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Valuing a Shoe & Footwear Manufacturing Business

Valuing a Shoe & Footwear Manufacturing Business

Most of the shoe & footwear manufacturing industry is overseas. Many manufacturers choose to produce their product overseas and import it back to the United States because the costs are significantly less. In fact, 95.9% of domestic demand is satisfied through overseas products. The shoe & footwear industry, like many others, was no stranger to the effects of the pandemic. Demand decreased, availability decreased, and imports/exports became restricted. As such, some manufacturers choose to sell their business while others choose to expand. Whether you plan to buy or sell a shoe & footwear manufacturing business, it is important to understand the value. Below we discuss how to value a shoe and footwear manufacturing business and key success factors. 

The following information gives an overview of how an expert values a shoe & footwear manufacturing business. At Peak Business Valuation, our business appraisers determine a fair market value and key success factors. In the valuation process, we look at trends, historical data, and projections to help determine the value of your shoe & footwear manufacturing business. To schedule your free consultation, contact us below. 

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Market Multiples for a Manufacturing Business

  • SDE Multiple Average: 2.59x – 3.30x
  • EBITDA Multiple Average: 4.08x – 4.76x
  • REV Multiple Average: 0.62x – 0.76x
**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.

A valuation expert uses market multiples for a shoe and footwear manufacturer when valuing your business. An increased understanding of your business’s worth is valuable knowledge. It will help you take the right steps to increase the value of your shoe & footwear manufacturing business. This is valuable when expanding, acquiring, or maximizing the value of your business. For a more extensive valuation, schedule a free consultation with Peak Business Valuation, business appraiser.

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Key Success Factors

Peak Business Valuation, business appraiser, values shoes & footwear manufacturing businesses on a regular basis. Below are several success factors that will help distinguish your business and increase its value. 

Product Mix

Styles and product demand constantly change. While your overall product (shoes) will stay the same, the type of product will change. This means staying vigilant of styles, trends, and consumer wants. Expanding to new styles, trends, or clientele (such as gender or age mix), could increase the value of your business. Each season brings new demands or needs. As a shoe manufacturer, consider the wants of your customer in regards to the season. As you obtain loyal clientele, your shoe & footwear manufacturing business can better adapt and expand to the needs and wants of the customers. When valuing a shoe and manufacturing business, a valuation expert will look at your product mix and operating margins. 

Price

As we are well aware, shoes vary in price. Your shoe & footwear manufacturing business will need to determine what market to target. Is it high-end or budget-friendly? After determining that, consider what quality of products you want your shoes to have. This will be a big determinant of price. The nicer the materials, the higher the price. The price of a shoe determines the type of customers you work with. If a price is too high and the buyer is unwilling, your company won’t profit. Analyzing your market demands is critical in this department. Pricing your product strategically is key to maximizing your profit margin. A valuation expert will analyze your financials and compare them to similar manufacturing companies. 

Marketing/Branding

Marketing your product is everything. How you market determines your clientele. It also defines what people think about your product. What knowledge you share is what knowledge the consumer receives. While marketing can be initially expensive, it will reap the benefits. Marketing is everything in today’s society. Consider hiring a marketing/branding team that solely focuses on bringing in clientele. People want the latest and greatest products. Marketing in a way that invites the customer to be trendy and unique is a great way to increase profits and retain customers. Drawing in more customers leads to increased revenue. 

Overseas vs. Local

Last, it is important to consider whether you manufacture overseas or locally. Let’s discuss the pros and cons of each. While it is cheaper to produce products overseas, it comes with its own set of challenges. Managing an overseas factory is a whole different ballgame. In the 1980s, most shoe manufacturers moved their production overseas. Production costs are not even comparable, with the average American manufacturer making $16 in comparison to $3 overseas. Many shoe & footwear manufacturers are now based in China, Vietnam, or Cambodia. If your company chooses to do so, a team will need to be based in that country to help production run smoothly.

The main shoe manufacturing that happens in the US is for military shoes. However, some customers prefer USA-made products. Producing in the US leads to increased prices as labor is far more expensive in the United States. Your company will need to establish priorities and pricing options before committing to one or the other. 

Summary

There are many important considerations when valuing a shoe & footwear manufacturing business. Understanding the value of a shoe & footwear manufacturing business is important whether you are looking to buy, sell, or grow. Receiving a business valuation from Peak Business Valuation can help you understand the fair market value. A business appraisal will also identify opportunities to maximize the value of a business. 

Peak Business Valuation, business appraiser, values businesses across the country of all industries. We are happy to answer any questions you might have about the value of a shoe & footwear manufacturing business. Reach out via email or schedule a free consultation below. 

 

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