Valuation Multiples for an Optometry Clinic
Optometry clinics are responsible for examining, diagnosing, treating, and managing eye problems for patients. In addition, many optometry clinics sell glasses, contact lenses, and vision therapy. According to IBIS World’s data, there are approximately 31,000 optometry clinics in the United States. Together, these establishments have generated over $22.4 billion dollars in recent years. Moving forward, we can expect industry revenue to continue to grow. However, the optometry industry is extremely fragmented with growing competition. To succeed, it is important to understand the value of an eye clinic. This includes learning about valuation multiples for an eye clinic.
Valuing an Optometry Practice
Whether you are buying, growing, or selling an optometry clinic, it is crucial to understand the principles of valuing an optometry clinic. Doing so can help you know how to increase the value of an eye clinic. The best way to start is to receive a business valuation for an optometry clinic. If you are buying an optometry clinic, a business valuation can help in determining a fair purchase price. You may also learn about negotiation strategies as part of a business appraisal. If you are selling an eye clinic, receiving a business valuation may help you decide on a listing price.
There are various methods that experts use to determine the fair market value of an optometry clinic. A common method is the market approach which relies on valuation multiples. This article discusses valuation multiples for an eye clinic. Keep in mind, this article is only a guide and will use averages. As such, the multiples presented in this article may not apply to your optometry clinic. For more accurate information, receive a business valuation. Peak Business Valuation is happy to help! We can provide you with a business valuation and answer any questions you may have about valuing an eye clinic. Schedule a free consultation with Peak Business Valuation today!
To learn more, read Valuing an Optometry Business, How to Value an Optometry Clinic, and Value Drivers for an Optometrist.
Valuation Multiples for an Eye Clinic
The diagram below displays average market multiples for an optometry clinic. At Peak Business Valuation, we often use market multiples to value an eye clinic. It is important to note that the values below are only averages. To know what multiples apply to your optometry clinic, receive a business valuation. Peak is happy to provide you with a business valuation for an eye clinic. Schedule a free consultation with Peak today!
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?
Valuation multiples are similar to ratios because they compare two numbers. These ratios compare a clinic’s value to metrics such as cash flow, earnings, or sales. For instance, a common ratio for valuing an eye clinic is the SDE multiple. When using this valuation multiple, a business appraiser compares the seller’s discretionary earnings of the clinic to the implied value of the optometry clinic. By assessing the multiples of similar establishments that recently sold, business appraisers can determine the fair market value of an eye clinic. They then determine suitable multiples for your optometry clinic and provide a range of value.
For example, suppose an optometry clinic has $260,000 in seller’s discretionary earnings and receives a 2.02x SDE multiple. In this case, the optometry clinic has a fair market value of $525,200 ($260,000 times 2.02x). Conversely, if it receives a 2.64x multiple, the value of the optometry clinic would be $686,400 ($260,000 times 2.64x).
Peak Business Valuation is a professional business appraiser. We frequently help individuals who are buying, growing, or selling an eye clinic. In many cases, this involves using valuation multiples for an eye clinic. Below we highlight SDE, EBITDA, and REV multiples for an optometry clinic. These multiples indicate the range of values that optometry clinics often transact at. Keep in mind, the range of value can vary since each eye center is unique. To learn more about valuation multiples for an optometry clinic, receive a business appraisal with Peak. Schedule a free consultation with Peak Business Valuation today!
SDE Multiples for an Eye Clinic
Average SDE Multiple range: 1.96x – 2.67x
Optometry clinics transact at an average SDE multiple range of 1.96x – 2.67x. By applying an SDE multiple to the most recent 12-month period of earnings, valuation experts can determine an implied value of an optometry clinic. See the following equation.
SDE X Multiple = Value of the Business
For example, an eye clinic generates $332,300 in seller’s discretionary earnings. If it transacts at a 2.31x multiple, the value of the eye clinic is about $767,613.
$332,300 X 2.31x = $767,613
SDE multiples are common when determining the value of an optometry clinic. When using SDE multiples, it is important to calculate the optometry clinic’s seller’s discretionary earnings. To do so, business appraisers add back any expenses the new operator may not incur to the value of the optometry clinic. Some common add-backs include non-related or nonrecurring business expenses, a fair owner’s compensation, and personal expenses. By considering these add-backs, valuation experts can determine the cash flow potential of the optometry clinic. Knowing the cash flow potential is crucial when valuing an eye clinic.
EBITDA Multiples for an Optometry Clinic
Average EBITDA Multiple range: 2.97x – 4.06x
According to our data, optometry clinics transact at an average EBITDA multiple range of 2.97x – 4.06x. Valuation experts apply this multiple to EBITDA to determine a fair market value of the business. Refer to the calculation below.
EBITDA X Multiple = Value of the Business
For example, an optometry clinic has an EBITDA of $234,900. It transacts at an EBITDA multiple of 3.58x. In this instance, the optometry clinic is worth $840,942.
$234,900 X 3.58x = $840,942
The EBITDA multiple measures the return on investment (ROI) of an optometry clinic. Valuation experts at Peak often prefer EBITDA multiples since they help normalize differences. These multiples allow the business appraiser to compare your optometry clinic to similar businesses. Normalized ratios also provide an accurate projection of the future earnings an investor can expect to receive from an optometry clinic.
REV Multiples for an Eye Clinic
Average REV Multiple range: 0.43x – 0.75x
The average revenue multiples for an optometry clinic range between 0.43x – 0.75x. At Peak, a business appraiser determines the implied value of an optometry clinic by multiplying its revenue by the REV multiple. See the equation below.
Revenue X Multiple = Value of the Business
In this instance, an eye center makes $1,200,000 in revenue. If it transacts at a 0.62x multiple, the eye clinic is worth approximately $744,000.
$1,200,000 X 0.62x = $744,000
These multiples measure the total amount of revenue generated by an eye clinic. Keep in mind, REV multiples are less common when valuing an eye clinic. Typically, business appraisers rely on the cash flow multiples – SDE and EBITDA. However, they will use their knowledge to determine which methods and multiples are most applicable to your optometry clinic.
Summary
There are various valuation multiples for an eye clinic that business appraisers may use when valuing an optometry clinic. By understanding which multiples are applicable to your clinic, you can learn the value of an eye clinic. The first step is to receive a business valuation. During a business valuation, a business appraiser may use multiples to determine the fair market value of an optometry clinic. In addition, they may discuss the strengths and weaknesses of your eye clinic. With this information, you can take steps to increase the value of an optometry clinic.
Whether you are buying, growing, or selling an eye clinic, Peak Business Valuation is happy to help! Peak Business Valuation, business appraiser, works with optometry clinics throughout the country. We can provide you with a business valuation for an optometry clinic. In addition, Peak is here to answer any questions you \have about valuation multiples for an eye clinic. Start now by scheduling a free consultation with Peak below!
