Valuing an Apparel Manufacturing Business
The apparel industry has experienced many ups and downs throughout the pandemic. With public restrictions in place, clothing stores were forced to shut their doors. All manufacturers experienced and continue to experience shortages in supplies. These shortages increase prices for consumers and change demand. Even during a pandemic, the apparel manufacturing industry managed to increase revenue. This increase is expected to continue. Due to these factors, now is a great time to buy or sell an apparel manufacturing business. The first place to start is understanding the value of an apparel manufacturing business. In the following paragraphs, we discuss key factors used when valuing an apparel manufacturing business.
As a business appraiser, Peak Business Valuation works with individuals around the nation who are buying or selling an apparel manufacturing business. During the valuation process, we discuss key factors a valuation expert uses when valuing an apparel manufacturing business. The factors below are only a guide. For more information, schedule your free consultation with Peak Business Valuation.
Market Multiples for an Apparel Manufacturing Business
- SDE Multiple Average: 2.66x – 3.20x
- EBITDA Multiple Average: 3.89x – 4.47x
- REV Multiple Average: 0.52x – 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 an apparel manufacturing business. A valuation expert uses multiples when determining the value of an apparel manufacturing business. In doing so, a valuation expert will help you understand how to increase the value of your business. For more information see Valuation Multiples for Apparel Manufacturing.
First, you need to know what your business is worth. A business appraisal will determine the fair market value of an apparel manufacturing business. This knowledge is helpful whether expanding, acquiring, or maximizing the value of your business. In the following paragraphs, we will discuss key success factors for an apparel manufacturing company. For more information, schedule a free consultation with Peak Business Valuation, business appraiser.
Key Success Factors
Peak Business Valuation, business appraiser, values apparel manufacturers on a regular basis. To increase the value of your business, focus on these success factors. It is a simple way to learn the ins and outs of your business while increasing its fair market value. See Value Drivers for an Apparel Manufacturing Business, Valuation Multiples for Apparel Manufacturing, and How to Value an Apparel Manufacturing Business for more ideas.
World Price of Cotton
First, the price of cotton is very volatile. In fact, most commodities like steel or oil are extremely volatile. Because of this, the price of cotton affects the financial performance of an apparel manufacturer. At Peak Business Valuation, our business appraisers will look at historical price averages. This gives them a better understanding of the company’s operations for a normal year. This is often a stronger indicator of value.
Product Mix
Second, the fashion industry is ever-changing. For instance, things like trends, preferences, and seasons constantly adapt. As a manufacturer, it is important to be ahead of the game. A great way to do so is by working with your marketing and production teams. In working with them, they can determine apparel styles to produce and stay ahead of trends. Make sure to offer a diverse product mix. If you expand to different markets, your company will increase in value. A diverse product mix has the potential to increase the value of your business.
Recurring Revenue
Lastly, for a manufacturer, recurring revenue is essential. Manufacturers provide large quantities of an item to businesses located around the world. Creating good relationships with potential clients will help solidify consistent sources of revenue. In turn, a loyal customer base brings safety to your business. It also looks very good to potential buyers and clients. A potential client will notice a manufacturer with a loyal client base. Therefore, they will trust that your company is reliable and trustworthy. In addition, a potential buyer will want to see consistent revenue that is easily transferable. Contracts create this and are very valuable recurring revenue sources.
In the valuation process, recurring revenue is worth more than one-time sources of revenue. This is because consistency is the key to success. Consistent revenue means consistent profits for your apparel manufacturing business.
Summary
In conclusion, valuing an apparel manufacturing business requires many important considerations. Understanding the value of an apparel manufacturer is important whether buying, selling, or growing your apparel manufacturing business. Obtain a business valuation to help learn the fair market value. Doing so will also identify opportunities to maximize the value of your apparel manufacturing business.
Peak Business Valuation, business appraiser, values apparel manufacturers across the country. We would be happy to answer any questions you might have about the value of your business. Reach out by scheduling your free consultation below.
