Valuing an Iron & Steel Manufacturing Business
Companies that manufacture iron and steel create products for several different industries. Iron and steel have experienced several ups and downs over the years. This includes drops in revenue by 9.8% in 2019 or increases by 12.7% in 2021. While the industry took a big hit in 2019, it was nothing they could not recover from. The biggest issue was the extensive decline in the automotive and construction industries. These industries are two of the biggest customers for the iron and steel manufacturing industry. As such, 2020 experienced several changes in the types of revenues it incurred. These factors make it a great time for someone to exit or enter the iron and steel industry. Valuing an iron & steel manufacturing business is important whether you plan on buying or selling an iron and steel manufacturing business
As a business appraiser, Peak Business Valuation works with many individuals who are buying or selling an iron and steel manufacturing business. The first step in buying or selling is obtaining a business valuation. Part of the valuation engagement is discussing some of the key factors an expert uses in valuing an iron and steel manufacturing business. Keep in mind, the factors below are only a guide. For detailed information about a business you are buying or selling, schedule your free consultation with Peak Business Valuation, business appraiser.
Market Multiples for an Iron & Steel Manufacturing Business
- SDE Multiple Average Range: 2.84x – 3.13x
- EBITDA Multiple Average Range: 3.75x – 4.37x
- REV Multiple Average Range: 0.53x – 0.78x
**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 market multiples for an iron and steel manufacturing business. Experts use market multiples when valuing an iron and steel manufacturing business. Knowing the worth of your iron and steel manufacturing business will help to increase its value. This is useful whether expanding, obtaining, or maximizing the value of your business before selling. Here are a few ideas to increase the value of an iron and steel manufacturing business. For a more extensive valuation, schedule a free consultation with Peak Business Valuation, business appraiser.
Key Success Factors
Peak Business Valuation, business appraiser, values iron and steel manufacturing businesses regularly. Below are some success factors that will distinguish your business. These factors will also increase the value of an iron and steel manufacturing business. For additional ideas see Value Drivers for Metalworking Machinery Manufacturing, Valuation Multiples for Iron and Steel Manufacturing, and How to Value a Steel Mill.
Price of Steel
Certain businesses are closely related to commodities such as iron and steel. Because of this, the price of the commodity affects the financial performance of the company. At Peak Business Valuation, our business appraisers will look at historical price averages to better understand a company’s operations for a normal year. This is often a better indicator of value.
Product Mix
With over 200 iron and steel manufacturers in the United States, and hundreds more overseas, it is important to diversify your product mix. Pay attention to market demand and adapt when needed. Be willing to specialize in certain products and services to enhance customer satisfaction. Your product mix can make or break your business. Determine what adds value to your business while meeting customer needs. A valuation expert will look at your product mix and compare it with similar companies and industry averages.
Access to Raw Materials
Next, with the price of steel constantly fluctuating, it is important to create contracts with those that supply raw materials. These contracts can help regulate the costs for your company on raw materials. With shortages happening everywhere, this can also prevent delays in supplies. Without access to consistent supplies, your iron and steel manufacturing business will not be sustainable. Prioritizing this value driver will encourage positive customer relationships. As you supply products on time, your reputation will grow. Consistent access to raw materials is important to maximizing efficiency and increasing revenue.
Financial Structure
The iron and steel manufacturing industry experiences many ups and downs. Each year could bring a high or a low. Because of this, it is important to structure your business wisely. Preparing for the lows will ease financial stress when it comes. This is a very important success factor to buyers. They will be looking for a stable business that can handle the extremes that come with this industry. When selling your business, ensure your financial structure is organized, legible, and realistic.
To help determine the value of your iron and steel manufacturing business, obtain a valuation from Peak Business Valuation, business appraiser. This is a great way to understand the financial status of your business. A business appraisal will also help you discover where you can improve and grow. To talk with one of our business appraisers, contact us by scheduling a free consultation.
Summary
There are many considerations when valuing an iron and steel manufacturing business. Learning about the value of your business is helpful whether you want to buy, sell, or grow a business. Obtaining a business valuation will identify the fair market value. It will also uncover opportunities to maximize the value of an iron and steel manufacturing business.
Peak Business Valuation, business appraiser, values businesses across the country. We are happy to discuss any questions you may have about the value of an iron and steel manufacturing business. You can contact us by scheduling a free consultation below.
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