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Valuation Multiples for Automobile Wholesaling

Valuation Multiples for Automobile Wholesaling

The automobile wholesaling industry includes businesses that wholesale various automobiles. This includes automobiles, trucks, motor homes, trailers, and motorcycles. This industry does not include businesses that sell automobile parts or tires. In the U.S., there are nearly 8,800 automobile wholesale businesses. These businesses generate over $635 billion in revenue. This industry is slightly declining due to decreasing revenue, disposable income, and new car sales. Whether you are looking to buy or sell an automobile wholesale business, knowing the value of that business is key. A business valuation for an automobile wholesaling business will provide a fair market value. It also includes multiples for the automobile wholesaling business. Below we show average valuation multiples for automobile wholesaling.

Valuation multiples for automobile wholesaling are just one method an experienced business appraiser uses to determine the value of an automobile wholesaling business. For specific information about your automobile wholesaling business, schedule a free consultation. Peak Business Valuation, business appraiser, would love to help!

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Valuation Multiples for Automobile Wholesaling

Below are average valuation multiples for automobile wholesaling. Know that the information presented below is just a guide. For specific multiples for an automobile wholesale business you are buying or selling, schedule a free consultation with Peak Business Valuation, business appraiser.

Market Multiples For Automobile Wholesaling

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.

 

Valuing an Automobile Wholesale Business

When valuing an automobile wholesale business, the business appraiser will analyze many facets. This can include the company’s financial statements, key value drivers for automobile wholesaling, and how the automobile wholesale business compares to similar automobile wholesalers. Using methods such as valuation multiples for automobile wholesaling the business appraiser will determine a range of value for the automobile wholesale business. For additional information, read Valuing an Automobile Wholesale Business.

Obtaining a business valuation for buying an automobile wholesale business can help you feel confident in your business transaction. A business appraisal is also beneficial when negotiating the purchase price of the automobile wholesaling business.

If you are planning on selling an automobile wholesale business, a business appraisal can help with proper planning. This can include maximizing the value prior to selling, determining a fair listing price, and negotiating the selling price. Obtaining a business appraisal is an important aspect of selling an automobile wholesale business.

As a business appraiser, Peak Business Valuation is happy to provide a business appraisal for an automobile wholesale business. We work with hundreds of companies across the nation. We are happy to answer any questions you have about valuing an automobile wholesaling business. Whether you are buying or selling an automobile wholesale business, get started with a business valuation today by scheduling a free consultation.

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What is a Valuation Multiple?

When a business appraiser at Peak is valuing an automobile wholesale business, there are many valuation approaches they will use. One of these methods includes using valuation multiples for automobile wholesaling. Using this method and others the business appraiser will determine a fair market range of value for the automobile wholesale business.

So, what is a valuation multiple? A valuation multiple is a ratio. It compares two financial factors with each other. For instance, a common valuation multiple is the SDE multiple. The SDE multiple compares the seller’s discretionary earnings with the implied value of the business.

To illustrate this, say an automobile wholesaler makes $127,000 in seller’s discretionary earnings. If the valuation expert determines a 2.95x multiple is applicable, the implied value of the automobile wholesale business would be $374,650. Whereas if a 3.62x multiple is more appropriate, the automobile wholesale business is worth approximately $459,740.

Below we discuss how to calculate valuation multiples for automobile wholesaling. This includes SDE, REV, and EBITDA multiples for automobile wholesale. Keep in mind the ranges and numbers presented below are just a guide. As such, schedule a free consultation to learn more about the specifics of valuing an automobile wholesale business.

As a business appraiser, Peak Business Valuation values automobile wholesale businesses across the country. If you are looking to buy or sell an automobile wholesale business, we are happy to help! Schedule a free consultation today to get started!

SDE Multiples for Automobile Wholesale

Average SDE Multiple range: 2.36x – 3.39x

In Peak’s database, automobile wholesalers transact between a 2.36x – 3.39x SDE multiple. To determine the implied value of the automobile wholesale business, take SDE and multiply it by the applicable SDE multiple. See the calculation as follows.

SDE X Multiple = Value of the Business

For example, an automobile wholesale business has $415,000 in seller’s discretionary earnings. The business appraiser at Peak Business Valuation determines a 3.09x SDE multiple is applicable for the business transaction. Looking at the above calculation, the value of the automobile wholesale business is approximately $1,282,350.

$415,000 X 3.09x= $1,282,350

An automobile wholesale business is commonly valued using an SDE multiple. Cash flow multiples such as SDE and EBITDA multiples are common for small businesses to transact on. This is because they include common-add backs to the business valuation. These can include a fair owner’s compensation, any non-related or non-recurring business expenses, and personal expenses ran through the business, among others. Adding these expenses back shows the true cash flow of the business. For more information see Understanding Seller’s Discretionary Earnings.

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EBITDA Multiples for Automobile Wholesaling

Average EBITDA Multiple range: 3.61x – 4.42x

In our data, average EBTIDA multiples for automobile wholesaling range between 3.61x – 4.42x. A business appraiser determines the value of the automobile wholesale business by applying the multiple to EBTIDA. Refer to the calculation below.

EBITDA X Multiple = Value of the Business

For instance, the EBTIDA of an automobile wholesale business is $332,000. It transacts at a 4.21x EBTIDA multiple. Inserting these numbers into the above equation, the implied value of the automobile wholesaling business is $1,397,720.

$332,000 X 4.21x = $1,397,720

The EBITDA multiple measures the ROI or return on investment an individual can expect to make for the automobile wholesale business. The business appraiser may prefer the EBITDA multiple because it normalizes differences in taxation, capital structure, and fixed assets. Normalized ratios allow the business appraiser to compare similar businesses more easily. They can also more accurately represent the future earnings a buyer can anticipate making from the business.

REV Multiples for Automobile Wholesale

Average REV Multiple range: 0.23x – 1.00x

According to our numbers, automobile wholesale businesses on average sell between a 0.23x – 1.00x REV multiple. To calculate the implied value of the automobile wholesale business, use the most recent 12-month period of revenue and multiply it by the appropriate valuation multiple. The calculation is as follows:

Revenue X Multiple = Value of the Business

For instance, an automobile wholesale business makes $2.3 million in revenue. The business appraiser determines a 0.64x REV multiple is appropriate. In this case, the automobile wholesale business is worth approximately $1,472,000.

$2,300,000 X 0.66x = $1,472,000

The valuation expert will decide what valuation multiples for automobile wholesaling are most applicable to your business. In addition, the appraiser will use a variety of valuation methods to determine a range of values for your automobile wholesale business.

Summary

When looking at valuation multiples for automobile wholesaling, understand there are many factors that impact them. These include quantitative and qualitative factors. When valuing an automobile wholesale business, the business appraiser will analyze the company’s financials, operations, and key value drivers. They will then compare them to similar automobile wholesalers. Then the business appraiser determines the value of the automobile wholesale business.

Peak Business Valuation, business appraiser, would love to help you understand the value of an automobile wholesale business. We provide business appraisals for automobile wholesalers across the United States. As such, we would love to discuss with you further about valuation multiples for automobile wholesaling and how to use them. Schedule a free consultation today to learn more.

 

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