How Much is My Appliance Repair Service Business Worth?
When you are debating with yourself about whether or not it is a good idea to sell your appliance repair service business, taking the time to fully understand your appliance repair service valuation is extremely important.
When you ask yourself “How much is my appliance repair service business worth,” your answer is only dependent on two things.
The first is how much cash flow your business has at the ready, and the second is the multiples of the cash flow that people will pay to buy your business.
Determine Cash Flow
Sometimes people get so wrapped up in forms and acronyms that they forget the bottom line. And this certainly happens when it comes time to sell a business. With SDE (Seller’s Discretionary Earnings), EBITDA, adjusted EBITDA, and add-backs flying through your brain, figuring out how to value an appliance repair service company seems like an impossible task. But you really can put all of those fancy words aside when it comes time for your appliance repair service valuation. The only thing you really need to worry about is the cash flow.
If you have been asking yourself, “How much is my appliance repair service business worth?” you can start understanding the value of your company by investigating the recurring and non-recurring items in your budget.
Recurring Items
- Owner’s compensation
- Money owed to other family members
- Gas, monthly payments, insurance for vehicles
- Medical insurance coverage cost for owner and family
- Travel, meals, entertainment not 100% related to business
- Any phone expenses
- Country club, golf club, or other club fees
Non-Recurring Items
REVENUE ITEMS
- PPP or EIDL loans
- Sale of asset
EXPENSE ITEMS
- Expenses from bad debt
- Improvements and repairs
- Legal fees, consulting fees, accounting fees
- Any major business purchases
- Un-reimbursed insurance claim losses
- Other major expenses
Manage the Multiples
How to value an appliance repair service company all comes down to cash flow, and the way you calculate multiples based on that. You need to find out what multiple of the cash flow the buyer is willing to pay. With an appliance repair service valuation, the buyer will pay two times, four times, six times, etc. of the given cash flow.
primary Implications
Compare the adjusted cash flow to the size of your business when it is time to determine the garage door business worth. It makes sense that the higher the cash flow, the higher the multiples.
- Under $500k free cash flow – 2x-4x / Valuation range $500k – $2m
- $500k-$1m free cash flow – 3x-5x / Valuation range $1.5m – $5m
- $1m-$2.5m free cash flow – 4x-6x / Valuation range $4m – $15m
- $2.5-$10m free cash flow – 6x-10x / Valuation range $15m – $100m
- $10m-$25m free cash flow- 10x-20x / Valuation range $100m – $250m
- $25m+ free cash flow – 25x+ / Valuation range $600m+
When you consider cash flow, it is intricately linked to how long it will take to pay off the purchase price of the business. If the buyer pays two times the cash flow, it will take two years, four times the cash flow four years, and so on. In order to sell, you need to understand this scenario.
And the multiples game is even more important. If your business is stable with a stronger customer base and varied revenue streams, you would have more cash flow and an increased multiple.
Secondary Implications
Besides just the cash flow and add-backs, there are other intricacies that can affect the sale of your business.
- New company construction (Aim for 20%, and lower is stellar)
- Important maintenance contracts (Aim for 20%, and higher is stellar)
- Revenue growth (Aim for more than 20%, and higher year by year)
- Reputation management (number of Google reviews and average star rating)
- Creation of marketing leads (consistent and repeatable lead generation flow is stellar)
- A longstanding technician crew (more technicians is better – aim for 10)
- Workflow technology used in company (ServiceTitan or HouseCall Pro is great)
- If business can run without the owner constantly around (Aim for the owner being able to leave on vacation and turn the phone off, and less day-to-day involvement is better.)
So, how much is my Appliance Repair Service worth?
If you are still wondering “How much is my appliance repair service business worth?” do not fret. Multiply the free cash flow by the multiples to determine your appliance repair service valuation.
In addition to the ease with which you can determine the multiples, there are several other important factors inherent in selling your business. You might be astounded by the large sale number, but understand that fees and taxes will eat a large portion and you will generally get 70-80% of the asking price.
Generally, a business is sold with all trucks and equipment that make it run, so consider that when you go to sell. The business also must be sold debt free, which puts you as the person in charge of clearing all debts before it exchanges hands. The buyer and seller will also agree upon an amount of capital left in the business before the sale.
Why Work With Brentwood Growth
Access to Buyers
Over 400 private equity firms and consolidators that are actively looking to purchase.
Confidentiality
Ensure the sale of your business remains confidential to avoid disruptions for you.
Industry Expertise
More than 20 acquisitions with transactions from $80 million with an average of $4 million.
Valuation
Learn the value of your business and receive support with pricing to the market.
Negotiation
As your mediator, we work with you and the buyers to make sure both parties are satisfied.
Experience
Lead by a team with 75+ years of experience. Our experience ensures a smooth experience.
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