Valuation Multiples for Footwear Wholesale
Two major players, Nike and Adidas, dominate the footwear wholesale industry. However, there are still opportunities for small footwear wholesalers to make a mark. Athletic and sporting goods stores and discount stores are the main drivers of demand for footwear wholesalers. Therefore it is vital that footwear wholesalers establish solid relationships with manufacturers and retailers. Within the U.S. there are over 3,000 footwear wholesalers generating $35+ billion in revenue. Demand for this industry is steady and expected to remain consistent in the coming years. As such, now is a good time if you plan to buy a footwear wholesale business or sell a shoe wholesale business. A business appraisal determines the value of a footwear wholesale business through various valuation methods. This includes valuation multiples for footwear wholesale.
Peak Business Valuation, business appraiser, provides business appraisals for footwear wholesalers across the country. We are happy to answer any questions about valuing a footwear wholesale business. And, valuation multiples for footwear wholesalers. Reach out by scheduling a free consultation using the link below. We look forward to chatting with you!
Valuing a Footwear Wholesale Business
As a business appraiser is valuing a footwear wholesale business there are many factors they consider. For instance, industry trends, current economics, and relationships with manufacturers and retailers, among other key value drivers. Through analyzing the financial statements, key value drivers, and comparisons with similar footwear manufacturers, the business appraiser will determine a fair market value for the footwear wholesale business.
If you are preparing to sell a footwear wholesale business, obtaining a business valuation can help you understand how to maximize the value. A business appraisal for a footwear wholesale business can also help you determine a fair listing price.
If you plan on buying a footwear wholesale business, a business valuation can help you negotiate a fair purchase price. It is also a useful tool to understand opportunities for growth. A business appraisal for growing, buying, or selling a footwear wholesale business can help increase your confidence in the business transaction.
As the most-reviewed, highest-rated business appraiser, Peak Business Valuation is happy to provide a business appraisal for a footwear wholesale business. Through a consultation, we can answer any question on valuing a footwear wholesale business. Get started today, by scheduling your free consultation.
Valuation Multiples for Footwear Wholesale
Below we show the average valuation multiples for footwear wholesale. Keep in mind these are only averages. It is best to obtain a business valuation for your footwear wholesale business. The visual shows REV, SDE, and EBITDA multiples for footwear wholesalers. For specific information, please schedule a consultation with Peak Business Valuation, business appraiser.
Disclaimer: These multiples are for educational purposes only. Data is limited due to the small number of recent transactions of wholesale shoe businesses. 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 at Peak Business Valuation is valuing a footwear wholesaler, they commonly use multiples for footwear wholesale. This is one method they use to determine the fair market value of a footwear wholesale business. A valuation multiple is a ratio that compares two factors. A common multiple is the SDE multiple. The SDE multiple compares the seller’s discretionary earnings with the implied value of the footwear wholesale business.
For example, the seller’s discretionary earnings of a footwear wholesale business are $450,000. If the footwear wholesale business transacts at a 3.82x SDE multiple, the implied value of the footwear wholesale business is $1,719,000. Whereas, if a 4.0x SDE multiple is applicable to the footwear wholesale company, the value is approximately $1,800,000.
When using multiples for footwear wholesale, the business appraiser analyzes your footwear wholesale business and compares the operations to similar footwear wholesale businesses that recently sold. Using various valuation methods, the business appraiser determines a range of fair market value for the footwear wholesaler.
Peak Business Valuation, business appraiser, loves providing business valuations for footwear wholesalers. If you plan to buy or sell a footwear wholesale business, schedule a free consultation.
SDE Multiples for Footwear Wholesaling
Average SDE Multiple: 3.91x
In the database at Peak, the average SDE multiple for a footwear wholesaling business is 3.91x. To determine the implied value of the footwear wholesale business, take the seller’s discretionary earnings and multiply it by the applicable SDE multiple. As mentioned above, this is only an average, seek a business appraisal for appropriate multiples for your business. See the equation below.
SDE X Multiple = Value of the Business
For instance, a footwear wholesale business makes $468,000 in seller’s discretionary earnings. A business appraiser at Peak Business Valuation determines a 3.94x SDE multiple is appropriate. In this case, the value of the footwear wholesale business is approximately $1,843,920.
$468,000 X 3.94x = $1,843,920
An SDE multiple is a common cash flow multiple that small businesses transact on. To calculate SDE, the business appraiser starts with the business’s operating profit and adds-back expenses a new owner may not incur. A few of the common add-backs to a business valuation include personal expenses run through the business, non-recurring or non-related expenses, and a fair owner’s compensation, among others. For additional information, read Understanding Seller’s Discretionary Earnings.
EBITDA Multiples for Footwear Wholesale
Average EBITDA Multiple: 4.74x
Using private transaction data, the average EBITDA multiple for a footwear wholesaler is 4.74x. To calculate the implied value of a footwear wholesale business, multiply EBITDA by the applicable EBITDA multiple. The calculation is as follows.
EBITDA X Multiple = Value of the Business
To illustrate, the EBITDA of a footwear wholesaler is $380,000. It transacts at a 4.70x EBITDA multiple. Using the equation above, the footwear wholesale business is worth about $1,786,000.
$380,000 X 4.70x = $1,786,000
An EBITDA multiple measures the ROI or return on investment an individual expects to make from the business. A business appraiser at Peak Business Valuation may prefer this multiple as it normalizes differences in fixed assets, taxation, and capital structure. Normalized ratios make it easier for the business appraiser to compare similar wholesale businesses.
REV Multiples for Footwear Wholesaling
Average REV Multiple: 0.55x
Last, in Peak’s database, the average REV multiple for a footwear wholesale business is 0.55x. To calculate the value of a footwear wholesaler using this multiple, begin with the most recent 12-month period of revenue. Take this number and multiply it by the applicable REV multiple. Refer to the equation below.
Revenue X Multiple = Value of the Business
For example, a footwear wholesaler generates $3.5M in sales or revenue. The valuation expert determines a 0.52x REV is appropriate for the transaction. In this scenario, the footwear wholesaler’s implied value is $1,820,000.
$3,500,000 X 0.52x = $1,820,000
With every business transaction, the business appraiser determines what methods and valuation multiples are most applicable. Often a business appraiser uses several methods to determine the fair market value of a footwear wholesale business. However, cash flow multiples – SDE and EBITDA – are common as they consider expenses such as COGS, salaries, rent, and other expenses that impact cash flow.
When looking at valuation multiples for footwear wholesale, know that these averages are only a guide. During the valuation process, a business appraiser analyzes financial statements, key value drivers, and other factors. By comparing the operations of your footwear wholesale business to similar companies, the business appraiser determines appropriate market multiples for your footwear wholesale business. The above multiples for footwear wholesale are not applicable to your business.
Our business appraisers at Peak Business Valuation value footwear wholesalers across the United States. We are happy to answer questions about valuing a footwear wholesale business. For specific multiples for a footwear wholesale business you are buying or selling, obtain a business appraisal. Reach out by scheduling a free consultation below.
Be sure to take a look at Valuing a Footwear Wholesaler and Value Drivers for Footwear Wholesale.
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