Valuing a Hardware Store
While some industries were negatively affected by the Covid-19 pandemic, the hardware store industry was positively impacted. With contractors and homeowners doing DIY projects, hardware stores found their place in a world of uncertainty. In fact, the industry has steadily increased at a rate of 1.2% over the past five years. This industry is heavily impacted by the residential construction industry. As interest rates rise, many fear it might decrease the need for hardware stores. However, the hardware store industry is expected to continue increasing as the housing market remains hot. A business appraiser considers these and more factors when valuing a hardware store.
Whether you plan on buying or selling a hardware store, it is important to understand the fair market value. There are many things impacting the value of a hardware store. As a business appraiser, Peak Business Valuation works with business owners around the country who are buying or selling a hardware store. The first step in buying or selling a business is getting a business valuation. As part of this engagement, a business appraiser at Peak Business Valuation will discuss key factors they use when valuing a hardware store. Keep in mind, the factors below are only a guide. For specific information about valuing a hardware store, schedule your free consultation with Peak Business Valuation, business appraiser.
Market Multiples for a Hardware Store
- SDE Multiple Average: 3.22x – 3.93x
- EBITDA Multiple Average: 4.20x – 4.74x
- REV Multiple Average: 0.37x – 0.74x
**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 a hardware store. A valuation expert uses multiples when valuing a hardware store. They will compare your financials to similar hardware companies that recently sold. They will then apply an applicable market multiple to your hardware store. This is just one way to determine the fair market value of a hardware store. Often a business appraiser uses several business valuation methods to determine a fair market value for a hardware store.
Understanding the value of your hardware store will help you learn how to increase its worth. This will benefit your business whether expanding, acquiring, or maximizing the value of your hardware store. Here are a few helpful ideas to help increase the value of your hardware store. For a detailed valuation, schedule a free consultation with Peak Business Valuation, business appraiser.
Key Success Factors
Peak Business Valuation, business appraiser, values hardware stores across the country. To increase the value of your hardware store, focus on these success factors. This is a great way to maximize the value of a hardware store. For more ideas take a look at Value Drivers for a Hardware Store, How to Value a Hardware Store, as well as Valuation Multiples for a Hardware Store.
Create an E-Commerce Website
As the world transitions to a virtual world, it is important to take part in that. Your store’s revenues will greatly benefit from the presence of a functional website. Shopping online saves time and energy for many consumers. Not only that, but it provides the customer an opportunity to look at many different products all at once. Spend the money and time creating a solid website for your consumers.
At Peak Business Valuation, our business appraisers want to see multiple revenue streams as it increases the value of your business. E-commerce is a great way to do this.
Offer Consumer Credit Cards
Next, if you’ve ever been to a large hardware store, you know they offer consumer credit cards. This is a very smart business tactic as it allows the customer to remain loyal to your business while obtaining products with better perks. Hardware supplies can get costly and many contractors or DIY’ers have to buy in bulk. Offering a credit card with benefits is a great way to create a loyal customer base. Offering numerous options for your customers to remain loyal is a great success factor to focus on. The more business, the better. Customer loyalty is extremely valuable when selling a hardware store. A business appraiser will analyze your revenue streams (credit cards are one). The most valuable revenue streams are recurring revenue. For more information see The Value of Customer Loyalty.
Keep Stock on Hand
Last, as supplies continue to be limited around the world, there is only so much you can do. However, it is important to stay vigilant. Order products in advance, communicate with customers when stock is unavailable, and be aware of high-demand products. While you cannot change the supply chain, you can be prepared. Your business depends on it. If your hardware store is known for having stock on hand, your reputation will grow. As your reputation grows, so do sales. This is a great success factor to focus on as it remains very relevant to the current market situation.
At Peak Business Valuation, our business appraisers will look at historical averages for your industry to better understand a “normal” year. This gives us a better indication of what sales could look like without the effects of the pandemic.
Summary
There are many other factors a business appraiser considers when valuing a hardware store. Understanding the value of a hardware store is important whether buying, selling, or growing your business. Consider receiving a business valuation to help you understand the fair market value. A business valuation will also identify opportunities to maximize the value of your hardware store.
Peak Business Valuation, business appraiser, values hardware stores across the nation. We are happy to help you with your valuation needs or answer any questions you may have. Reach out by scheduling a free consultation. We look forward to working with you.
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