Value Drivers for Flooring Installers
The flooring installation industry is heavily dependent on the housing market and construction industry. With low mortgage rates, the residential market has increased by 5.4% in 2021 alone. This has brought annual revenue growth up by 3.9% over the last five years. Whether you plan to buy or sell, learn the fair market value of a flooring installation business.
Focusing on key value drivers will positively impact the value of your flooring installation business. If you understand what drives your revenue, you can create a business plan that supports those drivers. Peak Business Valuation, business appraiser, helps flooring installation businesses learn the value and value drivers of their business. Whether you looking to sell, buy, or maximize the growth of a flooring business, a valuation is useful. Schedule your free consultation today. Our business appraisers at Peak Business Valuation are happy to answer any questions you have.
Key Value Drivers for Flooring Installers
Knowing your business’s key value drivers will encourage better business tactics. Currently, the flooring installation industry is tied to the residential market. This is a result of the Covid-19 pandemic. With mortgage rates coming in at around 3.1%, the housing market continues to boom. In the sections below, we will cover several important value drivers of a flooring installation business. For specifics on your business, please schedule a free consultation with Peak Business Valuation, business appraiser.
Supplies on Hand
The pandemic has severely impacted the supply chain for all industries. While the demand for products is there, the products are not. This has become a key value driver through the recent pandemic. Keeping supplies on hand will not only be convenient, but essential to your business. Supplies can be delayed for months at a time. Remaining vigilant with your stock will keep you a leading flooring installer and positively impact the success of your business.
Specialization
There are over 100,000 flooring installation businesses across the nation. Most survive by being the top provider in a small geographic area. This means creating a business that is capable of being a top provider or specializing in a certain type of flooring or service. Consumers feel confident in specialized services. Flooring installation can include the installation of carpet, tile, wood, or linoleum. It also includes resurfacing floors, finishing wooden floors, and removing flooring. Specializing and promoting one or two items will enhance your business model. It will also entice customers to work with your business.
Product & Service Mix
Flooring installation includes many products and services. Service mix plays a significant role in the value of a flooring installation business. Services range from residential to commercial to repairs to installation. With residential construction taking the lead in demand, it should be the top priority for owners. A valuation expert will compare your business model’s service mix to the average of the flooring installation industry.
As mentioned in the specialization section, there are many products flooring installers offer. This is beneficial because it can reach many types of consumers. It also gives an opportunity to increase the value of your company as you expand to new products or services.
Recurring Revenue
Recurring revenue will always be an important value driver. This is because it is a consistent source of revenue. A great way to gain recurring revenue is by getting contracts with housing developers or contractors. These sources provide large amounts of work and consistent projects. Residential work has become the leading provider of income for flooring installation. This should be a top priority for business owners as it can bring in the most revenue.
Recurring revenue is valued higher than one-time jobs. As a business appraiser, Peak Business Valuation will value recurring revenue more than other sources of revenue. If you intend to sell, pay attention to this value driver. It will ultimately drive your business’s worth upwards. For specific questions, do not hesitate to reach out. Our valuation experts would love to answer further questions.
Owner Dependency
Next, a valuation expert will look at the level of owner dependency. The average number of employees in a flooring installation business is 1.6. As this number is very low, it can be difficult to grow the business. It can also imply that owner dependency is very high, bringing down the business’s overall value.
Lowering owner dependency is a very important value driver. Creating a business that has the structure and training in place with or without the owner will increase the value. It is very hard to sell a business that is extremely owner-dependent. This is because the business will not survive without the owner. For ideas see Reducing Owner Dependence.
A low owner-dependent business is worth more than a high one. When receiving a valuation, our valuation experts at Peak Business Valuation will take the level of owner dependence into account.
Summary
There are many things to consider when valuing a flooring installation business. A business appraiser at Peak Business Valuation will uncover specific value drivers for your business through the valuation process. Understanding what drives your business will allow you to adapt your business model. This will ultimately bring increased value and revenue to your business. Receiving a business valuation will also help determine a fair market value.
Peak Business Valuation is a leading business appraiser in the country. We happily provide business valuations for flooring installation businesses. Whether you are buying or selling a flooring business, we would love to work with you. Schedule a free consultation today by clicking the link below.
Be sure to take a look at Valuing a Flooring Installation Company, How to Value a Flooring Company, as well as Valuation Multiples for a Flooring Business.
