Valuation Multiples for RV Dealerships
RV dealerships are in high demand due to increasing consumer demand for outdoor recreation. As such, now is the perfect time to enter or exit the recreational vehicle industry. If you plan on buying an RV dealership or selling an RV dealership, understanding the value is key. Valuation multiples for RV dealerships are often used when determining the value of an RV dealership.
As a business appraiser, Peak Business Valuation provides business appraisals for RV dealerships across the country. Using valuation multiples for RV dealerships is just one method an experienced business appraiser uses when valuing an RV dealership. For specific information about an RV dealership you are buying or selling, schedule your free consultation. Peak Business Valuation, business appraiser, is happy to answer any questions you have.
Valuing a Recreational Vehicle Dealership
When a business appraiser is valuing an RV dealership, there are many important aspects they will consider. Some of these key value drivers for an RV dealership include the type of inventory, inventory levels, flooring, parts & repair services, among other factors. Mentioned above is just one example of economics and how consumer trends impact the value of an RV dealership. Using common valuation methods such as valuation multiples for RV dealerships, the business appraiser determines a fair market value for the RV dealership.
For additional information, read How to Value an RV Dealership, Valuing a Recreational Vehicle Dealership, as well as Value Drivers for an RV Dealership.
If you plan on buying a recreational vehicle dealership, a business valuation can help determine a fair purchase price. A business appraisal is an extremely useful tool when negotiating with the seller of the business. It can also help you understand more in-depth the operations of the company so you can feel confident in your business purchase.
Whereas, if you plan on selling an RV dealership, a business appraisal can help you prepare to maximize the value. The business valuation report details a fair market value range so you can know what price to list your business at. You don’t want to risk listing too high and scaring away potential buyers but listing too low means you leave money on the table.
Peak Business Valuation loves working with individuals who want to understand the value of a recreational vehicle dealership. We are happy to answer any questions about valuing an RV dealership. Whether you plan on buying or selling an RV dealership, schedule a free consultation today to start your business valuation.
Valuation Multiples for RV Dealerships
Below we show average valuation multiples for RV dealerships. Understand that these numbers are just a guide. For specific multiples for your RV dealership, schedule a free 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 valuing an RV dealership, they will often use many business valuation approaches. One of the methods to value an RV dealership uses valuation multiples for RV dealerships. Using several methods, the business appraiser will determine a range of fair market value for the recreational vehicle dealership.
What is a valuation multiple you ask? A valuation multiple is similar to a ratio. It compares two factors to each other. One of the common multiples in business valuation is the SDE multiple. The SDE multiple compares the seller’s discretionary earnings of the business with the implied value.
For instance, an RV dealership’s owner makes $408,000 in seller’s discretionary earnings. The business appraiser determines a 2.43x SDE multiple is applicable to the RV dealership. Using the equation, the implied value of the RV dealership is approximately $991,440. Whereas, if the business appraiser determines a 2.89x multiple is applicable, the RV dealership is worth roughly $1,179,120.
Below we discuss the calculations for valuation multiples for RV dealerships. This includes SDE, REV, and EBITDA multiples for an RV dealership. Keep in mind that the ranges and numbers presented below are only a guide. Schedule a free consultation to learn more about the specifics of valuing your RV dealership. Peak Business Valuation, business appraiser, is here to help you. We appraise RV dealerships across the country.
SDE Multiples for an RV Dealership
Average SDE Multiple range: 1.65x – 3.01x
Using our database, RV dealerships transact on average between a 1.65x – 3.01x SDE multiple. To determine the implied value of the RV dealership using the following equation. Start with the seller’s discretionary earnings and multiply it by the applicable SDE multiple. The calculation is below.
SDE X Multiple = Value of the Business
For example, an RV dealership’s seller’s discretionary earnings are $295,000. The business appraiser at Peak Business Valuation determines a 2.52x SDE multiple is most applicable. Using the above equation, the implied value of the RV dealership is $743,400.
$295,000 X 2.52x= $743,400
Small businesses commonly transact on SDE multiples. As such, an RV dealership is commonly valued using SDE multiples. SDE and EBITDA multiples – are cash flow multiples. As such, they consider expenses that impact cash flow. The SDE adds back common expenses a new business owner may not incur. This can include non-related or non-recurring business expenses, a fair owner’s salary, and any personal expenses, among others. For additional information, read Understanding Seller’s Discretionary Earnings.
EBITDA Multiples for RV Dealerships
Average EBITDA Multiple range: 2.32x – 3.69x
In our data, the average EBITDA multiples for RV dealerships fall between 2.32x – 3.69x. A business appraiser calculates the value of the RV dealership by applying the multiple to EBITDA. The calculation is as follows.
EBITDA X Multiple = Value of the Business
To illustrate, the EBITDA of an RV dealership is $175,000. It transacts on a 4.57x EBITDA multiple. In this scenario, the implied value of the RV dealership is approximately $799,750.
$175,000 X 4.57x = $799,750
An EBITDA multiple measures the return on investment an individual can expect to make from the RV dealership. This multiple may be preferred by the business appraiser because it normalizes differences in fixed assets, capital structure, and taxation. Normalized ratios make it easier for the business appraiser to compare similar businesses. EBITDA multiples can also more accurately represent the future earnings a buyer can expect to make from the business.
REV Multiples for an RV Dealership
Average REV Multiple range: 0.23x – 0.45x
According to Peak’s numbers, RV dealerships commonly sell between a 0.23x – 0.45x REV multiple. The business appraiser will calculate the value of the RV dealership by taking the most recent 12 months of revenue and multiplying it by the appropriate REV multiple. See the calculation below. Refer to the equation below.
Revenue X Multiple = Value of the Business
For instance, the revenue of a recreational vehicle dealership is $2.5 million. The business appraiser at Peak Business Valuation determines a 0.31x REV multiple is appropriate. In this case, the RV dealership is worth approximately $775,000.
$2,500,000 X 0.31x = $775,000
When valuing an RV dealership, the valuation expert will analyze what valuation multiples for an RV dealership are most applicable to your business. They will also use several valuation methods to determine a range of value for your recreational vehicle dealership.
Summary
When viewing valuation multiples for RV dealerships, know many factors that impact them. The business appraiser will analyze the company’s financial statements, operations, key value drivers, etc… They will then compare your company’s operations to similar RV dealerships. Using this information and their expertise to determine a fair value of the RV dealership.
Peak Business Valuation as a business appraiser is here to help you understand the value of a recreational vehicle dealership. We would love to answer any questions about valuing an RV dealership and multiples for RV dealerships. To schedule a free consultation or start your business appraisal for an RV dealership, click on the link below.
