Valuation Multiples for a Jewelry Store
The jewelry store industry includes businesses that sell new jewelry, new sterling and plated silverware, and new watches and clocks. These businesses in addition to selling new jewelry may also provide engraving or repair services. In the United States, there are over 46,000 jewelry stores. These stores generate $32 billion in revenue. During the pandemic, many jewelry stores were forced to close. However, instead of spending money on vacations, many consumers started spending more money on jewelry and watches. This caused many jewelry stores to thrive. However, since then the jewelry store industry is experiencing an increase in the world price of gold. This is leading to purchase costs for industry operators increasing drastically causing extreme competition. As such, these high costs may cause smaller jewelry stores to sell or go out of business.
If you are looking to buy a jewelry store or sell a jewelry store, understanding the value of a jewelry store is important. When a valuation expert values a jewelry store, they often use valuation multiples for a jewelry store.
Valuing a Jewelry Store
Understanding the value of a jewelry store is important if you plan on buying or selling a jewelry store. Obtaining a business valuation or business appraisal will help you understand the fair market value. Knowing the value of a jewelry store can help you negotiate a fair purchase price. If you are selling a jewelry store, a business appraisal can help you decide a listing price. Prior to selling a jewelry store, obtaining a business valuation can help you prepare to maximize the value.
If you are buying a jewelry store, a business appraisal will help you feel confident in your business purchase. A business appraisal will give you an in-depth look at the jewelry store, its strengths, and weaknesses. This can help when negotiating a fair purchase price.
A valuation expert will determine the fair market value of a jewelry store using a variety of common business valuation approaches. This can include the use of valuation multiples for a jewelry store. Below is a brief overview of average valuation multiples for a jewelry store. Whether you plan on selling a jewelry store or buying a jewelry store be sure to obtain a business valuation. Get started by scheduling your free consultation with Peak Business Valuation, business appraiser.
Be sure to also check out Valuing a Jewelry Store, How to Value a Jewelry Store, and Value Drivers for a Jewelry Store.
Valuation Multiples for a Jewelry Store
The below visual contains average market multiples for a jewelry store. Keep in mind the below numbers are only a guide. For specific information about a jewelry store you are buying or selling, schedule a free consultation. As a business appraiser, Peak Business Valuation has the expertise to answer any questions you have about valuing a jewelry store.
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?
Using valuation multiples for a jewelry store is a common way a valuation expert determines the value of a jewelry store. A valuation multiple is a ratio. These ratios compare two factors to each other. A common ratio or multiple in business valuation is the SDE multiple. The SDE multiple compares the seller’s discretionary earnings of the jewelry store with the implied value of the jewelry store. When using multiples, the valuation analyst will analyze your jewelry store and recently sold jewelry stores. Doing so helps them determine an applicable market multiple for the jewelry store they are valuing. Using a variety of valuation methods, they will then determine a range of value for your jewelry store.
For instance, a jewelry store makes $279,000 in seller’s discretionary earnings. Using a 3.27x SDE multiple, the jewelry store has an implied value of $912,300. ($279,000 times 3.27x) Whereas if a 3.52x SDE multiple is applicable, the jewelry store would be worth approximately $982,080. ($279,000 times 3.52x)
As a business appraiser, Peak Business Valuation provides business appraisals for jewelry stores across the country. We work with many individuals who are buying or selling a jewelry store. Below are examples using average valuation multiples for jewelry stores. These are what jewelry stores commonly transact and are valued between. Each jewelry store is different, and the range of value can be considerable. As such, it is important to obtain a business valuation for your jewelry store. Below we discuss EBITDA, REV, and SDE multiples for a jewelry store.
SDE Multiples for a Jewelry Store
Average SDE Multiple range: 2.95x – 3.91x
According to our data, jewelry stores transact on average between a 2.95x – 3.91x SDE multiple. To derive the implied value of the jewelry store, take the seller’s discretionary earnings and apply the applicable multiple. See the calculation below.
SDE X Multiple = Value of the Business
For example, a jewelry store generates $240,000 in seller’s discretionary earnings. Using a 3.15x SDE multiple, the jewelry store has a value of approximately $756,000.
$240,000 X 3.15x = $756,000
The seller’s discretionary earnings multiple is a common cash flow multiple a valuation expert uses when they value a small business. Jewelry stores commonly transact on an SDE multiple. The seller’s discretionary earnings are calculated by taking the company’s operating profit and adding back any expenses the new owner may not incur. Common add-backs in business valuation include a fair owner’s compensation, personal expenses the owner runs through the business, and any other non-related or non-recurring business expenses.
EBITDA Multiples for a Jewelry Store
Average EBITDA Multiple range: 4.69x – 5.12x
According to Peak’s data on average, the EBITDA multiple for a jewelry store ranges between 4.69x – 5.12x. Applying the multiple to EBITDA derives an implied value of the jewelry store. The calculation follows.
EBITDA X Multiple = Value of the Business
For instance, the EBITDA of a jewelry store is $208,000. It transacts at a 4.79x EBITDA multiple. Using the above calculation, the jewelry store’s value is approximately $996,320.
$208,000 X 4.79x = $996,320
An EBITDA multiple measures the return on investment or ROI for the company. The valuation expert may prefer this multiple as it normalizes differences in capital structure, taxation, and fixed assets. Normalized ratios allow the valuation expert to compare similar businesses. Normalized ratios more accurately represent the future earnings a buyer can expect from the business.
REV Multiples for a Jewelry Store
Average REV Multiple range: 0.66x – 1.08x
According to data, jewelry stores sell for an average of 0.66x- 1.08x of revenue. The revenue multiple for a jewelry store is less common to rely on, but in some transactions is applicable. To calculate the implied value of the jewelry store, multiply the most recent 12-month period of revenue or sales of the business by the multiple.
Revenue X Multiple = Value of the Business
For instance, a jewelry store makes $1.1 million in revenue. Using a 0.86x REV multiple would mean the business has an implied value of approximately $946,000.
$1,100,000 X 0.86x = $946,000
When valuing a jewelry store, the valuation expert will determine what multiples are most applicable for the business valuation and its stated purpose. Often small businesses transact on cash flow multiples – SDE and EBITDA multiples. This is because they consider expenses that impact cash flow such as COGS, salaries, rent, and other expenses.
Summary
When looking at valuation multiples for a jewelry store, understand that many factors impact the multiple that is most applicable. The valuation expert will analyze company financials, key value drivers, and compare the jewelry store to other similar jewelry stores. Using their expertise, they will determine what multiples and methods to use to value the jewelry store. As such, Peak Business Valuation, business appraiser, would love to talk with you more about valuing a jewelry store.
Peak Business Valuation, business appraiser, values jewelry stores across the nation. If you are looking to buy a jewelry store or sell a jewelry store understanding the value is key. Get your business appraisal started by scheduling your free consultation. We are happy to answer any questions you have about valuing a jewelry store or valuation multiples for a jewelry store.
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