Valuation Multiples for a Paint Wholesaler
The paint wholesale industry includes businesses that purchase and resell paint, special coatings, painting supplies and accessories, and wallpaper. Some of the top markets for the paint wholesale industry include other wholesalers, retailers, and automotive repair shops. According to IBIS World, there are approximately 2,700 paint wholesalers in the United States. With over 60% of the industry dominated by small businesses, the paint wholesale industry is fragmented and competitive. As such, it can be hard for smaller players to earn a sufficient portion of the market share. To succeed in this competitive industry, it is vital to learn about valuation multiples for a paint wholesaler.
Valuing a Paint Wholesaler
There are many factors to consider when valuing a paint wholesaler. During a business valuation, the business appraiser will analyze key value drivers for a paint wholesaler as well as the financial statements. Then, they compare these to similar paint wholesalers that recently sold. Using various valuation methods the business appraiser determines a fair market value for the paint wholesaler.
If you are looking to buy a paint wholesaler, a business appraisal can help you determine a fair purchase price. For individuals who are selling a paint wholesale business, a business valuation can help determine the listing price. Receiving a business valuation is also key to maximizing the value of a paint wholesaler.
Peak Business Valuation is a professional business appraiser. We are happy to value a paint wholesaler. We can also answer any questions you may have about valuing a paint wholesaler. Reach out by scheduling a free consultation with Peak Business Valuation!
Valuation Multiples for a Paint Wholesaler
The diagram below shows average valuation multiples for paint wholesalers. It is important to note that these numbers are just a guide. To learn what multiples are applicable to your transaction, it is best to receive a business valuation. This diagram shows REV, SDE, and EBITDA multiples for paint wholesalers. For more information, schedule a free consultation with Peak Business Valuation, business appraiser.
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?
Peak Business Valuation, business appraiser, is proficient in valuing paint wholesalers. During the valuation process, we commonly use valuation multiples for paint wholesalers. This is a popular valuation approach to determine the value of a paint wholesaler. A valuation multiple is a ratio that compares your paint wholesaler with a paint wholesaler that recently sold on the market. For example, the SDE multiple is a common valuation multiple an appraiser uses when valuing a paint wholesaler. The SDE multiple compares the seller’s discretionary earnings and the implied value of the paint wholesaler.
Suppose the seller’s discretionary earnings of a paint wholesaler are $310,000. If the paint wholesaler transacts at a 2.96x SDE multiple, then the implied value of the paint wholesaler is $917,600. Contrarily, the business appraiser may determine a 3.87x SDE multiple is most applicable to the paint wholesaler. In this example, the implied value of the paint wholesaler is approximately $1,119,700.
When using multiples for a paint wholesaler, a business appraiser will assess the operations of your paint wholesaler. They then compare these to similar paint wholesalers that recently sold on the market. Using this method the valuation expert determines a range of value for the paint wholesaler.
Peak Business Valuation, business appraiser, is happy to provide a business valuation for a paint wholesaler. Understanding the value of a paint wholesaler is important whether you are buying, growing, or selling a paint wholesaler. Schedule a free consultation with Peak today to learn more!
SDE Multiples for Paint Wholesaling
Average SDE Multiple range: 2.81x – 4.31x
According to Peak’s data, paint wholesalers transact between a 2.81x – 4.31x average SDE multiple. To determine an implied value of a paint wholesaler, apply the multiple by the most recent 12-month period of revenue. The calculation is as follows.
SDE X Multiple = Value of the Business
For instance, a paint wholesaler generates $273,000 in the seller’s discretionary earnings and transacts at a 3.50x multiple. In this case, the business value is approximately $955,500.
$273,000 X 3.50x = $955,500
It is common for paint wholesalers to transact on an SDE multiple. To determine the seller’s discretionary earnings of a paint wholesaler an expert takes the following steps. First, they take the wholesaler’s operating profit and add back expenses that a new owner may not incur. Some of the common add-backs to a business valuation include personal expenses and non-related or non-recurring business expenses. Additionally, a fair owner’s compensation may be adjusted. For more information, see Understanding Seller’s Discretionary Earnings.
EBITDA Multiples for a Paint Wholesaler
Average EBITDA Multiple range: 3.20x – 4.16x
The average EBITDA multiples for a paint wholesaler range between 3.20x – 4.16x. Apply this multiple to EBITDA to determine an implied value of the business. See the calculation below.
EBITDA X Multiple = Value of the Business
For example, a paint wholesaler has an EBITDA of $205,000. It transacts at an EBITDA multiple of 3.66x. Using the above metrics, the paint wholesaler is worth approximately $750,300.
$205,000 X 3.66x = $750,300
EBITDA multiples for a paint wholesaler measure return on investment (ROI) that an operator can expect to make from the business. This multiple is often used because it normalizes differences in fixed assets, capital structure, and taxation. Normalized ratios make it easier for a business appraiser to compare similar paint wholesalers.
REV Multiples for Paint Wholesaling
Average REV Multiple range: 0.39x – 1.10x
According to our data, paint wholesalers sell an average of 0.39x – 1.10x of revenue. A valuation expert can calculate the implied value of the business by multiplying the amount of revenue a paint wholesaler makes by the REV multiple. Refer to the equation below.
Revenue X Multiple = Value of the Business
For instance, a paint wholesaler makes $1,200,000 in revenue. It then transacts at a 0.73x multiple. In this case, the business is worth approximately $876,000.
$1,200,000 X 0.73x = $876,000
As part of the business valuation process, the valuation expert determines what methods and multiples for paint wholesalers are most applicable. Typically, a business appraiser uses various methods to determine the fair market value of a paint wholesaler. Often, cash flow multiples – SDE and EBITDA – are most applicable because they consider expenses that impact cash flow. These can include salaries, other expenses, and COGS.
Summary
Understanding the above valuation multiples help you determine the value of a paint wholesaler. Keep in mind the above valuation multiples are only averages. For specific information, receive a business valuation. During a valuation, a business appraiser will analyze the financial statements, key value drivers for paint wholesalers, and several other factors. The business appraiser can determine proper market multiples for your paint wholesaler by comparing these metrics to similar paint wholesalers.
Peak Business Valuation, business appraiser, regularly provides business appraisals for paint wholesalers. We are happy to answer any questions you may have on valuing a paint wholesaler. For more guidance on valuation multiples for a paint wholesaler you are buying or selling, receive a business valuation. Start now by scheduling a free consultation with Peak below!
See also Valuing a Paint Wholesaler, Value Drivers for Paint Wholesalers, and How to Value a Paint Wholesaler.
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