Valuation Multiples for Glass & Glazing Contractors
Glass and glazing contractors primarily install glass panes and other glasswork for buildings. They perform this work for new builds, additions, alterations, maintenance, and repairs. There are more than 24,000 glass and glazing businesses across the country. These specialty contractors generate nearly $17 billion in revenue. New construction, including both residential and commercial, is the primary source of revenue for glass and glazing contractors. If you plan on buying or selling a glass & glazing business, it is important to understand the value. This value is often determined using valuation multiples for glass and glazing contracting businesses. Below we discuss how to value a glass & glazing business and average valuation multiples for glass & glazing companies.
Valuing a Glass & Glazing Contracting Business
The coronavirus pandemic took its toll on the construction industry. This, in turn, impacted glass and glazing contractors. However, the high demand for residential construction helped offset the decline in nonresidential construction. As the economy recovers, nonresidential construction is projected to increase leading to more work for glass and glazing contractors. These and many other factors impact the value of glass and glazing businesses.
A business valuation for a glass & glazing business will determine a fair market value. If you are selling a glass & glazing business, a business appraisal can help you determine a listing price. If you plan on buying a glass and glazing business, a business valuation can be helpful when negotiating a purchase price. It is also an important part of the due diligence process when buying a business. In either case, a business valuation can help you feel confident in the transaction of a glass and glazing business. Peak Business Valuation, business appraiser, is here to help. We are happy to answer any questions you have about the value of a glass and glazing business. Get started with a business valuation by scheduling a free consultation.
A valuation expert determines the fair market value of a glass and glazing business using a variety of methods. These methods often use valuation multiples for glass and glazing businesses. They also consider important value drivers for glass and glazing companies.
Valuation Multiples for Glass & Glazing Contracting Businesses
Below is a brief overview of average valuation multiples for glass and glazing contracting businesses. For specific information about your business, schedule a free consultation. You can also check out Valuing a Glass & Glazing Business, How to Value a Glass and Glazing Company, as well as Value Drivers for Glass & Glazing Companies.
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?
A valuation expert often values a glass and glazing business using valuation multiples. A valuation multiple is a ratio. It compares two factors to each other. For instance, a common ratio in valuation is an SDE multiple. The SDE multiple compares the seller’s discretionary earnings of the company, with the implied value of the company. When using multiples, a valuation expert often looks at similar glass or glazing businesses that have recently sold to determine an applicable multiple. This helps the expert determine a range of value for the glass and glazing company.
For instance, a glass & glazing contractor makes $295,000 in seller’s discretionary earnings. The valuation expert applies a 2.58x SDE multiple to the business. In this case, the glass & glazing business is worth approximately $761,100. ($295,000 times 2.58x) Whereas, if the valuation expert uses a 2.19x SDE multiple, the business’s implied value would be $646,050. ($295,000 times 2.19x)
As a business appraiser, Peak Business Valuation works with dozens of glass and glazing contractors. These individuals were looking to buy, expand, or sell a glass and glazing business. Below is an average range of valuation multiples that glass and glazing businesses transact and are valued at. This includes SDE, EBITDA, and REV multiples for glass and glazing contractors. Keep in mind that each glass & glazing company is unique. As such, the range of value can be significant. For questions, schedule your free consultation with Peak Business Valuation, business appraiser.
SDE Multiple
Average SDE Multiple range: 2.12x – 2.83x
According to our data, glass and glazing businesses on average transact between a 2.12x – 2.83x SDE multiple. To derive an implied value of the glass business, apply the multiple to the recent 12-month period of revenue. The calculation follows.
SDE X Multiple = Value of the Business
For instance, a glass company generates $367,000 in seller’s discretionary earnings. It transacts at a 2.82x SDE multiple. Then the business value is approximately $1,034,940.
$367,000 X 2.82x = $1,034,940
As a cash flow multiple, a valuation expert commonly uses the seller’s discretionary earnings to value a small business including glass and glazing businesses. They calculate it by taking the company’s operating profit and adding back potential expenses a new owner may not incur. These expenses can include the owner’s compensation, any personal expenses taken by the owner, and other non-recurring or non-related business items.
EBITDA Multiple
Average EBITDA Multiple range: 2.92x – 4.24x
The average EBITDA multiples for a glass & glazing business range between 2.92x – 4.24x. To derive the implied value of the business, apply this multiple to EBITDA. The calculation is as follows.
EBITDA X Multiple = Value of the Business
For example, a glass & glazing contracting business has an EBITDA of $215,000. It transacts at an EBITDA multiple of 3.66x. Using the above calculation, the glass business is worth approximately $786,900.
$215,000 X 3.66x = $786,900
The EBITDA multiple measures a business’s return on investment (ROI). This multiple is preferred because it normalizes 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: 0.31x – 0.62x
According to our data, glass & glazing businesses sell for an average of 0.31x – 0.62x of revenue. To calculate the implied value of the company, multiply revenue or sales the glass business makes by the REV valuation multiple. Below is the calculation.
Revenue X Multiple = Value of the Business
For instance, a glass & glazing contractor generates $2,200,000 in revenue. It transacts at a 0.46x REV multiple. In this case, the business is worth approximately $1,012,000.
$2,200,000 X 0.46x = $1,012,000
When determining the value of a glass & glazing contracting business, the valuation expert will determine which multiples are most applicable. A combination of methods is common and are weighted in a valuation report. Often small businesses transact on cash flow multiples – SDE and EBITDA. This is because the revenue multiple does not consider the operations of the business. Cash flow multiples consider expenses such as COGS, salaries, rent, among other expenses.
Summary
When viewing valuation multiples for glass & glazing contractors, keep in mind many factors impact them. These value drivers impact the multiple the valuation expert uses to value the business and the end fair market value. Peak Business Valuation, business appraiser, would love to talk about the factors that may impact the value of your glass & glazing business. We are also happy to answer any questions you have about the value of a glass & glazing contracting business.
As a business appraiser, Peak Business Valuation works with specialty contractors across the country. We perform business appraisals on a weekly basis for individuals looking to buy or sell a specialty contracting business. If you plan on buying or selling a glass or glazing business, start with a business appraisal. Understanding the value of a glass & glazing business can help you feel confident in your business transaction. Get started today by scheduling a free consultation using the link below.
