Valuation Multiples for a Veterinary Clinic
Veterinary clinics provide essential healthcare services for pets and animals. This typically includes a wide range of offerings from vaccinations to surgical procedures and emergency care. Owning a veterinary care clinic can be a fulfilling and profitable business opportunity. Whether you plan to buy, grow, or sell a veterinary clinic, obtaining a professional business valuation is a crucial step. During a business valuation, business appraisers often use valuation multiples for a veterinary clinic. This provides an accurate assessment of the business’s fair market value. In addition, valuation experts highlight critical factors that impact a veterinary clinic’s value and growth potential. This information can help you take vital steps to maximize the value of a veterinary clinic.
In this article, we discuss the most common valuation multiples for a veterinary clinic. Keep in mind that the values we highlight are just industry averages. For accurate insights, it is essential to work with a business appraiser.
As a professional business appraiser, Peak Business Valuation frequently helps individuals who are buying, growing, or selling veterinary clinics. We are here to help you with a business valuation for a veterinary clinic! Additionally, Peak can answer any questions you may have about valuation multiples for a veterinary clinic. Schedule a free consultation with Peak Business Valuation below!
Valuing a Veterinary Clinic
When valuing a veterinary clinic, business valuation experts may use a variety of valuation approaches. At Peak, we frequently use the market approach. This approach uses valuation multiples to estimate a veterinary clinic’s value based on similar companies in the market. Below, we outline the most common valuation multiples for a veterinary clinic. For additional information, refer to How to Value a Veterinary Clinic.
Valuation Multiples for Veterinary Clinics
The following graphic represents the average range of valuation multiples for veterinary clinics. It is important to note that these figures may not apply to your clinic. To determine the most appropriate multiples for your veterinary clinic, it is best to obtain a professional business valuation. Peak Business Valuation is here to help! Schedule your free consultation with Peak Business Valuation to begin a veterinary clinic valuation!
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 reflect the price buyers are willing to pay for a certain business. These ratios are determined by assessing trends in the open market. In addition, multiples are often based on cash flow, earnings, or sales. For example, Seller’s Discretionary Earnings (SDE) multiples are common for valuing a veterinary clinic.
Suppose a veterinary clinic has $240,000 in seller’s discretionary earnings. If it receives an SDE multiple of 1.50x, the clinic’s estimated value is $360,000 ($240,000 x 1.50x). This indicates that most buyers will accept a purchase price 1.5 times more than the clinic’s SDE. If the same veterinary clinic receives a 3.20x multiple, its estimated value increases to $768,000 ($240,000 x 3.20x).
At Peak Business Valuation, we specialize in calculating the fair market value of a veterinary clinic using valuation multiples. Below, we explore SDE, EBITDA, and revenue (REV) multiples for a veterinary clinic. For additional insights, refer to What is a Valuation Multiple? or reach out to Peak Business Valuation today!
SDE Multiples for a Veterinary Clinic
Average SDE Multiple Range: 2.32x – 2.85x
According to Peak’s data, veterinary clinics often transact within an SDE multiple range of 2.32x to 2.85x. Business appraisers calculate the value of a veterinary clinic by applying the multiple to its seller’s discretionary earnings.
SDE x Multiple = Business Value
For example, if a veterinary clinic generates $320,000 in SDE and sells at a 2.55x multiple, it would be worth about $816,000.
$320,000 x 2.55x = $816,000
To determine SDE, Peak Business Valuation adjusts operating profit to reflect the true cash flow potential of the clinic. These adjustments include adding back non-recurring expenses, personal expenses, and owner compensation. This provides a more accurate estimate of the clinic’s profitability. For more details, see Understanding Seller’s Discretionary Earnings.
Peak Business Valuation is a professional business appraiser that works with veterinary clinics nationwide. We can assist you with a veterinary clinic valuation and answer any questions you may have. Schedule a free consultation by clicking below!
EBITDA Multiples for a Veterinary Clinic
Average EBITDA Multiple Range: 3.48x – 4.30x
On average, veterinary clinics transact at an EBITDA multiple ranging between 3.48x and 4.30x. A valuation analyst can apply this multiple to the veterinary clinic’s EBITDA to calculate its fair market value. The formula is as follows:
EBITDA x Multiple = Business Value
For instance, if a veterinary clinic generates $215,000 in EBITDA and is valued at a 3.85x multiple, its estimated value would be $827,750.
$215,000 x 3.85x = $827,750
EBITDA multiples are particularly useful for analyzing the return on investment (ROI) of a veterinary clinic. Additionally, business appraisers may use this multiple to compare the performance of similar clinics in the market.
Revenue Multiples for Veterinary Clinics
Average Revenue Multiple Range: 0.55x – 0.85x
Based on industry data, veterinary clinics typically transact within a revenue multiple range of 0.55x to 0.85x. See the equation below:
Revenue x Multiple = Business Value
If a veterinary clinic generates $1,100,000 in revenue and is valued at a 0.70x multiple, it could likely be sold for $770,000.
$1,100,000 x 0.70x = $770,000
Revenue multiples provide an assessment of a veterinary clinic’s total sales performance. However, Peak Business Valuation generally prioritizes cash flow multiples such as SDE or EBITDA. Read The Valuation Process to learn more.
Summary
A business valuation is essential if you are looking to buy, grow, or sell a veterinary clinic. Business appraisers often utilize valuation multiples for a veterinary clinic to accurately determine its fair market value. The valuation process also includes an assessment of a clinic’s strengths, weaknesses, risks, and opportunities. With this information, you can take strategic steps to enhance the value and performance of your veterinary clinic.
As a business appraiser, Peak Business Valuation is here to help you with a veterinary clinic valuation! We can also answer any questions about valuation multiples for a veterinary clinic. Schedule your free consultation with Peak Business Valuation today!
