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Valuation Multiples for an Auto Detailing Business

Valuation Multiples for an Auto Detailing Business

Businesses in the auto detailing industry offer thorough cleaning, washing, and waxing for passenger cars, trucks, vans, and trailers. This often includes hand washing and waxing of the vehicle’s exterior and detailed interior cleaning. According to IBIS World, there are about 56,000 auto detailing and car wash businesses in the United States. In recent years, these businesses have generated $14.6 billion dollars in sales revenue. However, this amount represents a decrease in the auto detailing and car wash industry. This is due to factors such as intense competition, industry volatility, do-it-yourself trends, etc… These conditions present challenges for individuals looking to buy, expand, or sell an auto detailing business. Whether you are entering or exiting the auto detailing and car wash industry, it is important to know the value of an auto detailing business. You can start by learning about valuation multiples for an auto detailing business. 

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Valuing an Auto Detailing Business

When valuing an auto detailing business, there are many factors to consider. This can be a complex process. The best way to learn the principles of valuing an auto detailing business is to receive a business appraisal. If you are looking to buy an auto detailing business, a business appraisal can help you determine a reasonable purchase price. If you are selling an auto detailing business, a business appraiser can help you set a fair listing price. In addition, business appraisers may identify the strengths and weaknesses of your auto detailing business during a business appraisal. This information can help you take steps to increase the value of an auto detailing business

There are various valuation approaches that a valuation expert may use during an appraisal. Often, business appraisers use valuation multiples as part of the valuation process. In this article, we highlight valuation multiples for an auto detailing business. It is important to note that this article is only a guide and this information may not apply to your business. For specific information, receive a business valuation. To learn more about the value of an auto detailing business, see Valuing an Auto Detailing Business, Value Drivers for an Auto Detailing Business, and How to Value an Auto Detailing Business.

Peak Business Valuation, business appraiser, works with auto detailing businesses on a regular basis. We are passionate about helping small business owners find success. Peak can provide you with a business valuation for an auto detailing business. Additionally, we welcome any questions you may have about valuation multiples for an auto detailing business. Schedule your free consultation with Peak Business Valuation today! 

Valuation Multiples for an Auto Detailing Business

The following image displays common market multiples for auto detailing businesses. Keep in mind, these numbers are only averages. As such, they may not be suitable for your auto detailing business. To learn what multiples are applicable to your business, receive a business valuation. Peak Business Valuation is happy to help! Schedule a free consultation with Peak Business Valuation now! 

Valuation Multiples For An Auto Detailing Business

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.

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What is a Valuation Multiple? 

Valuation multiples are ratios that compare the value of a business to a financial metric. These metrics may include cash flow, earnings, or sales. For instance, the SDE multiple is common when valuing small businesses. This valuation multiple compares the seller’s discretionary earnings of an auto detailing business to its implied value. During a business valuation, an appraiser considers the multiples of similar auto detailing businesses that recently sold. By applying an appropriate multiple to your auto detailing business, they can determine a fair market range of value

For example, an auto detailing business has $126,000 in seller’s discretionary earnings and receives a 2.42x SDE multiple. In this example, the business is worth approximately $304,920 ($126,000 times 2.42x). On the other hand, if it receives a 3.96x multiple the value of the auto detailing business would be about $498,960 ($126,000 times 3.96x).

Peak Business Valuation, business appraiser, often helps individuals who are looking to buy or sell an auto detailing business. When valuing an auto detailing business, this often involves working with valuation multiples for an auto detailing business. In the following paragraphs, we share a range of valuation multiples that auto detailing businesses often transact at. The range of value may vary depending on the business, since each is unique. Below, we highlight SDE, EBITDA, and REV multiples for auto detailing businesses. 

SDE Multiples for an Auto Detailing Business

Average SDE Multiple range: 2.39x – 4.23x

According to Peak’s data, auto detailing businesses receive an average SDE multiple within the range of 2.39x – 4.23x. Business appraisers determine the value of an auto detailing business by multiplying the seller’s discretionary earnings by the multiple. The calculation is as follows. 

SDE X Multiple = Value of the Business

For example, an auto detailing business generates $199,000 in SDE. If it transacts at a 3.44x multiple, the value of the auto detailing business is worth about $684,560. 

$199,000 X 3.44x = $684,560

Business appraisers at Peak Business Valuation often use SDE multiples when valuing an auto detailing business. To calculate the seller’s discretionary earnings of the business, valuation experts add back any expenses the new operator may not incur to the operating profit of the business. Common add-backs may include the owner’s compensation, personal expenses, and non-related or non-recurring business expenses. This allows the business appraiser to estimate the cash flow potential of the auto detailing business. This is important when determining the value of an auto detailing business. 

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EBITDA Multiples for Auto Detailing Businesses

Average EBITDA Multiple range: 3.59x – 6.88x

The average auto detailing business transacts between an EBITDA multiple range of 3.59x – 6.88x. Valuation experts multiply this number to the business’s EBITDA to determine its fair market value. See the equation below. 

EBITDA X Multiple = Value of the Business

For instance, an auto detailing business has an EBITDA of $162,000. If it transacts at an EBITDA multiple of 5.35x, the auto detailing business is worth $866,700. 

$162,000 X 5.35x = $866,700

Valuation analysts use the EBITDA multiple to measure an auto detailing business’s return on investment (ROI). Business appraisers may use EBITDA multiples for auto detailing businesses since they help normalize differences. This allows the business appraiser to compare your auto detailing business to similar businesses. Normalized ratios also provide an accurate forecast of the future earnings an investor can expect from an auto detailing business.

REV Multiples for an Auto Detailing Business

Average REV Multiple range: 0.47x – 1.08x

Auto detailing businesses transact at an average revenue multiple range of 0.47x – 1.08x. Business appraisers can determine the implied value of an auto detailing business by multiplying the most recent 12-months of revenue by the REV multiple. Refer to the following equation. 

Revenue X Multiple = Value of the Business

For example, an auto detailing business generates $724,000 of revenue and transacts at a 0.84x multiple. Here, the auto detailing business is worth approximately $608,160. 

$724,000 X 0.84x = $608,160

The REV multiple evaluates the total amount of revenue an auto detailing business generates. Please note that REV multiples are less common when valuing an auto detailing business. At Peak Business Valuation, appraisers generally use the cash flow multiples – SDE and EBITDA. However, our valuation analysts use their expertise to determine suitable methods and multiples for your auto detailing business. 

Summary

Business appraisers often use valuation multiples to determine the fair market value of an auto detailing business. The valuation multiple the appraiser uses depends on various factors. By receiving a business valuation, you can learn which valuation methods and multiples are best for your auto detailing business. In addition, business appraisers can help you understand how to maximize the value of your auto detailing business during a business valuation. This is ideal for those looking to buy, expand, or sell an auto detailing business

Peak Business Valuation is a reputable business appraiser for valuing an auto detailing business. We work with many auto detailing businesses throughout the country. Peak is happy to help you by providing you with a business valuation for an auto detailing business. We can also answer any questions about valuation multiples for an auto detailing business. Start now by scheduling a free consultation with Peak Business Valuation below! 

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