shop is worth about $627,200.
$1,120,000 X 0.56x = $627,200
REV multiples are less common in small business transactions. Typically, business appraisers use the market multiples – SDE and EBITDA to value a floral shop. However, the valuation analyst will use their knowledge and expertise to determine which methods and multiples are best for your floral shop.
Summary
Understanding how to use valuation multiples is beneficial if you are looking to buy, expand, or sell a floral shop. There are various market multiples for a floral shop that a business appraiser may use when valuing a floral shop. To determine which multiples are most suitable for your business, receive a business valuation for a floral shop. During a business valuation, a business appraiser can help you understand the fair market value of a floral shop. In addition, they may highlight the strengths and weaknesses of your floral shop. This information is important if you are looking to maximize the value of a floral shop.
Peak Business Valuation, business appraiser, frequently uses valuation multiples to value floral shops. We are happy to help you by providing a business valuation for a floral shop you are buying or selling. Questions about how to value a floral shop are also welcome at Peak! Schedule a free consultation with Peak Business Valuation below!
For more information see Valuing a Floral Business, How to Value a Floral Business, and Value Drivers for a Floral Business.
