Valuation Multiples for a Tree Service Business
Tree service businesses provide a variety of services from pruning and removing trees to emergency services after storms. These businesses are essential for homeowners and commercial properties with natural landscapes. In addition, owning a tree service business can be a rewarding business venture. If you are considering buying, growing, or selling a tree service business, obtaining a professional business valuation is essential. During a business valuation, a valuation expert uses valuation multiples for a true service business to determine its fair market value. A tree service business valuation also highlights the company’s strengths, weaknesses, risks, and growth opportunities. You can leverage this assessment to take your tree service business to the next level.
In this article, we explore the most common valuation multiples for valuing tree service businesses. Please note that the multiples we discuss are only averages and may not apply to your tree service business. For applicable insights, it is important to connect with a professional business appraiser.
Peak Business Valuation is a reputable business appraiser that works with tree service businesses across the country. We can provide you with a business valuation whether you are buying, growing, or selling a tree service business! In addition, Peak can address any inquiries about valuation multiples for a tree service business. Get started by scheduling a free consultation with Peak Business Valuation below!
Valuing a Tree Service Business
When valuing a tree service business, valuation experts at Peak Business Valuation often rely on the market approach. This methodology uses valuation multiples to estimate the fair market value of the tree service business. Below, we discuss the most common valuation multiples for a tree service business. For additional information, refer to How to Value a Tree Service Business or reach out to Peak Business Valuation!
Valuation Multiples for Tree Service Businesses
The following graphic displays the average range of valuation multiples that tree service businesses sell at. Remember, these figures may not apply to your business. To determine which multiples are suitable for your tree service business, it is essential to obtain a professional valuation. Peak Business Valuation is here to help! 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 compare a tree service business’s value to financial figures like revenue, cash flow, or earnings. This forms a strong foundation for estimating the fair market value of a tree service business.
For example, suppose a tree service business reports $720,000 in SDE. If it is valued at a 2.95x multiple, it would be worth $2,124,000 ($720,000 x 2.95x). Similarly, if it is valued at a 3.85x multiple, the estimated value would increase to $2,772,000 ($720,000 x 3.85x).
At Peak Business Valuation, we specialize in performing accurate business valuations using valuation multiples. Below, we explore the use of SDE, EBITDA, and revenue (REV) multiples for a tree service business. To learn more, check out What is a Valuation Multiple?
SDE Multiples for a Tree Service Business
Average SDE Multiple Range: 3.14x – 3.64x
Tree service businesses generally transact in an SDE multiple range of 3.14x and 3.64x. Valuation analysts can calculate the tree service business’s value by applying this multiple to its seller’s discretionary earnings. See the equation below.
SDE x Multiple = Business Value
For example, if a tree service business generates $790,000 in SDE and sells at a 3.40x multiple, its estimated value is $2,686,000.
$790,000 x 3.40x = $2,686,000
To calculate SDE, Peak Business Valuation will make adjustments to the operating profit to reflect the true cash flow potential of the business. These adjustments often include adding back non-recurring expenses, personal expenses, and owner compensation. This helps provide a clearer and more accurate assessment of the tree service business’s profitability. For more information, read Understanding Seller’s Discretionary Earnings.
Peak Business Valuation, professional business appraiser, values tree service businesses around the United States. We are here to help you with a business valuation for a tree service business! Additionally, we can discuss any questions about how to value a tree service business. Schedule your free consultation with Peak by clicking the link below!
EBITDA Multiples for a Tree Service Business
Average EBITDA Multiple Range: 3.79x – 4.10x
Next, tree service businesses generally sell at EBITDA multiples ranging from 3.79x to 4.10x. To determine a tree service business’s fair market value, a business appraiser uses the following formula:
EBITDA x Multiple = Business Value
In this case, the tree service business reports $700,000 in EBITDA. If it is valued at a 3.95x multiple, its estimated value would be $2,765,000.
$700,000 x 3.95x = $2,765,000
EBITDA multiples are extremely useful for analyzing the return on investment (ROI) of a tree service business. Valuation experts may also use this multiple to compare the performance of similar businesses in the market.
Revenue Multiples for Tree Service Businesses
Average Revenue Multiple Range: 0.58x – 1.03x
Finally, according to our data, tree service businesses generally transact at revenue multiples between 0.58x and 1.03x. The equation is as follows:
Revenue x Multiple = Business Value
For instance, if a tree service business generates $3,900,000 in revenue and sells at a 0.90x multiple, its value is approximately $3,510,000.
$3,900,000 x 0.90x = $3,510,000
Revenue multiples provide useful insights into a tree service business’s total sales. However, Peak Business Valuation generally prefers cash flow multiples like SDE or EBITDA. Business appraisers will determine the most appropriate valuation method and multiples as part of the valuation process. See The Valuation Process for more guidance.
Summary
Securing a tree service business valuation is crucial if you are planning to buy, grow, or sell a tree service business. During a business valuation, valuation experts use valuation multiples for a tree service business to calculate its fair market value. In addition, they will evaluate the financial strengths and weaknesses of your tree service business. You can use these insights to maximize the value of a tree service business.
As a business appraiser, Peak Business Valuation is here to help you with a tree service business valuation! Peak is also available to discuss any questions about valuation multiples for a tree service business. Schedule your free consultation to get started today!
