Valuation Multiples for an Apparel Wholesaler
The apparel wholesale industry includes companies that distribute clothing and accessories to midstream markets. These markets can include retailers, businesses, institutions, and exporters. According to IBIS World, there are approximately 29,000 apparel wholesalers in the United States. These businesses have struggled over the past several years for various reasons including the COVID-19 pandemic. However, as the economy recovers, we can expect healthy growth in the apparel wholesale industry. If you are looking to buy, expand, or sell an apparel wholesaler, it is beneficial to learn about valuation multiples for an apparel wholesaler. Multiples are important in valuing an apparel wholesale business.
Valuing an Apparel Wholesaler
Whether you are buying or selling an apparel wholesaler, it is important to understand the value of an apparel wholesale business. The first step is to receive a business valuation. If you are buying an apparel wholesaler, a business valuation can help you determine a fair purchase price. In addition, a business valuation can help you learn how to negotiate the purchase price. For individuals selling an apparel wholesaler, receiving a business valuation can help you maximize the value. It is also useful for determining a fair listing price.
There are various approaches that valuation experts use when determining the fair market value of an apparel wholesale business. One approach is to use valuation multiples for an apparel wholesaler. Below, we give an overview of what valuation multiples for an apparel wholesaler look like. This is only a guide, for more guidance, to receive a business valuation for an apparel wholesale business. Start now by scheduling a free consultation with Peak Business Valuation, business appraiser.
Valuation Multiples for an Apparel Wholesaler
Below are average valuation multiples for an apparel wholesaler. This diagram highlights REV, SDE, and EBITDA multiples. These numbers are only a guide. For specific guidance about an apparel wholesale business you are buying or selling, schedule a free consultation with Peak Business Valuation, business appraiser!
Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation or its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.
What is a Valuation Multiple?
A business appraiser often uses valuation multiples when determining the value of an apparel wholesaler. These values are ratios that compare your apparel wholesaler to similar apparel wholesalers that recently sold on the market. This helps the valuation expert determine an appropriate valuation multiple for your apparel wholesale business. The appraiser will then use various valuation approaches to determine a range of value for the apparel wholesaler.
A popular valuation multiple is the SDE multiple. An SDE multiple for an apparel wholesaler compares the seller’s discretionary earnings with the implied value of the apparel wholesale business. For example, the seller’s discretionary earnings of an apparel wholesaler are $175,000. When using a 2.44x SDE multiple, the implied value of an apparel wholesaler is $427,000. ($175,000 times 2.44x) On the contrary, if a 2.72x multiple is most applicable, the implied value of the apparel wholesaler is $476,000. ($175,000 times 2.72x)
Peak Business Valuation provides business appraisals for apparel wholesalers on a regular business. We frequently work with individuals who are buying, expanding, or selling an apparel wholesale company. To learn more, schedule a consultation with Peak Business Valuation below!
SDE Multiples for an Apparel Wholesaler
Average SDE Multiple range: 2.39x – 2.76x
According to Peak’s data, apparel wholesalers transact between a 2.39x – 2.76x average SDE multiple. To determine an implied value of an apparel wholesaler, apply the multiple to the seller’s discretionary earnings. The calculation is as follows.
SDE X Multiple = Value of the Business
For instance, an apparel wholesaler generates $468,000 in seller’s discretionary earnings and transacts at a 2.70x multiple. In this case, the business value is approximately $1,263,600.
$468,000 X 2.70x = $1,263,600
The seller’s discretionary earnings multiple is commonly used when valuing an apparel wholesale company. This is because SDE includes common add-backs in the business valuation. This can include any personal expenses, a fair owner’s salary, and any non-related or non-recurring business expenses.
EBITDA Multiples for an Apparel Wholesale Company
Average EBITDA Multiple range: 3.09x – 4.51x
The average EBITDA multiples for apparel wholesalers range between 3.09x – 4.51x. Apply this multiple to EBITDA to determine an implied value of the business. See the calculation below.
EBITDA X Multiple = Value of the Business
For example, an apparel wholesaler has an EBITDA of $370,000. It transacts at an EBITDA multiple of 3.86x. Using the above metrics, the apparel wholesale business is worth approximately $1,428,200.
$370,000 X 3.86x = $1,428,200
The EBITDA multiples measure the return on investment (ROI) that the operator expects to make from an apparel wholesale company. The business appraiser will determine if this multiple is applicable to your apparel wholesale business. The EBITDA multiple may be preferred because it includes normalized ratios. Normalized ratios allow the valuation expert to compare similar apparel wholesale businesses. This is because it normalizes differences in taxation, capital structure, and fixed assets. In addition, normalized ratios can more accurately determine the future earnings that a buyer can expect from the apparel wholesaler.
REV Multiples for an Apparel Wholesaler
Average REV Multiple range: 0.44x – 0.80x
According to our data, apparel wholesalers sell an average of 0.44x – 0.80x of revenue. A valuation expert can calculate the implied value of the business by multiplying the amount of revenue or sales a apparel wholesaler makes by the valuation multiple. Refer to the equation below.
Revenue X Multiple = Value of the Business
For instance, an apparel wholesaler makes $2,100,000 in revenue. It then transacts at a 0.61x multiple. In this case, the business is worth approximately $1,281,000.
$2,100,000 X 0.61x = $1,281,00
The REV multiple measures the total revenue generated by the apparel wholesaler. When valuing an apparel wholesaler, business appraisers analyze REV multiples of similar apparel wholesalers that have sold on the market. This helps the expert determine an applicable multiple for your apparel wholesaler. REV multiples may vary depending on factors such as location, competition, and industry trends. However, small businesses typically transact on cash flow multiples – SDE and EBITDA. This is because cash flow multiples consider expenses such as COGS, salaries, and rent.
Summary
There are many factors that impact the valuation multiples for an apparel wholesaler. As such, it is beneficial to receive a business valuation for an apparel wholesale company. As part of a business valuation, an appraiser at Peak Business Valuation will assess your apparel wholesaler, financial statements, and many other factors. They will then compare your business to similar apparel wholesalers. Using various business valuation approaches they will then determine a fair market value for the apparel wholesale business
Peak Business Valuation, business appraiser, values apparel wholesalers often. We are happy to provide you with a business appraisal for an apparel wholesaler. In addition, we can answer any questions you may have about valuation multiples for an apparel wholesaler. Start now by scheduling a free consultation with Peak!
See also Valuing an Apparel Wholesaler, Value Drivers for an Apparel Wholesaler, and How to Value an Apparel Wholesaler.
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