Valuation Multiples for a Moving Company
Moving companies provide moving and relocation services for individuals, governments, and businesses. These services include local, long-distance, and international shipping of used assets. According to IBIS World, there are over 17,000 moving companies throughout the country. In recent years, these businesses have generated over $21 billion dollars in sales revenue. Moving forward, we can expect this number to increase. However, demand for moving services may suffer due to high mortgage and interest rates. To build a successful moving company, it is crucial to understand valuation multiples for a moving company. A business appraiser uses these when valuing a moving company.
Valuing a Moving Company
If you are looking to buy or sell a moving company, it is crucial to know the value of a moving company. You can start by receiving a business valuation. When buying a moving company, a business valuation can help you determine a reasonable purchase price. You may also learn about effective negotiation strategies as part of a business valuation. If you are selling a moving company, receiving a business valuation can help you maximize its value.
There are various methods that experts use to determine a moving company’s fair market value. A common method is the market approach. This approach uses valuation multiples. In this article, we give an overview of what valuation multiples for a moving company look like.
However, this article is only a guide. For more extensive guidance, receive a business valuation for a moving company. Peak Business Valuation is happy to assist! We can provide a business valuation and answer any questions you may have on the value of a moving company. Start today by scheduling a free consultation with Peak Business Valuation, business appraiser!
Valuation Multiples for a Moving Company
The following image displays average market multiples for a moving company. When valuing a moving company, an expert at Peak Business Valuation often uses multiples. However, these valuation multiples are only averages. For multiples that apply to your moving company, obtain a business valuation. Peak is happy to provide a business valuation for a moving company. Schedule a free consultation with Peak today 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 that compare a business’s value to a financial metric. These metrics can include earnings, sales, or cash flow. For instance, a common ratio in business valuation is an SDE multiple. The SDE multiple compares the seller’s discretionary earnings of the business to the implied value of the business. The valuation expert analyzes multiples of other similar moving companies that have recently sold. They then determine a multiple that is applicable to your moving company to get a range of value.
For example, suppose that a moving company has $175,000 in SDE and receives a 2.65x SDE multiple. In this case, the business would have an implied value of $463,750 ($175,000 times 2.65x). On the other hand, a 2.86x multiple would imply the value of the company would be $500,500 ($175,000 times 2.86x).
As a business appraiser, Peak Business Valuation frequently works with individuals looking to buy, expand, or sell a moving company. Below, we share a range of valuation multiples for a moving company. These multiples are what moving companies often transact at and are valued between. Keep in mind that the range of value may vary since each moving company is unique. In the following paragraphs, we discuss SDE, EBITDA, and REV multiples for moving companies. For specific information, schedule a free consultation with Peak Business Valuation, business appraiser!
SDE Multiples for a Moving Company
Average SDE Multiple range: 2.18x – 3.06x
According to Peak’s data, moving companies transact between a 2.18x – 3.06x average SDE multiple. To determine an implied value of a moving company, apply the multiple by the most recent 12-month period of revenue. The calculation is as follows.
SDE X Multiple = Value of the Business
Suppose a moving company generates $256,000 in seller’s discretionary earnings and transacts at a 2.70x multiple. In this case, the business value is about $691,200.
$256,000 X 2.70x = $691,200
SDE is a popular cash flow multiple an appraiser uses when valuing a moving company. To calculate SDE, a valuation expert takes the moving company’s profit and adds back any expenses the new owner may not incur. These may include owner’s compensation, personal transactions, and non-recurring or non-related business expenditures. Doing this allows the expert to determine the potential cash flow of the moving company. This is crucial in determining the value of a moving company.
EBITDA Multiples for Moving Companies
Average EBITDA Multiple range: 3.23x – 4.30x
Moving companies transact between an average EBITDA multiple range of 3.23x – 4.30x. Apply this multiple to EBITDA to determine an implied value of the business. See the equation below:
EBITDA X Multiple = Value of the Business
For example, a moving company has an EBITDA of $182,300. It transacts at an EBITDA multiple of 3.67x. Using the above metrics, the moving company is worth approximately $669,041.
$182,300 X 3.67x = $669,041
An EBITDA multiple helps calculate a company’s return on investment (ROI). Business appraisers may prefer using the EBITDA multiple because it helps to normalize differences. This allows comparisons to be made between similar moving companies. Normalized ratios provide an accurate representation of the future earnings a buyer can expect from a moving company.
REV Multiples for a Moving Company
Average REV Multiple range: 0.41x – 0.65x
According to our data, moving companies sell an average of 0.41x – 0.65x of revenue. A professional business appraiser can derive the implied value of the business by multiplying the amount of revenue a moving company makes by the valuation multiple. Refer to the equation below.
Revenue X Multiple = Value of the Business
For instance, a moving company makes $1,100,000 in revenue. It then transacts at a 0.58x multiple. In this case, the business is worth approximately $638,000.
$1,100,000 X 0.58x = $638,000
The REV multiple measures the total sales revenue generated by a moving company. When valuing a moving company, business appraisers assess the REV multiples of comparable moving companies that have recently sold on the open market. This analysis allows them to determine a proper multiple for your moving company. It is important to remember that REV multiples can vary based on factors such as the moving company’s location, competition, and industry demands. A revenue multiple for a moving company is less common to rely on for moving company transactions.
Summary
There are many factors to consider when using valuation multiples for a moving company. The valuation process can be complex. As such, Peak Business Valuation, business appraiser, is here to help! During a business valuation, a business appraiser will discuss factors that influence the value of a moving company. They will also determine applicable multiples. To understand the multiples for a moving company you are buying or selling, receive a business valuation. During a business valuation, you will learn about the value of a moving company and how to maximize it.
Peak Business Valuation, business appraiser, values moving companies often. At Peak, we focus on helping you buy, expand, or sell your moving company. We are happy to provide you with a business appraisal of a moving company! We can also answer any questions you may have about valuation multiples for a moving company. Start today by scheduling a free consultation with Peak Business Valuation!
For more information, see Valuing a Moving Company, How to Value a Moving Company, and Value Drivers for Moving Companies.
