Valuation Multiples for Dry Cleaning
The dry cleaning industry includes businesses that provide dry cleaning and laundering services. Throughout the United States, there are over 28,500 dry cleaning businesses. To stand out in this industry many dry cleaning businesses provide drop-off and pick-up sites to increase customer convenience. In addition, dry cleaning businesses can stand out from the competition by offering specialty dry cleaning services. These and other value drivers for a dry cleaning business impact the value. When a business appraiser is valuing a dry cleaning business, they often use valuation multiples for dry cleaners. This is one method to determine the fair market value of a dry cleaning business.
Below we walk you through valuation multiples for dry cleaning. Keep in mind the below numbers are only a guide. As a business appraiser, Peak Business Valuation provides business appraisals for dry cleaners across the country. We are happy to answer your questions about valuing a dry cleaning business. For specific multiples for your dry cleaning business, obtain a business valuation. Get started today by scheduling a free consultation below!
Valuing a Dry Cleaning Business
When a business appraiser is valuing a dry cleaning business, they consider many factors. This includes the above ones we mentioned in addition to economic factors, customer concentration, and SEO among others. The business appraiser will analyze key value drivers for a dry cleaning business and the financial statements. They then compare these to similar dry cleaning businesses that recently sold. Using various valuation methods the business appraiser determines a fair market value of the dry cleaning business.
If you plan on buying a dry cleaning business a business appraisal is an important part of the due diligence process. Whereas, if you are selling a dry cleaning business a business valuation can help determine the listing price. It is also a helpful tool for maximizing the value of a business. Whether buying or selling a dry cleaning business, a business valuation can help you negotiate a fair purchase price.
Peak Business Valuation, business appraiser, is happy to value a dry cleaning business. We can answer questions on valuing a dry cleaning business through a consultation call. Reach out by scheduling a free consultation. For more information take a look at Valuing a Dry Cleaning Business, Value Drivers for a Dry Cleaning Business, and How to Value a Dry Cleaning Business.
Valuation Multiples for Dry Cleaning
The below diagram shows average valuation multiples for dry cleaning businesses. Know that these numbers are just a guide. It is best to obtain a business appraisal for your dry cleaning business to know what multiples are applicable to your transaction. The visual shows REV, SDE, and EBITDA multiples for dry cleaning businesses. For specific information, please schedule a 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?
As a business appraiser at Peak Business Valuation is an expert at valuing a dry cleaning business. As we do so, we commonly use valuation multiples for dry cleaners. This is one valuation approach to determine the value of a dry cleaning business. A valuation multiple is a ratio. It compares two factors. The SDE multiple is a common valuation multiple an appraiser uses when valuing a dry cleaning business. The SDE multiple compares the seller’s discretionary earnings and the implied value of the dry cleaning business.
For instance, the seller’s discretionary earnings of a dry cleaning business are $230,000. If the dry cleaning business transacts at a 2.31x SDE multiple, then the implied value of the dry cleaning business is $531,300. On the other hand, the business appraiser may determine a 2.67x SDE multiple is most applicable to the dry cleaning business. In this instance, the implied value of the dry cleaning business is approximately $614,100.
When using multiples for dry cleaning, a business appraiser will analyze the operations of your dry cleaning business. They then compare these to similar dry cleaning businesses that recently sold. Using this and other methods the valuation expert determines a range of value for the dry cleaning business.
Peak Business Valuation, business appraiser, would love to provide a business valuation for a dry cleaning business. Knowing the value of a dry cleaning business is important whether you plan on buying, growing, or selling a dry cleaning business. Schedule a free consultation today to learn more.
SDE Multiples for Dry Cleaning Businesses
Average SDE Multiples: 1.95x – 2.93x
In our data, the average SDE multiples for dry cleaners range between 1.95x – 2.93x. To determine the implied value of a dry cleaning business, start with the seller’s discretionary earnings. Then multiply it by the applicable SDE multiple. See the calculation as follows.
SDE X Multiple = Value of the Business
For example, a dry cleaning business has a seller’s discretionary earnings of $194,000. A business appraiser at Peak Business Valuation determines a 2.54x SDE multiple is applicable to the business valuation. In this case, the value of the dry cleaning business is approximately $492,760.
$194,000 X 2.54x = $492,760
Small businesses commonly transact on an SDE multiple. It is often appropriate to use when valuing a dry cleaning business. To determine the seller’s discretionary earnings of a dry cleaning business a business appraiser does the following. They start with the company’s operating profit and add back expenses a new owner may not incur. Some of the common add-backs to a business valuation include any personal expenses run through the business and non-related or non-recurring business expenses. In addition, a fair owner’s compensation may be adjusted. For more information, see Understanding Seller’s Discretionary Earnings.
EBITDA Multiples for Dry Cleaners
Average EBITDA Multiples: 2.49x – 4.14x
According to private transaction data, the average EBITDA multiples for a dry cleaning business are between 2.49x – 4.14x. This can be quite a range. As such, it is important to obtain a business appraisal for your dry cleaning business. To determine how much a dry cleaning business is worth, multiply EBITDA by the appropriate EBITDA multiple. See the equation below.
EBITDA X Multiple = Value of the Business
To illustrate, a dry cleaning business has an EBITDA of $145,000. The business appraiser may determine an applicable EBITDA multiple for the dry cleaning business is 3.33x. Using the above equation, the dry cleaning business is worth about $482,850.
$145,000 X 3.33x = $482,850
EBITDA multiples for a dry cleaning business measure ROI or return on investment a person can expect to make from the business. A business appraiser at Peak Business Valuation may decide this multiple is applicable to the business transaction because it normalizes differences in fixed assets, capital structure, and taxation. Normalized ratios make it easier for a business appraiser to compare similar dry cleaning businesses.
REV Multiples for Dry Cleaning
Average REV Multiples: 0.47x – 0.89x
Last, in Peak’s database, the average REV multiples for a dry cleaning business fall between 0.47x – 0.89x. To determine the value of a dry cleaning business, start by using revenue from the most recent 12 months. Then apply this to the applicable revenue multiple. Refer to the equation below.
Revenue X Multiple = Value of the Business
For example, a dry cleaning business makes $760,000 in revenue or sales. The valuation expert determines a 0.71x REV multiple is applicable to the dry cleaning business. In this scenario, the dry cleaning business’s value is approximately $539,600.
$760,000 X 0.71x = $539,600
In every business valuation report, the business appraiser will determine what methods and multiples for dry cleaners are most applicable. Often a business appraiser uses several methods to determine the fair market value of a dry cleaning business. Often, cash flow multiples – SDE and EBITDA – are applicable as they consider expenses that impact cash flow. These can include salaries, rent, other expenses, and COGS, among others.
Summary
When viewing valuation multiples for dry cleaning businesses, understand that these are only a guide. During the valuation process, a business appraiser will analyze the financial statements, key value drivers for dry cleaners, and other factors. By comparing these to similar dry cleaning businesses, they determine appropriate market multiples for your dry cleaning business. The above multiples for a dry cleaning business are only averages.
As a business appraiser, Peak Business Valuation loves to provide business appraisals for dry cleaning businesses. We are happy to answer your questions on valuing a dry cleaning business. For specific multiples for a dry cleaning business you are buying or selling, obtain a business valuation. Schedule a free consultation below to get started!
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