Valuation Multiples for a Laundromat
Businesses in the laundry industry provide laundry and dry cleaning services to consumers. Typically, this involves providing laundry and dry cleaning machines that are coin or smart-card-operated. In recent years, the laundry industry has experienced a slight decline. This is a result of various factors such as rising electricity prices, intense competition, and poor economic conditions. Moving forward, IBIS World expects these trends to continue. This may be concerning if you are looking to buy, expand, or sell a laundromat. However, with a careful approach, you can find success in the laundry industry. It is beneficial to start by learning how to value a laundromat. This includes understanding valuation multiples for a laundromat.
Valuing a Laundromat
Whether you are buying or selling a laundromat, it is important to understand the principles of valuing a laundromat. The best way to do so is to receive a business valuation. If you are buying a laundromat, a business valuation can help you determine a reasonable purchase price. Additionally, the valuation expert may discuss effective negotiation strategies. If you are selling a laundromat, a business valuation can help you decide on a listing price.
When valuing a laundromat, there are various valuation approaches that a valuation expert may use. The market approach is a common method that relies on valuation multiples for laundromats. In this article, we highlight valuation multiples for a laundromat. To learn more, receive a business valuation. And, be sure to also read Valuing a Laundromat.
Peak Business Valuation, business appraiser, is happy to provide a business appraisal for a laundromat. We work with many laundromats across the nation. In addition, we can answer any questions you may have on valuing a laundromat or market multiples for a laundromat. Schedule a free consultation with Peak Business Valuation today!
Valuation Multiples for a Laundromat
Below, we display average valuation multiples for laundromats. Business appraisers at Peak Business Valuation often use valuation multiples to determine the value of a laundromat. Keep in mind, the values below are only averages. As such, they may not be suitable for your laundromat. To understand which methods and multiples are best for your laundromat, receive a business valuation. Peak Business Valuation, business appraiser, can answer any questions you may have on valuation multiples for a laundromat. Start now by scheduling a free consultation with Peak!
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 similar to ratios. This is because valuation multiples compare two values. When using valuation multiples for a laundromat, business appraisers compare the value of a laundromat to a financial metric. This may include cash flow, earnings, or sales. For example, the SDE multiple is common when valuing a laundromat or small business. This multiple compares the implied value of a laundromat to its seller’s discretionary earnings. Valuation experts consider the multiples of similar businesses that recently sold and apply an appropriate multiple to your laundromat. This helps them determine an accurate range of value for a laundromat.
For example, a laundromat has $487,000 in REV and receives a 1.24x REV multiple. Here, the laundromat would have an implied value of $603,880 ($487,000 times 1.24x). Contrarily, a 1.67x REV multiple implies that the value of the laundromat is about $813,290 ($487,000 times 1.67x).
Peak Business Valuation, business appraiser, works with laundromats on a regular basis. At Peak we often use valuation multiples to determine the value of a laundromat. This article shows a range of valuation multiples that laundromats often transact at. Keep in mind, the range of value may vary since each laundromat is unique. Below, we discuss SDE, EBITDA, and REV multiples for a laundromat.
REV Multiples for Laundromats
Average REV Multiple range: 1.19x – 1.78x
According to Peak Business Valuation’s data, laundromats sell an average of 1.19x – 1.78x of revenue. Business appraisers can determine the implied value of a laundromat by multiplying the amount of revenue it generates by the REV multiple. The equation is as follows. :
Revenue X Multiple = Value of the Business
For example, a laundromat generates $939,000 in revenue. It then transacts at a 1.54x multiple. In this case, the laundromat is worth about $1,446,060.
$939,000 X 1.54x = $1,446,060
While the REV multiple is less reliable in business valuation, this multiple is most common when valuing a laundromat. When using the REV multiple, business appraisers apply it to the laundromat’s revenue. This helps them estimate the fair market value of a laundromat.
SDE Multiples for a Laundromat
Average SDE multiple range: 3.16x – 4.23x
Laundromats transact at an average SDE multiple of 3.16x – 4.23x. Valuation experts apply the multiple to the seller’s discretionary earnings of the business to calculate an implied value of a laundromat. See the following equation.
SDE X Multiple = Value of the Business
For instance, a laundromat generates $366,000 in the seller’s discretionary earnings and transacts at a 3.74x multiple. In this example, the business value is approximately $1,368,840.
$366,000 X 3.74x = $1,368,840
When using the SDE multiple, the valuation expert considers any add-back expenses that may not be incurred by the new owner. These add-backs may include owner’s compensation, personal transactions, and non-recurring or non-related business expenditures. Doing so helps the business appraiser determine the potential cash flow of the laundromat. This is crucial when determining the value of a laundromat.
EBITDA Multiples for a Laundromat
Average EBITDA Multiple range: 3.44x – 4.85x
On average, EBITDA multiples for laundromats range between 3.44x – 4.85x. Apply this multiple to a laundromat’s EBITDA to determine an implied value of the business. Refer to the following equation.
EBITDA X Multiple = Value of the Business
For example, a laundromat has an EBITDA of $323,000 and transacts at an EBITDA multiple of 4.32x. This would imply that the laundromat is worth about $1,395,360.
$323,000 X 4.32 = $1,395,360
The EBITDA multiple helps a valuation expert determine a laundromat’s return on investment (ROI). Business appraisers often use the EBITDA multiple since it helps normalize differences. This allows comparisons to be made between similar laundromats. Normalized ratios provide an accurate projection of the future earnings a buyer can expect from a laundromat.
Summary
There are various valuation methods for valuing a laundromat. Business appraisers often use valuation multiples as part of a business appraisal. To understand which methods and multiples are best for your laundromat, obtain a business appraisal. During a business appraisal, a valuation analyst considers the laundromat’s strengths and weaknesses. Additionally, they will determine the fair market value of a laundromat. This is important whether you are looking to buy, expand, or sell a laundromat.
Peak Business Valuation, business appraiser, is happy to assist you! We work with many individuals who are buying or selling a laundromat. We can answer any questions you may have about valuation multiples for a laundromat. Peak can also provide you with a business valuation for a laundromat. Get started now by scheduling a free consultation with Peak Business Valuation below!
See also Valuing a Laundromat, How to Value a Laundromat, and Value Drivers for a Laundromat.
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