Valuation Multiples for a Masonry Business
A mason primarily performs masonry work, stone setting, bricklaying, and other stonework. This work is for new builds, additions, alterations, maintenance, and repairs. In the United States, there are over 90,000 masonry businesses. These businesses generate nearly $27 billion in revenue. While this industry’s growth rate decreased, the rebounding economy is expected to increase demand for masonry services. The housing and residential market also plays a part in industry revenue growth. Due to the current economy, now is a great time to sell a masonry business or buy one. The first step of either process is understanding the value of a masonry business. When valuing a masonry business, a valuation expert will use valuation multiples for a masonry.
Valuing a Masonry Business
There are many factors a valuation expert will look at when valuing a masonry business. Below are a few of these:
- Owner Dependency
- Management Team and Training
- Recurring Revenue
- Residential vs Commercial Masonry
- Supplier and Customer Concentration
Understanding the value of a masonry business is beneficial when selling a business. A business appraisal can help determine a fair listing price. This is key to ensure you aren’t leaving money on the table, but you also don’t want to drive away potential buyers by listing the business too high.
If you plan on buying a masonry business, a business valuation can help you negotiate a fair purchase price. A business appraisal can help you feel confident in your business transaction. It is also a useful tool when growing a business.
Peak Business Valuation, business appraiser, values masonry businesses across the country. We are happy to answer any questions you have about the value of a mason. Schedule a free consultation today. Be sure to also check out Valuing a Masonry Business, How to Value a Masonry Company, as well as Value Drivers for a Masonry Business.
Valuation Multiples for a Masonry Business
You may wonder how a valuation expert determines the fair value of a masonry business. A valuation expert often uses valuation multiples for a masonry business. Below is a brief overview of what valuation multiples for a masonry business look like. Keep in mind these numbers are only a guide. For specific information about your masonry business, schedule a free consultation.
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 like a ratio. A ratio compares two factors to each other. For instance, in business valuation one of the common ratios is an SDE multiple. The SDE multiple compares the seller’s discretionary earnings of the business with the implied value of the company. A valuation expert will look at multiples of similar masonry businesses when determining an applicable multiple for your masonry business. Using valuation multiples will give you a range of value for your masonry company.
For example, a mason generates $260,000 in seller’s discretionary earnings. The valuation expert determines a 2.26x SDE multiple is most applicable. In this case, the business has an implied value of $587,600. ($260,000 times 2.26x) Whereas if they use a 1.69x multiple the value of the masonry business would be $439,400. ($260,000 times 1.69x)
As a business appraiser, Peak Business Valuation has worked with individuals who are buying, growing, or selling a masonry business. Below are average multiples a masonry business transacts at. Each mason is unique and as such the range of value can be significant. Below we discuss SDE, EBITDA, and REV multiples for a masonry business.
SDE Multiple
Average SDE Multiple range: 1.69x – 2.73x
According to our data, masonry businesses transact between a 1.69x – 2.73x average SDE multiple. To derive an implied value of the company, apply the multiple to the recent 12 months of revenue. The calculation is as follows:
SDE X Multiple = Value of the Business
For instance, a masonry business makes $610,000 in seller’s discretionary earnings. It transacts at a 2.71x SDE multiple. In this case, the business value is approximately $1,653,100.
$610,000 X 2.71x = $1,653,100
Seller’s discretionary earnings is a common cash flow multiple a valuation expert uses when valuing a masonry business. This is because it takes into account the cash flow of the business. A valuation expert starts by calculating the company’s operating profit and adding back expenses a new owner may not incur. These expenses may include the owner’s compensation and personal expenses run through the business. It can also include other expenses such as non-recurring or non-related business items.
Schedule Your Free Consultation!
EBITDA Multiple
Average EBITDA Multiple range: 2.13x – 3.36x
The average EBITDA multiples for a masonry business range between 2.13x – 3.36x. Apply this multiple to EBITDA to derive an implied value of the business. See the calculation below:
EBITDA X Multiple = Value of the Business
For example, a masonry business has an EBITDA of $465,000. The valuation expert uses a 2.84x EBITDA multiple. Using the above metrics, the masonry business value is approximately $1,320,600.
$465,000 X 2.84x = $1,320,600
An EBITDA multiple measures a company’s return on investment (ROI). A valuation expert may prefer this multiple as it is normalized for differences in capital structure, taxation, and fixed assets. Normalized ratios allow for comparisons to similar businesses. Normalized ratios also more accurately represent the future earnings a buyer can expect from the business.
REV Multiple
Average REV Multiple range: 0.31x – 0.62x
According to our data, masonry businesses sell for an average 0.31x – 0.62x revenue multiple. To calculate the implied value of the business, multiply revenue or sales by the valuation multiple. The calculation is as follows.
Revenue X Multiple = Value of the Business
For instance, a mason makes $2,520,000 in revenue. It transacts on a 0.49x revenue multiple. In this case, the masonry business is worth approximately $1,234,800.
$2,520,000 X 0.49x = $1,234,800
A valuation expert will determine what multiples are most applicable to your masonry business. Often, they will weight the multiples to determine a range of value. In some cases, a revenue multiple is less relied upon. This is because it does not consider the operations of the business. Therefore, it is important to look at cash flow multiples – SDE and EBITDA multiples. Cash flow multiples consider the operations of the business and expenses that impact the cash flow. For in
Summary
When looking at valuation multiples for a masonry business, keep in mind many factors impact them. These key value drivers impact the multiple a valuation expert uses to value the masonry business. Peak Business Valuation, business appraiser, is happy to talk with you about these key factors.
As a business appraiser, Peak Business Valuation values masonry businesses across the country. We love working with masons who are looking to sell their business or buy a masonry business. Understanding the fair market value of a masonry business is crucial to successful business transactions. Questions are always welcome! Get started by scheduling your free consultation below.
Schedule Your Free Consultation Today!
