Valuing a Clothing Store or Clothing Boutique
In the recent economic condition, the retail clothing store industry saw a dramatic impact. Many clothing stores struggled to maintain revenue levels. This is due to consumers shopping less and spending less of their discretionary income on clothes. The pandemic forced many clothing stores to close, and some even shut their doors. Others were required to make budget cuts and reduce expenses wherever possible. These industry and economic factors have a negative impact on the value of a clothing store. However, with the positive economic outlook, this industry is expected to rebound but the time it will take is unknown.
Valuing a Clothing Store
The clothing industry includes several subsectors. These include women’s clothing stores, family clothing stores, children and infant clothing stores, men’s clothing stores, and clothing boutiques. Each of these subsector’s values can widely range. Understanding the value of a clothing store can help you make smart financial decisions. Are you planning on selling a business? Understanding the value can help you determine a listing price. If you are buying a clothing boutique, a business valuation can help determine a fair purchase price. Or, maybe you are looking for ways to grow your clothing store. A business appraisal can help identify ways to maximize the value of a clothing store.
There are dozens of factors that can impact the value of a clothing store. Peak Business Valuation has worked with many individuals who are buying or selling a clothing store. The first step in either process is obtaining a business valuation. A business appraisal will determine the fair market value of a clothing store. It will also identify key factors a valuation expert uses when valuing a clothing store. Below we discuss the average valuation multiples for a clothing store. And then discuss some of the key value drivers of a clothing store. Keep in mind the below factors are only a guide. For specific information about valuing your clothing store, schedule a free consultation with Peak Business Valuation.
If you have an online clothing store or eCommerce clothing store, be sure to read Valuing an eCommerce Business.
Market Multiples for a Clothing Store
- SDE Multiple Average: 2.20x – 2.95x
- EBITDA Multiple Average: 2.92x – 4.56x
- REV Multiple Average: 0.36x – 0.51x
** Disclaimer: These multiples are for educational purposes only. Multiples are based on companies with revenues between $1-$5 million. As such, the information provided does not constitute valuation advice. Do not act on it as such. These multiples do not represent the valuation opinion of Peak Business Valuation. Or any of its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional with respect to any matter in this article.
A valuation expert most often values a clothing store using an SDE multiple. This is because the SDE multiple considers the operations of the business and what a potential owner would expect to receive. Both the revenue multiple and EBITDA multiple may be applicable as well. A valuation expert will determine the most appropriate valuation multiples for a clothing store. For more information see Valuation Multiples for a Clothing Store.
By increasing your understanding of the value of a clothing store, you can take steps to maximize the value. This is helpful if you are expanding your clothing store or looking to maximize the value of a clothing store before selling. Here are several ideas to help increase your clothing store’s value. If you are searching for a more extensive valuation, schedule a free consultation with Peak Business Valuation.
Key Success Factors
Peak Business Valuation values clothing stores on a regular basis. Below are several success factors that can help distinguish your clothing boutique. These value drivers can also increase the value of a retail clothing store.
Type of Clothing Retail
The retail clothing industry is highly concentrated. The 50 largest companies bring in nearly 65% of the total industry revenue. However, there are thousands of small clothing stores Peak Business Valuation gets to work with. These small retail clothing stores can bring in significant revenue for the business owner. Most companies in this industry seek to find a niche market of customers. This can include infant clothing, women’s clothing, maternity, men’s clothing, etc… The type of retail store you own will impact the value of the store.
Next, the size of a retail clothing store can range anywhere from a small independently owned boutique to large department stores. The value of a clothing store can be significantly impacted by the size of the clothing store. Small clothing stores are frequent targets for acquisition. As such, Peak Business Valuation values small clothing stores regularly.
One of the most valuable intangible assets a clothing store has is customer loyalty. Building customer loyalty increases revenue and makes your company more valuable. There are several ways to increase customer loyalty. From creating rewards programs to coupons and sales and asking for referrals. For more ideas, see The Value of Customer Loyalty.
What direction is your clothing store’s revenue trending? Particularly for brick-and-mortar clothing stores, revenue growth is decreasing as competition increases by large department stores and online retailers. Businesses with premium valuations show revenue that is stable or trending upwards.
Competition from Online-based Businesses
Online shopping is seeing exponential growth. In the competitive market, online shopping is a must for clothing stores. In the recent pandemic, clothing stores that operated through brick-and-mortar were severely hurt by states imposing shutdowns. This resulted in consumers turning to more online shopping to meet their clothing needs. Operating your business both physically and online can attract more consumers. The key is to invest in a highly intuitive website and mobile applications that are easy to use. Doing so can significantly increase exposure to consumers and create ease of access for consumers to shop. If you own a clothing store online, be sure to check out Valuing an eCommerce Business.
One of the largest factors impacting the value of a clothing store is the overall economic condition. Pandemic conditions negatively impacted the clothing industry. As such, businesses in this industry will see a decline in the value of a clothing store. Throughout this article, we mention several ways in which the economic condition impacts the clothing industry.
A valuation expert considers many impact factors when valuing a clothing store. From the economic climate to the type of clothing store, each factor impacts the value. Learning the value of your clothing store is important whether you are buying, selling, or growing a clothing store. Obtaining a business valuation can determine the fair market value of a clothing store. And it can identify opportunities to maximize the value of a clothing boutique.
Peak Business Valuation appraises clothing stores regularly. We are happy to answer any questions you may have about understanding the value of a retail clothing store. Reach out via email or by scheduling your free consultation below!
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