Valuing a Business: The Multiplier Valuation
6h) Multiplier Valuation
This area is very subjective and there will be a variation in people’s attitudes and opinions for the figures involved. The figures that we have given are USA based and should be used for guidance purposes only to give you an idea of the differences between industries.
The value of the business is derived from the multiplication of a figure (or percentage) and a financial value of the business.
Below are multiplication figures that have been supplied by the Business Brokerage Press, located in the USA, from their publication ‘The 2001 Business Reference Guide’.
| Type of Business | “Rule of Thumb” valuation |
| Accounting Firms | 100% – 125% of annual revenues |
| Auto Dealers | 2-3 years net income + tangible assets |
| Book Stores | 15% of annual sales + inventory |
| Coffee Shops | 40% – 45% of annual sales + inventory |
| Courier Services | 70% of annual sales |
| Day Care Centres | 2-3 times annual cash flow |
| Dental Practices | 60% – 70% of annual revenues |
| Dry Cleaners | 70% – 100% of annual sales |
| Employment & Personnel Agencies | 50% – 100% of annual revenues |
| Engineering practices | 40% of annual revenues |
| Florists | 34% of annual sales + inventory |
| Food/Gourmet Shops | 20% of annual sales + inventory |
| Furniture & Appliance Stores | 15% – 25% of annual sales + inventory |
| Gas Stations | 15% – 25% of annual sales + equip/inventory |
| Gift & Card Shops | 32% – 40% of annual sales + inventory |
| Grocery Stores | 11% – 18% of annual sales + inventory |
| Insurance Agencies | 100% – 125% of annual commissions |
| Janitorial & Landscape Contractors | 40% – 50% of annual sales |
| Law Practices | 40% – 100% of annual fees |
| Liquor Stores | 5% of annual sales + inventory |
| Property Management Companies | 50% – 100% of annual revenues |
| Restaurants (non-franchised) | 30% – 45% of annual sales |
| Sporting Goods stores | 30% of annual sales + inventory |
| Taverns | 55% of annual sales |
| Travel Agencies | 40% – 60% of annual commissions |
| Veterinary Practices | 60% – 125% of annual revenues |
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