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Valuation Multiples for an Auto Parts Store

Valuation Multiples for an Auto Parts Store

Auto parts stores within the United States sell auto parts and accessories, as well as repair automobiles and install automotive accessories. This industry is slowly growing as the average age of vehicles and vehicle miles increases. With over 43,000 auto parts stores in the U.S., this industry generates nearly $77 billion in revenue. With consistent demand, auto parts stores can be excellent investments. As such, each year there are dozens of transactions of auto parts stores. If you are looking to buy or sell an auto parts store, the first place to start is with a business valuation for an auto parts store. A business valuation will determine a fair market value for the auto parts store. Valuation multiples are just one method an experienced business appraiser uses to determine the value of an auto parts store.

Below we detail average valuation multiples for an auto parts store and how a business appraiser uses them. Keep in mind the information in this article is for educational purposes. For specific information about valuing an auto parts store you are buying or selling, schedule a free consultation.

Peak Business Valuation, business appraiser, values auto parts stores on a regular basis. We are happy to answer your questions about valuing an auto parts store. Get started today by scheduling a free consultation.

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Valuing an Auto Parts Store

When valuing an auto parts store, a business appraiser looks at many factors. Some of these factors include financials such as profitability, key partnerships, and customer channels, among others. These are key value drivers for an auto parts store. The business appraiser will also analyze the auto parts store’s financial statements and compare them to similar auto parts stores. Using methods such as valuation multiples for an auto parts store they will determine a fair market value. For more information, check out How to Value an Auto Parts Store, Value Drivers for Auto Parts Stores, as well as Valuing an Auto Parts Store.

If you are planning on buying an auto parts store, obtaining a business valuation for the auto parts store can help you feel confident in your business purchase. In addition, a business appraisal is useful for negotiating a fair purchase price.

If you are preparing to sell an auto parts store, a business appraisal can help you maximize the value. It is also a useful tool for determining a fair listing price. Many businesses don’t sell because of a lack of preparation or listing too high. A business appraisal can assist in understanding many important aspects of selling an auto parts store.

Whether you are buying or selling an auto parts store, a business appraisal is key to understanding the value of the auto parts store. As a business appraiser, Peak Business Valuation is happy to help. We would love to answer any questions you have about valuing an auto parts store and valuation multiples for an auto parts store. Start your business valuation today by scheduling your free consultation!

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Valuation Multiples for an Auto Parts Store

The image below shows average valuation multiples for an auto parts store. Know that the numbers below are only a guide. For specific information about an auto parts store you are looking to buy or sell, schedule a free consultation with Peak Business Valuation, business appraiser.

Valuation Multiples For An Auto Parts Store

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?

When a business appraiser is valuing an auto parts store there are many valuation methods they will use. One of these methods involves using valuation multiples for an auto parts store. Using a variety of methods will determine a range of fair market values for the auto parts store. A valuation multiple is an equation or ratio. It compares two factors to each other.

For instance, a common valuation multiple in business valuation is the SDE multiple. The SDE multiple for an auto parts store compares the seller’s discretionary earnings with the implied value of the auto parts store. To illustrate, say an auto parts store has $219,000 in the seller’s discretionary earnings. If the valuation expert uses a 2.64x SDE multiple, the auto parts store’s implied value is $578,160. Whereas if a 3.16x SDE multiple is applicable, the implied value of the auto parts store would be $692,040.

As a business appraiser, Peak Business Valuation provides business appraisals for auto parts stores across the country. If you are looking to buy or sell an auto parts store, we would be happy to help. Schedule a free consultation today!

Below we describe how to calculate valuation multiples for an auto parts store. This includes using SDE, REV, and EBITDA multiples for an auto parts store. Keep in mind the ranges below are significant. As such, schedule a free consultation to learn more about the specifics of valuing your auto parts store.

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SDE Multiples for an Auto Parts Store

Average SDE Multiple range: 2.56x – 3.20x

In Peak’s data, auto parts stores commonly transact between a 2.56x – 3.20x SDE multiple. To calculate the implied value of the auto parts store, multiply SDE by the applicable SDE valuation multiple. See the calculation below.

SDE X Multiple = Value of the Business

For example, an auto parts store makes $267,000 in the seller’s discretionary earnings. The business appraiser determines a 2.87x SDE multiple is applicable to this business transaction. Using the above calculation, the value of the auto parts store is approximately $766,290.

$267,000 X 2.87x= $766,290

An auto parts store is commonly valued using an SDE multiple. The SDE multiple is a common cash flow multiple small businesses transact on. This is because it adds back common expenses a new owner may not incur. Common add-backs to the business valuation include a fair owner’s compensation, non-recurring or non-related business expenses, and any personal expenses ran through the business, in addition to others. This is how the business appraiser determines the seller’s discretionary earnings.

 

EBITDA Multiples for an Auto Parts Store

Average EBITDA Multiple range: 3.52x – 4.60x

In our data, the average EBITDA multiples for an auto parts store fall between 3.52x – 4.60x. A business appraiser determines the value of an auto parts store by applying an applicable multiple to EBITDA. Refer to the calculation as follows:

EBITDA X Multiple = Value of the Business

For instance, the EBITDA of an auto parts store is $196,000. It transacts at a 3.98x EBITDA multiple. Inputting these numbers into the above equation, the auto parts store has a value of approximately $780,080.

$196,000 X 3.98x = $780,080

An EBITDA multiple measures the return on investment or ROI an investor can expect to make from the company. A business appraiser may prefer the EBITDA multiple because it uses normalized ratios. Normalizing differences in capital structure, taxation, and fixed assets allows the business appraiser to compare similar businesses. In addition, normalized ratios can more accurately represent the future earnings a buyer can expect from the company.

 

REV Multiples for an Auto Parts Store

Average REV Multiple range: 0.38x – 0.60x

In Peak’s database, auto parts stores on average sell between a 0.38x – 0.60x REV multiple. To calculate the implied value of the auto parts store, take the most recent 12-month period of revenue and multiply it by the valuation multiple. See the calculation that follows.

Revenue X Multiple = Value of the Business

For instance, an auto parts store makes $1,665,000 in revenue. If the business appraiser determines a 0.49x REV multiple is applicable, the implied value of the auto parts store is $815,850.

$1,665,000 X 0.49x = $815,850

The valuation expert will determine what valuation multiples for an auto parts store are applicable to your business. In addition, the business appraiser will use a variety of methods to determine a range of values for your auto parts store.

Summary

When you review valuation multiples for an auto parts store, know that many factors impact them. When a business appraiser is valuing an auto parts store, they will analyze company financials, and qualitative factors, and compare them to similar auto parts stores. Using various valuation approaches they will then determine a fair market value for the auto parts store.

As a business appraiser, Peak Business Valuation provides business appraisals for auto parts stores across the country. We would love to talk with you more about how to value an auto parts store. Schedule a free consultation today for more information!

 

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