Valuation Multiples for a Hair Salon
The U.S. hair care services industry has more than 80,000 businesses. Approximately 77,000 beauty salons and 4,500 barbershops. This industry has a combined annual revenue of about $20 billion. Here is a quick summary of the trend of valuation multiples for a hair salon. Be sure to also check out our posts Valuing a Hair Salon, How to Value a Hair and Nail Salon, Business Valuation for Buying a Hair and Nail Salon, Business Valuation for Selling a Hair and Nail Salon, and Value Drivers for a Hair Salon.
Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. One should not act on it as such. These multiples do not represent the valuation opinion of Peak Business Valuation or any of its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional.
SDE Multiples for a Hair Salon
Average SDE Multiple Range: 1.15x – 2.28x
Hair salons often transact within an SDE multiple range of 1.15x to 2.28x. Valuation experts multiply the SDE by an appropriate multiple to calculate the hair salon’s fair market value. The formula is as follows:
SDE x Multiple = Business Value
For example, if a hair salon generates $180,000 in SDE and sells at a 1.85x multiple, the value estimate would be $333,000.
$180,000 x 1.85x = $333,000
To calculate SDE, valuation analysts adjust the hair salon’s income to include discretionary expenses, owner compensation, and one-time costs. These financial adjustments ensure an accurate assessment of the hair salon’s profitability. For more guidance, see Understanding Seller’s Discretionary Earnings.
EBITDA Multiples for a Hair Salon
Average EBITDA Multiple Range: 2.0x – 4.0x
On average, hair salons trade at an EBITDA multiple range of 2.0x to 4.0x. Business appraisers can calculate the salon’s value by multiplying its EBITDA by a relevant multiple. Here is the equation:
EBITDA x Multiple = Business Value
For instance, if a hair salon generates $150,000 in EBITDA and is valued at a 3.0x multiple, it would be worth about $450,000.
$150,000 x 3.0x = $450,000
EBITDA multiples reflect a hair salon’s value based on its core operating profitability. Valuation analysts often use these multiples to compare the performance of similar companies during the valuation process.
Revenue Multiples for a Hair Salon
Average Revenue Multiple Range: 0.25x – 0.60x
Finally, revenue multiples for hair salons typically fall between 0.25x and 0.60x. See the formula below:
Revenue x Multiple = Business Value
For example, if a hair salon generates $800,000 in revenue and is valued at a 0.45x multiple, its estimated value would be $360,000.
$800,000 x 0.45x = $360,000
While revenue multiples provide a useful overview of the business’s financial performance, appraisers often prioritize cash flow multiples like SDE or EBITDA when valuing a hair salon. For more information, see The Valuation Process.
The Trend of Average EBITDA Multiples
The following graphic shows how EBITDA multiples have trended over the last 4 years in the hair care services industry.
Impact of Size on the Valuation Multiple
The following graphic shows how business size impacted EBITDA multiples for a hair salon over the last few years.
Peak Business Valuation enjoys working with small business owners to help maximize their hair salon value. We focus on providing valuable information to help you grow, buy, or sell a hair salon. We have worked with several salon owners to provide a business valuation. Questions are always welcome! Please reach out by scheduling a free consultation.
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