Valuation Multiples for a Print Shop
The printing industry includes companies that provide printing services to businesses and publishers. Printing services can include pre-press services, post-press services, and bookbinding. According to IBIS World, there are approximately 1,600 print shops throughout the United States. However, we can expect this number to decrease in the coming years due to declining demand for print services. In addition, industry revenue will likely decrease at a steady rate moving forward. This presents challenges for those looking to buy, grow, or sell a print shop. However, with a careful approach, you can build a successful print shop. Whether you are entering or exiting the print industry, it is important to understand valuation multiples for a print shop.
Valuing a Print Shop
Peak Business Valuation is a professional business appraiser. When valuing a print shop, Peak may use various valuation approaches. The market approach is a common method that uses valuation multiples. In this article, we highlight common valuation multiples for a print shop. However, the values provided in this article are only averages. To understand what methods and multiples are applicable to your print shop, receive a business valuation. Peak Business Valuation is happy to help. We work with various print shops across the nation. Peak can provide you with a business valuation and answer any questions you have! Schedule a free consultation with Peak Business Valuation today!
On your own, valuing a print shop can be a complicated process. In many cases, this process involves the use of valuation multiples. The best way to learn more about valuation multiples for a print shop is to receive a business valuation. Whether you are buying or selling a print shop, a business valuation comes with many benefits. For buyers, a business valuation can help you determine a fair purchase price. The business appraiser may also discuss effective negotiation strategies. If you are selling a print shop, a business appraisal can help you determine an appropriate listing price. Overall, receiving a business valuation can help you maximize the value of a print shop.
Read Valuing a Printing Shop, How to Value a Printing Company, and Value Drivers for a Print Shop to learn more.
Valuation Multiples for a Print Shop
In the following diagram, we share average valuation multiples for print shops. When valuing a print shop, Peak Business Valuation often uses the market approach. This valuation approach relies on valuation multiples to determine a fair market value. The following values are only a guide. For specific information, obtain a business appraisal for a print shop. Peak Business Valuation frequently values print shops. We are happy to provide you with a business appraisal. In addition, we can answer any questions you have about valuation multiples for a print shop. Start 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?
A valuation multiple is a ratio that compares the value of a print shop to a financial metric. This can include metrics like cash flow, earnings, or revenue. A common multiple is the SDE multiple. This valuation multiple compares the seller’s discretionary earnings to the printing shop’s implied value. To determine the fair market value of a print shop, the expert examines the multiples of similar businesses. They then identify appropriate multiples to estimate a range of value for your printing shop.
For example, a printing shop has $340,000 in SDE and receives a 2.62x SDE multiple. In this instance, the shop would have an implied value of $890,800 ($340,000 times 2.62x). Contrarily, a 3.16x multiple indicates that the value of the company is $1,074,400 ($340,000 times 3.16x).
The following sections provide an overview of SDE, EBITDA, and REV multiples for printing shops. These multiples are commonly used to value a printing shop. By using these multiples, a business appraiser can determine a range of value that your print shop may transact at. However, each printing shop is unique. As such, the range of value may vary.
SDE Multiples for a Print Shop
Average SDE multiple range: 2.60x – 3.26x
According to Peak’s data, print shops transact at an average SDE multiple of 2.60x – 3.26x. To calculate an implied value of a print shop, apply the seller’s discretionary earnings to the multiple. See the calculation below.
SDE X Multiple = Value of the Business
For instance, a print shop generates $482,000 in seller’s discretionary earnings. It transacts at a 2.80x multiple. In this example, the value of the print shop is about $1,349,600.
$482,000 X 2.80x = $1,349,600
At Peak Business Valuation, experts frequently use SDE multiples when valuing a print shop. Business appraisers calculate SDE by adding back any expenses that may not be incurred by the new owner of the print shop. These add-backs often include personal transactions, owner’s compensation, and non-recurring or non-related business expenses. By considering these factors, the expert can assess the print shop’s potential cash flow. This is crucial when determining the value of a print shop.
EBITDA Multiples for a Print Shop
Average EBITDA Multiple range: 2.99x – 3.93x
According to our data, print shops transact between an average EBITDA multiple range of 2.99x – 3.93x. To determine an implied value of the business, apply this multiple to EBITDA. Refer to the calculation below.
EBITDA X Multiple = Value of the Business
In this case, a print shop has an EBITDA of $435,000 and transacts at an EBITDA multiple of 3.63x. Using the above metrics, the print shop is worth about $1,579,050.
$435,000 X 3.63x = $1,579,050
The EBITDA multiple is commonly used to determine a print shop’s return on investment (ROI). Many valuation experts favor the EBITDA multiple since it helps normalize differences. This allows a comparison of your print shop to similar businesses. Normalized ratios provide a more accurate representation of the future earnings that a buyer can expect from a print shop.
REV Multiples for a Print Shop
Average REV Multiple range: 0.39x – 0.90x
On average, print shops sell at a REV multiple range of 0.39x – 0.90x. A business appraiser can determine the implied value of the business by multiplying the amount of sales revenue a print shop makes by the REV multiple. See the equation below for valuing a print shop:
Revenue X Multiple = Value of the Business
For example, a print shop makes $2,500,000 in revenue. It then transacts at a 0.63x multiple. In this case, the business is worth approximately $1,575,000.
$2,500,000 X 0.63x = $1,575,000
At Peak Business Valuation, our team receives thorough training. As such, they will use their expertise to determine the most appropriate methods and multiples for your print shop. Revenue multiples are less frequently used when valuing small businesses like print shops.
Summary
If you are looking to buy or sell a print shop, it is important to receive a business valuation. During a business valuation for a print shop, valuation experts often use valuation multiples for a print shop. This helps them determine the fair market value of a print shop you are buying or selling. By receiving a business valuation, you can take the next steps in maximizing the value of a print shop.
Peak Business Valuation, business appraiser, is proficient in valuing a print shop. We are happy to provide you with a business valuation for a print shop! In addition, we can answer any questions you have during a free consultation. Schedule your consultation with Peak Business Valuation today!
