Valuation Multiples for a Sporting Goods Store
The sporting goods retail industry provides athletic and outdoor apparel and equipment to a diverse customer base. With a strategic approach, a sporting goods store can be a lucrative asset to business owners. If you are looking to buy, expand, or sell a sporting goods store, it is essential to obtain a business valuation. During a business valuation, a valuation analyst applies valuation multiples for a sporting goods store. These are financial ratios that provide a reliable estimate of a sporting goods store’s value. In addition, a sporting goods store valuation provides insight into the company’s financial strengths, weaknesses, risks, and opportunities.
In this article, we outline the most common valuation multiples for a sporting goods store. It is important to note that the figures discussed in this article are industry averages and may not reflect the specifics of your store. To obtain accurate insights, it is important to connect with a qualified business appraiser.
As a professional business appraiser, Peak Business Valuation helps sporting goods store owners nationwide. We can provide a timely and accurate business valuation for a sporting goods store. Peak can also answer any questions you have about valuation multiples for a sporting goods store. Schedule a free consultation with Peak today!
Valuing a Sporting Goods Store
When valuing a sporting goods store, business appraisers rely on a variety of business valuation methods. One of the most common methods for valuing sporting goods stores is the market approach. This approach uses valuation multiples for a sporting goods store to compare similar stores on the market. Below, we highlight the most common valuation multiples for a sporting goods store. For additional information, check out How to Value a Small Business.
Valuation Multiples for Sporting Goods Stores
The image below provides a range of valuation multiples that sporting goods stores often transact at. These ranges are only general guidelines. To determine the most appropriate multiples for your sporting goods store, it is best to receive a professional business valuation. Peak Business Valuation, business appraiser, is here to help you! Schedule a free consultation with Peak to get started.
Disclaimer: These multiples are provided for educational purposes only. The information shared does not constitute professional advice, nor do these figures represent the valuation opinion of Peak Business Valuation or its experts. For personalized advice, we recommend consulting a qualified business valuation professional.
What is a Valuation Multiple?
Valuation multiples are financial ratios that indicate how much buyers are willing to pay for a sporting goods store. These multiples are often derived from key performance indicators like cash flow, earnings, or revenue. For example, Seller’s Discretionary Earnings (SDE) multiples are frequently used to value sporting goods stores.
Suppose a sporting goods store generates $550,000 in seller’s discretionary earnings. If it is valued at an SDE multiple of 2.20x, the estimated value of the store would be $1,210,000 ($550,000 x 2.20x). Similarly, if the store is valued at a 4.50x multiple, its estimated value rises to $2,475,000 ($550,000 x 4.50x).
As a business appraiser, Peak Business Valuation regularly uses valuation multiples for a sporting goods store. In the following sections, we discuss SDE, EBITDA, and revenue multiples in more detail. For further insights, read What is a Valuation Multiple?
SDE Multiples for a Sporting Goods Store
Average SDE Multiple Range: 3.01x – 3.57x
According to Peak, sporting goods stores typically transact within an SDE multiple range of 3.01x to 3.57x. To estimate the store’s value, valuation analysts multiply its SDE by the appropriate multiple. See the equation below:
SDE x Multiple = Business Value
For example, if a sporting goods store generates $600,000 in SDE and sells at a 3.35x multiple, its estimated value would be $2,010,000.
$600,000 x 3.35x = $2,010,000
To calculate SDE, business appraisers at Peak adjust the store’s operating profit to reflect its true cash flow potential. This process involves adding back non-recurring expenses, owner compensation, and discretionary expenses. These adjustments provide a more accurate picture of the store’s profitability. For more details see Understanding Seller’s Discretionary Earnings.
Peak Business Valuation is a professional business appraiser that works with sporting goods stores across the country. We are happy to help you with a sporting goods store valuation. Peak is also available to answer any questions you may have. Schedule a free consultation with Peak Business Valuation today!
EBITDA Multiples for a Sporting Goods Store
Average EBITDA Multiple Range: 3.61x – 4.65x
Sporting goods stores generally transact at an EBITDA multiple range of 3.61x to 4.65x. To determine the store’s value, valuation experts multiply its EBITDA by the applicable multiple. Refer to the calculator below:
EBITDA x Multiple = Business Value
For instance, if a sporting goods store generates $525,000 in EBITDA and is valued at a 4.15x multiple, it is worth about $2,178,750.
$525,000 x 4.15x = $2,178,750
EBITDA multiples are especially helpful in assessing the profitability of a sporting goods store. The business appraiser uses normalized ratios to compare similar stores that recently transacted.
Revenue Multiples for Sporting Goods Stores
Average Revenue Multiple Range: 0.34x – 0.55x
Lastly, sporting goods stores transact at an average revenue multiple range of 0.34x to 0.55x. The calculation is as follows:
Revenue x Multiple = Business Value
For example, if a sporting goods store generates $5,500,000 in revenue and is valued at a 0.45x multiple, its estimated value is $2,475,000.
$5,500,000 x 0.45x = $2,475,000
While revenue multiples provide valuable insights into the store’s financial performance, Peak Business Valuation often prioritizes cash flow multiples such as SDE or EBITDA. To learn more about the valuation process, check out The Valuation Process.
Summary
If you are considering buying, expanding, or selling a sporting goods store, a business valuation is a critical tool. A business valuation uses valuation multiples for a sporting goods store to determine its fair market value. Additionally, valuation analysts assess the business’s strength, weaknesses, risks, and growth opportunities. You can leverage this information to make informed decisions for your sporting goods store.
Peak Business Valuation, professional business appraiser, regularly values sporting goods stores throughout the United States. We are ready to assist you with a sporting goods store valuation and answer any questions you may have. Schedule your free consultation with Peak Business Valuation today!
