Valuation Multiples for a Recreation Business
Recreation businesses are dealerships that sell boats, ATVs, RVs, and other recreational vehicles. As such, these companies play a vital role in meeting the growing demand for outdoor adventures and leisure activities. In addition, recreation businesses provide a promising opportunity for those looking to buy, grow, or sell one. If you want to succeed in this industry, the first step is to receive a business valuation. During a recreation business valuation, a valuation expert uses valuation multiples for a recreation business to determine its value. Learning about multiples can help you better understand the reasoning behind your recreation business’s value.
This article discusses valuation multiples for valuing a recreation business. Keep in mind that the metrics presented in this article are only averages. For more accurate guidance, seek a professional business valuation for a recreation business.
Peak Business Valuation is a professional business appraiser that works with individuals looking to buy, grow, or sell recreation businesses. We are happy to provide a business valuation for a recreation business. If you have any questions about the value of a recreation business or valuation multiples for a recreation business, schedule a free consultation with Peak Business Valuation today!
Valuing a Recreation Business
When valuing a recreation business, business appraisers often rely on the market approach. This approach uses multiples to estimate a recreation business’s fair market value based on market data. Below, we outline common recreation valuation multiples that Peak Business Valuation uses when assessing recreation businesses. For additional information, see our guide on Recreation Business Valuations. If you have any questions, feel free to reach out to Peak!
Valuation Multiples for Recreation Businesses
The following image shows the average range of valuation multiples for recreation businesses. To determine which multiples apply to your specific recreation business, it is essential to obtain a business valuation. Peak Business Valuation is ready to help you with a professional recreation business valuation and answer any questions you may have. Start by scheduling a free consultation with Peak Business Valuation!
Disclaimer: These multiples are for educational purposes only. The information provided does not constitute professional advice. The figures shared here do not represent the valuation opinion of Peak Business Valuation or its professionals. We recommend consulting a qualified business valuation expert for any valuation-related decisions.
What is a Valuation Multiple?
Valuation multiples are financial ratios used to determine the fair market value of a recreation business. These multiples measure the recreation business’s value by comparing it to key financial metrics like earnings, cash flow, and revenue. For instance, a common multiple in the recreation industry is the seller’s discretionary earnings (SDE) multiple.
For example, suppose a recreation business has $310,000 in SDE and is valued at a 2.75x multiple. In this case, it is worth approximately $852,500 ($310,000 times 2.75x). If the recreation business were valued at a 3.40x multiple, its estimated value would increase to $1,054,000 ($310,000 times 3.40x).
As a professional business appraiser, Peak Business Valuation frequently uses valuation multiples for valuing a recreation business. The following sections cover SDE, EBITDA, and revenue (REV) multiples for a recreation business. Please note that the value range may vary since each recreation business is unique.
SDE Multiples for a Recreation Business
Average SDE Multiple Range: 2.75x – 3.38x
Based on our database, recreation businesses typically transact at an SDE multiple ranging from 2.75x to 3.38x. Business appraisers use this multiple to estimate the fair market value of a recreation business. The formula is shown below:
SDE X Multiple = Business Value
For example, if a recreation business generates $315,000 in SDE and transacts at a 2.85x multiple, the estimated value would be $897,750.
$315,000 X 2.85x = $897,750
At Peak Business Valuation, we frequently use SDE multiples to value recreation businesses. To calculate SDE, business appraisers adjust the recreation business’s operating profit by adding back discretionary and non-recurring expenses. This adjustment helps to determine the recreation business’s actual earning potential. For more information, check out Understanding Seller’s Discretionary Earnings.
EBITDA Multiples for Recreation Businesses
Average EBITDA Multiple Range: 3.52x – 4.32x
Recreation businesses often transact between an average EBITDA multiple range of 3.52x and 4.32x. To calculate a recreation business’s fair market value based on this multiple, use the equation below:
EBITDA X Multiple = Business Value
For instance, if a recreation business generates $250,000 in EBITDA and is valued at a 3.95x multiple, the recreation business’s approximate value would be $987,500.
$250,000 X 3.95x = $987,500
EBITDA multiples help understand a recreation business’s return on investment (ROI). Valuation experts at Peak Business Valuation may use EBITDA multiples as they normalize differences in company structure, taxation, and size. This makes it easier to compare similar recreation businesses in the market.
REV Multiples for a Recreation Business
Average REV Multiple Range: 0.76x – 1.10x
Lastly, recreation businesses transact at a revenue multiple ranging from 0.76x to 1.10x. Valuation analysts can calculate a recreation business’s value by multiplying the business’s revenue by the applicable multiple:
Revenue X Multiple = Business Value
Suppose a recreation business generates $1,000,000 in revenue. If it were valued at a 0.78x multiple, the business would be worth $780,000.
$1,000,000 X 0.78x = $780,000
While revenue multiples are commonly used, they are generally less reliable than cash flow multiples. When conducting a recreation business valuation, valuation experts will assess which multiple is most applicable to your recreation business. For more details, see The Valuation Process.
Summary
If you are buying, growing, or selling a recreation business, it is important to receive a business valuation. As part of a recreation business valuation, you will learn about the strengths, weaknesses, risks, and opportunities. In addition, business appraisers use valuation multiples for a recreation business to determine its fair market value. Understanding these factors can help you take the next steps in maximizing the value of a recreation business.
Peak Business Valuation, business appraiser, works with recreation businesses across the nation. We are happy to help to provide you with a business valuation for a recreation business! In addition, we can discuss any questions on valuation multiples for a recreation business. Start now by scheduling a free consultation with Peak Business Valuation below!
