Valuation Multiples for a Restoration Company
Natural disasters can leave communities devastated. In the event of an earthquake, flood, hurricane, etc, homes are destroyed and lives upended. Restoration companies can offer hope to affected areas by helping rebuild what has been lost. In addition, running a restoration company can be very rewarding. Whether you want to buy, grow, or sell a restoration company, obtaining a business valuation is critical. When performing a restoration business valuation, a business appraiser may work with valuation multiples for a restoration company. Understanding valuation multiples can give you a better understanding of your restoration company’s fair market value.
This article highlights valuation multiples commonly used to value restoration companies. Keep in mind, the numbers provided in this article are averages. For more accurate information, it is essential to obtain a restoration company valuation from a professional business appraiser.
At Peak Business Valuation, business appraiser, we regularly help individuals seeking to buy, grow, or sell a restoration company. We are happy to provide a restoration business valuation and answer any questions about valuation multiples for a restoration company. Get started today by scheduling a free consultation with Peak Business Valuation below!
Valuing a Restoration Company
Business appraisers often use the market approach to value a restoration company. This valuation approach involves using valuation multiples for a restoration company. This article discusses SDE, EBITDA, and REV multiples for restoration companies. For more information, see How to Value a Restoration Company or reach out to Peak Business Valuation!
Valuation Multiples for Restoration Companies
The image below illustrates the average range of valuation multiples for restoration companies. To discover what multiples are ideal for your restoration company, obtain a restoration company valuation. Peak Business Valuation is happy to assist you! Schedule your free consultation today!
Disclaimer: The multiples in this article are for educational purposes only. The information provided does not constitute valuation advice and does not reflect the valuation opinion of Peak Business Valuation or its valuation professionals. We recommend seeking advice from a qualified business appraiser for any matter discussed in this article.
What is a Valuation Multiple?
Valuation multiples are financial ratios that help business appraisers estimate the fair market value of a restoration company. These ratios reflect a restoration company’s value based on metrics such as earnings, cash flow, and revenue. For example, SDE multiples are commonly used when valuing a restoration company. An SDE multiple measures the implied value of a restoration company relative to its seller’s discretionary earnings.
If a restoration company generates $635,000 in seller’s discretionary earnings and receives an SDE multiple of 2.60x, the company’s estimated value would be $1,651,000 ($635,000 multiplied by 2.60x). On the other hand, with a 3.35x multiple, the restoration company would be valued at $2,129,750 ($635,000 times 3.35x).
As a professional business appraiser, Peak Business Valuation works with restoration companies across the country. As such, we work with valuation multiples on a regular basis. Below, we explore SDE, EBITDA, and REV multiples for a restoration company. Note that the ranges vary since each restoration company is different.
SDE Multiples for a Restoration Company
Average SDE Multiple Range: 2.34x – 3.55x
According to Peak Business Valuation, restoration companies typically transact at an SDE multiple between 2.34x and 3.55x. To estimate the value of a restoration company, valuation analysts multiply the company’s SDE by the appropriate multiple. The formula is as follows:
SDE X Multiple = Business Value
For example, if a restoration company generates $620,000 in seller’s discretionary earnings and sells for a 2.98x multiple, the business would be valued at approximately $1,847,600.
$620,000 X 2.98x = $1,847,600
When valuing a restoration company, Peak Business Valuation frequently uses SDE multiples. To calculate SDE, a valuation analyst adds back any expenses that may not be incurred by a new owner to the operating profit of the restoration company. This includes non-recurring or non-related expenses, fair owner’s compensation, and personal expenses. These adjustments provide a clear picture of the business’s cash flow potential. To learn more, check out Understanding Seller’s Discretionary Earnings.
EBITDA Multiples for Restoration Companies
Average EBITDA Multiple Range: 3.24x – 4.31x
Next, the average EBITDA multiples for restoration companies range from 3.24x to 4.31x. Business appraisers may use EBITDA multiples to calculate the company’s value based on earnings before interest, taxes, depreciation, and amortization. See the following equation:
EBITDA X Multiple = Business Value
For example, if a restoration company generates $515,000 in EBITDA and sells for a 3.75x multiple, the business is valued at around $1,931,250.
$515,000 X 3.75x = $1,931,250
EBITDA multiples are useful for measuring a restoration company’s return on investment (ROI). Valuation experts at Peak Business Valuation may use EBITDA multiples because they help normalize financial differences. EBITDA multiples also offer a more accurate forecast of the business’s earnings. In addition, this method allows business appraisers to compare the restoration company to similar companies in the market.
REV Multiples for a Restoration Company
Average REV Multiple Range: 0.47x – 0.93x
Finally, restoration companies transact at a revenue multiple ranging from 0.47x to 0.93x on average. To determine the value of a restoration company using a REV multiple, business appraisers multiply it by the amount of revenue a company generates.
Revenue X Multiple = Business Value
For instance, if a restoration company generates $3,000,000 in revenue and transacts at a 0.67x multiple, the restoration company’s estimated value is $2,010,000.
$3,000,000 X 0.67x = $2,010,000
While REV multiples can be useful, they are generally less reliable compared to SDE and EBITDA multiples. However, business appraisers will determine the best methods and multiples for a restoration company as part of a restoration company valuation.
Summary
If you are preparing to buy, grow, or selling a restoration company, a business valuation is a pivotal tool for decision-making. When valuing a restoration company, a business appraiser may use valuation multiples for a restoration company to estimate its value. Additionally, they will determine the restoration company’s strengths, weaknesses, risks, and growth potential. You can use this information to take the next steps toward achieving your goals in this competitive industry.
Peak Business Valuation, professional business appraiser, frequently works with restoration companies in the United States. We are here to assist you with a restoration company valuation and answer any questions you have about valuation multiples for restoration companies. Begin today by scheduling your free consultation with Peak Business Valuation below!
