Valuation Multiples for a Lumber and Building Material Store
The lumber and building material industry includes stores that sell construction materials such as lumber, hardwood and brick. According to IBIS World, there are over 37,000 lumber and building material stores in the United States. These businesses generate over $150 billion dollars in revenue. As disposable income increases and the housing and construction markets strengthen, industry revenue will continue to grow. As such, now is an ideal time to buy, grow, or sell a lumber and building material store. Whether you are entering or exiting the industry, it is crucial to understand valuation multiples for a lumber and building material store.
Valuing a Lumber and Building Material Store
There are many factors to assess when valuing a lumber and building material store. During a business appraisal, the business appraiser analyzes the key value drivers for a lumber and building material store. In addition, they will consider the business’s financial statements. Then, the expert compares these metrics to similar lumber and building material stores that recently sold. Using different valuation methods, the business appraiser determines a fair market value for the lumber and building material store.
If you plan on buying a lumber and building material store, a business appraisal can help you feel confident in your business acquisition. It is key to negotiating a fair purchase price. Whereas, if you are selling a lumber and building material store, a business valuation can help you determine a fair listing price. It is also a useful tool to maximize the value of a lumber and building store prior to selling.
As a business appraiser, Peak Business Valuation is here to help you value a lumber and building material store. We can answer questions on valuing lumber and building material stores. Schedule a free consultation today using the link below.
Valuation Multiples for a Lumber and Building Materials Store
The diagram below shows average market multiples for a lumber and building material store. When valuing a lumber and building material store, a business appraiser at Peak Business Valuation often uses multiples. However, the diagram below is only a guide. For specific multiples for your lumber and building material store, receive a business appraisal. Peak Business Valuation is happy to provide a business appraisal for a lumber and building material store. Schedule a consultation with Peak 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 used to assess the value of a company in relation to a specific financial metric. This can include cash flow, earnings, or sales. One commonly used ratio is the SDE multiple. This multiple compares the seller’s discretionary earnings to the implied value of the business. When determining the fair market value of a lumber and building material store, a valuation expert examines multiples of comparable lumber and building material stores that have recently sold. Based on this analysis, they establish suitable multiples for your lumber and building material store and provide a range that represents the fair market value.
For example, a lumber and building material store has $200,000 in SDE and receives a 1.89x SDE multiple. In this case, the business would have an implied value of $378,000. ($200,000 times 1.89x) On the other hand, a 2.17x multiple would imply the value of the company is $434,000. ($200,000 times 2.17x).
Peak Business Valuation is a professional business appraiser. At Peak, we assist individuals who are buying, expanding, or selling a lumber and building material store. As part of the valuation process, we provide valuation multiples that reflect the typical value range observed in lumber and building material store transactions. Keep in mind that the value range may vary since each lumber and building material store is unique. Below, we highlight SDE, EBITDA, and REV multiples for lumber and building material stores. To learn more about the value of a lumber and building material store, schedule a free consultation with Peak Business Valuation, business appraiser!
SDE Multiples for a Lumber and Building Material Store
Average SDE Multiple range: 1.58x – 2.43x
Based on Peak’s data, lumber and building material stores have an average SDE multiple of 1.58x – 2.43x. To determine an implied value of a lumber and building material store, apply the multiple to the seller’s discretionary earnings. The calculation is as follows:
SDE X Multiple = Value of the Business
For instance, a lumber and building material store generates $400,000 in seller’s discretionary earnings and transacts at a 2.05x multiple. In this context, the business value is approximately $717,500.
$400,000 X 2.05x = $820,000
The SDE multiple is commonly used to value a lumber and building material store. This is because SDE takes into account common add-backs during the business valuation process. These add-backs may include personal expenses, a fair owner’s salary, and any non-related or non-recurring business expenses.
EBITDA Multiples for a Lumber and Building Material Store
Average EBITDA Multiple range: 2.04x – 3.95x
The average EBITDA multiples for a lumber and building material store ranges between 2.04x – 3.95x. To calculate an implied value of the business, apply this multiple to EBITDA. See the calculation below:
EBITDA X Multiple = Value of the Business
For example, a lumber and building material store has an EBITDA of $350,000. It transacts at an EBITDA multiple of 2.52x. Using the above metrics, the lumber and building material store is worth approximately $882,000.
$350,000 X 2.52x = $882,000
The EBITDA multiple measures a company’s return on investment (ROI). Business appraisers often favor this multiple due to its ability to normalize differences among businesses. By using normalized ratios, meaningful comparisons can be made with similar businesses. Additionally, normalized ratios provide a more accurate representation of the future earnings that a buyer can anticipate from the business.
REV Multiples for a Lumber and Building Material Store
Average REV Multiple range: 0.23x – 0.37x
According to Peak’s data, lumber and building material stores sell an average of 0.23x – 0.37x of revenue. A valuation expert can determine the implied value of the business by multiplying the amount of revenue or sales a lumber and building material store makes by the valuation multiple. Refer to the equation below.
Revenue X Multiple = Value of the Business
For instance, a lumber and building material store makes $2,100,000 in revenue. It then transacts at a 0.36x multiple. In this case, the business is worth approximately $756,000.
$2,100,000 X 0.36x = $756,000
The REV multiple measures the total revenue generated by a lumber and building material store. During the valuation of a lumber and building material store, business appraisers examine the REV multiples of comparable lumber and building material stores that have recently sold. This analysis enables them to determine a suitable multiple for your lumber and building material store. It is important to note that REV multiples can vary based on factors such as the lumber and building material store’s location, competition, and industry trends.
Summary
Understanding the above valuation multiples for lumber and building material stores helps a business appraiser determine the value of a lumber and building material store. It’s important to keep in mind that these multiples are averages and may not be applicable to your lumber and building material store. For accurate information, it is best to receive a business appraisal. During an appraisal, the expert evaluates various factors such as financial statements and key value drivers for lumber and building material stores. By comparing these metrics to similar lumber and building material stores, the appraiser can determine appropriate market multiples for your lumber and building material store.
Peak Business Valuation, business appraiser, provides business valuations for lumber and building material stores on a regular basis. We are happy to answer any questions you may have about valuing a lumber and building material store. To learn more about valuation multiples for a lumber and building material store you are buying or selling, schedule a free consultation with Peak Business Valuation. Get started today by clicking the link below!
See also Valuing a Lumber and Building Material Store, How to Value a Lumber and Building Material Store, and Value Drivers for Lumber and Building Material Stores.
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