Valuation Multiples for Event Planning

Valuation Multiples for Event Planning

The event planning industry consists of businesses and individuals who primarily organize parties, weddings, corporate dinners, or other social gatherings. These events can be for individual households, businesses, or other organizations. The event planning industry does not include businesses that organize conventions, trade shows, or sporting events. Nor does it include internal event planning departments such as those for hotels, conference centers, and recreational facilities.

The event planning industry is highly fragmented with no major players. There are approximately 63,000 event planning businesses across the United States. The event planning industry generates nearly $3 billion in revenue. With recent COVID-19 events and continued impact, this industry saw a drastic change. With events being limited in size and forced shutdowns many event planners saw a significant decrease in revenue. As such, many event planning businesses have since transacted. One of the important pieces of transacting an event planning business is understanding the value of an event planning business.

Valuing an Event Planning Business

Knowing the value of an event planning business can help you sell for the maximum value and buy at a fair purchase price. Many event planners wonder how a valuation expert determines the fair market value of an event planning business. There are a variety of valuation approaches they use, including valuation multiples. A valuation expert will determine what valuation approaches are most appropriate for your business as well as the reason for the business appraisal.

Here is a brief overview of what valuation multiples for an event planning business look like. Keep in mind these numbers are only a guide. For specific information about a party planning business or event planning business please reach out. As a business appraiser, Peak Business Valuation, values event planning businesses across the country. Get started by scheduling your free consultation with us today!

Be sure to also check out Valuing Event Planning Businesses.

Multiples for an Event Planning Business

 

Valuation Multiples For Event Planning

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?

A valuation expert values an event planning business using a variety of valuation methods. These methods often use valuation multiples. A valuation multiple is like a ratio. A ratio compares two factors. For instance, a common ratio in valuing an event planning business is an SDE multiple. The SDE multiple compares the seller’s discretionary earnings of the business with the implied value of the company. The valuation expert looks at multiples of similar event planning businesses that have recently sold. They then apply an applicable multiple to your event planning business to get a range of value.

For instance, an event planning business generates $240,000 in SDE. The valuation expert applies a 2.89x SDE multiple. In this case, the event planning business is worth approximately $693,600. ($240,000 times 2.89x) On the contrary, a 3.25x SDE multiple would imply the value of the event planning business would be $780,000. ($240,000 times 3.25x)

Peak Business Valuation appraises dozens of event planning businesses each year. As a business appraiser, we work with individuals who are looking to buy, sell, or expand an event planning business. Through working with these event planners, here is a range of valuation multiples event planning businesses transact and are valued at. Keep in mind, many factors will impact the value of the business and the valuation multiple an expert uses to value the event planning business. For questions, schedule a free consultation with Peak Business Valuation, business appraiser. Below we discuss SDE, EBITDA, and REV multiples for an event planning or party planning business.

SDE Multiple

Average SDE Multiple range:2.55x – 3.89x

According to our data, event planning businesses transact between a 2.55x – 3.89x average SDE multiple.  To derive an implied value of an event planning business, apply the multiple by the most recent 12-month period of revenue. The calculation is as follows:

SDE X Multiple = Value of the Business

For instance, a party planning business generates $120,000 in sellers’ discretionary earnings.  It transacts at a 3.17x multiple, then the business value is worth approximately $380,400.

$120,000 X 3.17x = $380,400

Seller’s discretionary earnings is a common cash flow multiple a valuation expert uses to value small business transactions. It is especially useful when valuing event planning businesses. The expert calculates the company’s operating profit and adding back potential expenses that may not be incurred by a new owner. These expenses may include the owner’s compensation, the owner’s personal expenses, and other expenses such as non-recurring or non-related business items.

EBITDA Multiple

Average EBITDA Multiple range: 3.13x – 5.09x

The average EBITDA multiple for a party planning business ranges between 3.13x – 4.01x. Apply this multiple to EBITDA to derive an implied value of the business. The calculation is as follows:

EBITDA X Multiple = Value of the Business

For example, an event planning business has an EBITDA of $234,000. The business transacts at an EBITDA multiple of 4.01x. Using the above metrics, the event planning business’s value is approximately $938,340.

$234,000 X 4.01x = $938,340

An EBITDA multiple measures a company’s return on investment (ROI). This multiple is preferred as it is normalized for differences in capital structure, taxation, and fixed assets. Normalized ratios allow for comparisons to similar businesses. Normalized ratios also more accurately represent the future earnings a buyer can expect from the business.

REV Multiple

Average REV Multiple range: 0.60x – 1.28x

According to our data, event planning businesses sell for an average of 0.60x – 1.28x revenue multiple. You can calculate the implied value of the business by multiplying the amount of revenue or sales a party planner makes by the valuation multiple.

Revenue X Multiple = Value of the Business

For instance, an event planner makes $175,000 in revenue and transacts at a 0.95x multiple. In this case, the business is worth approximately $166,250.

$175,000 X 0.95x = $166,250

A valuation expert usually uses a combination of valuation multiples when valuing an event planning business. Both cash flow multiples – SDE and EBITDA – as well as REV are common. This is due to event planning businesses having a significant amount of unrecurring revenue.

Summary

When a valuation expert uses valuation multiples, there are many factors that impact the multiple. These factors ultimately impact the value of the business. Peak Business Valuation, business appraiser, would love to talk with you more about factors that impact the value of an event planning business. For more information, you can also read Valuing Event Planning Businesses.

Peak Business Valuation works with event planners across the country valuing their business. As a business appraiser, we focus on providing valuable information to help you grow, buy, or sell an event planning business. Questions are always welcome! Feel free to reach out via email or by scheduling your free consultation below!

 

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