Valuing a Fencing Business
With the rising demand for home building, the fence construction industry is on the rise. Although profit growth has been hindered by rising costs in raw materials, demand for fence construction is expected to increase. Despite a decrease in revenue in 2020, the industry outlook is optimistic. Understanding the value of these market trends can help add value to your company. However, in order to add value to your fence construction business, you must first understand its initial value. This will give you an advantage over your competitors. Whether you plan on selling a fence construction business or buying one, it is important to understand the process of valuing a fencing company.
There are many factors that impact the value of a fence construction business. As a business appraiser, Peak Business Valuation works with multiple individuals looking to buy or sell a fencing company. The first step in doing so is obtaining a business valuation. As part of a valuation engagement, we discuss some of the key factors we use when valuing a fence construction business. Keep in mind the below factors are only a guide. For more specific information about valuing a fence construction business you are looking to buy or sell, schedule your free consultation with Peak Business Valuation, business appraiser.
Market Multiples for a Fencing Business
- SDE Multiple Average: 2.14x -3.23x
- EBITDA Multiple Average: 3.27x – 4.36x
- REV Multiple Average: 0.38x – 0.81x
**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.
The above are average valuation multiples for a fence construction company. A valuation expert most often values a fence construction business using cash flow multiples. Cash flow multiples – SDE and EBITDA – take into consideration the operations of the business. However, a revenue multiple may also be applicable in some cases. The valuation expert will determine what multiples for a fence construction business are most applicable. For more information see Valuation Multiples for Fence Construction.
By increasing your understanding of what your fence construction business is worth, you can begin to take steps to increase its value. This is helpful whether you are expanding, acquiring, or want to maximize the value of a fence construction business before selling it. Here are a few ideas to help increase your fence construction business’ value. If you are searching for a more extensive valuation, we can help. Schedule a free consultation with Peak Business Valuation, business appraiser.
Key Success Factors
Peak Business Valuation, business appraiser, values fence construction businesses on a regular basis. Below are several success factors that can help distinguish your fence construction company and increase its value. For more ideas take a look at Value Drivers for a Fence Construction Business, How to Value a Fence Company, and Valuation Multiples for Fence Construction.
Quality of Work
Providing excellent service for your customers is largely determined by the quality of the end product. If customers are continually dissatisfied with your services, the value will plummet. The opposite is also true. Accurate turnaround times and attention to detail will lead to increased business. This will in turn increase the value of your fence construction company. This is something that becomes evident in indirect ways. When Peak Business Valuation, business appraiser performs valuations this is an unseen factor.
Knowing Costs of Doing Business
From materials to labor it is important to understand the costs of your fence construction business. This is taken into consideration when valuing your business. Peak Business Valuation, business appraiser, always looks at the costs of doing business. This, of course, ties in directly with profitability. It is difficult to obtain or maintain profitability without a clear understanding of variable and fixed costs. A business appraiser will look at profitability ratios when valuing a fencing business.
Online Presence
Customers look to the internet for pricing and other information. Someone in need of a new fence or fence repairs will likely look to the internet for help first. Not only is it important to have an online presence, but a good reputation online is also crucial. There are a few key elements that are essential to developing a good reputation online.
- Great website – A great website doesn’t require thousands of dollars. All you need is a website that is easy to navigate to generate leads. Pictures of previous projects help these leads know what to expect if they chose to work with you.
- Reviews – This is a key way to establish the credibility of your fence construction company. Clients want to have the best idea possible of what they are getting before they pay for it. This is a simple way to organically grow your business online.
- Contact – Make sure your contact information is easy to find online. If your info is hard to find then potential clients will look elsewhere. This applies to your Google page, website, social media, etc.
For more specific information see The Value of SEO.
Reliable Suppliers
Next, having a good relationship with the supplier(s) pays dividends. Having multiple suppliers can reduce the risk of supply shortages. Your fence construction company will benefit from this. More than one supplier will help secure the longevity of your business. Furthermore, having a good relationship with each supplier does more than reduce risk. It also encourages more timely transactions. This is key to not interrupting operational workflow. A valuation expert will consider the concentration of suppliers when valuing a fencing company.
Estimating and Scheduling Software
Last, using third-party software adds immense value to your fence construction business. Software can help to schedule and price projects. There are several software companies (Acculynx, JobNimbus, etc.) that provide these services. They provide a streamlined way for fence construction companies to operate more efficiently. They do this by allowing you to schedule and estimate projects. These services can expand the operational capabilities of your fence construction company. This is a great way to increase value in your fence construction company.
Summary
There are many important considerations when valuing a fencing construction business. Understanding the value of a fence construction business is important whether you are looking to buy, sell, or grow a fence construction business. Obtaining a business valuation can help you understand the fair market value. This can in turn help you to identify opportunities to maximize and grow that value.
As a business appraiser, Peak Business Valuation, values fence construction businesses across the country. We are happy to answer any questions you may have about valuing a fencing business. We would love to help you better understand the value of your fence construction business. You can reach out by scheduling your free consultation below.
