Valuation Multiples for a Travel Agency
The travel industry plays a vital role in the global economy, generating trillions of dollars each year. As such, running a travel agency can be lucrative. Whether you are buying, growing, or selling a travel agency, it is beneficial to receive a business valuation for a travel agency. During a travel agency valuation, valuation analysts often utilize valuation multiples to determine a fair market value. These are key metrics that can help you better understand the financial health of a travel agency.
In this article, we explore the most common valuation multiples for travel agencies It is important to note that the figures shared here are just averages. To know which multiples apply to your agency, it is best to obtain a travel agency valuation.
As a business appraiser, Peak Business Valuation can help you with a business valuation whether you are looking to buy, expand, or sell a travel agency. In addition, we can answer any questions you have on the valuation multiples for a travel agency. Start today by scheduling a free consultation with Peak Business Valuation below!
Valuing a Travel Agency
When valuing a travel agency, valuation experts frequently use the market approach. This method estimates a travel agency’s fair market value based on industry benchmarks and valuation multiples. Below, we discuss some of the most popular valuation multiples for travel agencies. For more details, see How to Value a Travel Agency or reach out to Peak with any questions.
Valuation Multiples for Travel Agencies
The chart below shows the average valuation multiples for travel agencies. Consider receiving a professional valuation for a more accurate understanding of which multiples apply to your business. Peak Business Valuation, business appraiser, is happy to help you with a travel agency valuation and answer any questions. Start by scheduling a free consultation with Peak Business Valuation today!
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 a key tool in determining the fair market value of a travel agency. These financial ratios compare the agency’s value to financial performance metrics like earnings, revenue, and cash flow. A common travel agency valuation multiple is the seller’s discretionary earnings (SDE) multiple.
For example, if a travel agency has $425,000 in SDE and is valued at a 2.30x multiple, the business’s estimated value would be $977,500 ($425,000 times 2.30x). On the other hand, if it transacts at a 3.25x multiple, the value would be about $1,381,000 ($425,000 times 3.25x).
As a professional business appraiser, Peak Business Valuation frequently works with valuation multiples for travel agencies. The following sections discuss SDE, EBITDA, and REV multiples for a travel agency. Keep in mind that the valuation range will vary from agency to agency.
SDE Multiples for a Travel Agency
Average SDE Multiple Range: 2.31x – 3.24x
According to Peak Business Valuation’s database, travel agencies transact at an SDE multiple between 2.31x and 3.24x. Business appraisers use this multiple to determine the fair market value of a travel agency. The formula is as follows:
SDE X Multiple = Business Value
For instance, if a travel agency generates $450,000 in SDE and transacts at a 2.74x multiple, the business value would be worth $1,233,000:
$450,000 X 2.74x = $1,233,000
Peak Business Valuation regularly uses SDE multiples when valuing travel agencies. To calculate SDE, business appraisers adjust the operating profit by adding back discretionary or one-time expenses. This provides a more accurate view of the travel agency’s earning potential. For more information on SDE multiples for a travel agency, refer to Understanding Seller’s Discretionary Earnings.
EBITDA Multiples for a Travel Agency
Average EBITDA Multiple Range: 3.35x – 4.11x
On average, travel agencies transact at an EBITDA multiple between 3.35x and 4.11x. This multiple is applied to the agency’s EBITDA to estimate its value:
EBITDA X Multiple = Business Value
For example, a travel agency generating $365,000 in EBITDA might be valued at $1,449,050 if it transacts at a 3.97x multiple:
$365,000 X 3.97x = $1,449,050
EBITDA multiples measure a travel agency’s return on investment (ROI). Valuation analysts at Peak Business Valuation often use EBITDA multiples to provide standardized financial metrics. This makes it easier to compare your travel agency to similar businesses on the market.
REV Multiples for a Travel Agency
Average REV Multiple Range: 0.40x – 0.90x
Lastly, travel agencies generally transact at a revenue multiple ranging from 0.40x to 0.90x. Valuation analysts may use this multiple to determine the value of a travel agency by multiplying its revenue by the appropriate multiple:
Revenue X Multiple = Business Value
If a travel agency generates $2,300,000 in revenue and transacts at a 0.62x multiple, the estimated value would be $1,426,000:
$2,300,000 X 0.62x = $1,426,000
Although revenue multiples are useful, they are generally less reliable than earnings-based multiples like SDE or EBITDA. During the valuation process, business appraisers will assess which valuation multiples for a travel agency are most suitable. For more information, check out The Valuation Process.
Summary
If you are planning to buy, grow, or sell a travel agency, it is beneficial to receive a travel agency valuation. When valuing a travel agency, business appraisers use valuation multiples for a travel agency to determine its fair market value. In addition, you will learn about the strengths, weaknesses, risks, opportunities, and growth potential of a travel agency. This information is vital if you want to maximize the value of a travel agency.
Peak Business Valuation works with travel agencies across the United States. We can offer you a business valuation for a travel agency and answer your questions on how to value a travel agency. Get started today by scheduling a free consultation with Peak Business Valuation below!
