Income multiplier

[Eric H]

What multiplier are people using to determine valuations?
Example property is absolute turnkey IBA/SS
What is the maximum GIM (Gross Income Multiplier)
What multiplier are you using for EBITDARL or EBITDA?

 

[New Washdog]

What multiplier are people using to determine valuations?
Example property is absolute turnkey IBA/SS
What is the maximum GIM (Gross Income Multiplier)
What multiplier are you using for EBITDARL or EBITDA?

Interested in what the feedback will be!

 

[Roz]

People use the gross revenue as EBITDA can vary significant depending on the operator. Deals I have heard about or been part of have multipliers of GR in the 2-6 range. The number used will often depend on age of equipment (ie any repairs needed in the short term), location potential (any new competition that could make rev Dec), and GR (higher GR usually have higher multipliers).

 

[mac]

And as always keep your eyes wide open and get EVERYTHING in writing. Even if it’s your brother or local pastor.

 

[kepi2000]

In real estate transactions, I use the cap rate to determine valuation. The cap rate is the net income (after manager expense) divided by the value of the asset. If the net income is $100k on a $1M asset, then the cap rate is 10%. I always include the manager expense, otherwise the value is overstated. The cap rate can vary greatly. In a slow growth/ stagnant market, the cap rate may be 12% - 15%. In a fast growth/appreciating market, the cap rate may be 4-6%. Depends greatly on the appreciation of the real estate market. In Colorado Springs, for years the cap rate was stated at 12%. Real estate has skyrocketed with 18% appreciation annually. So, conversely if I find a business with net income of $200K with a cap rate of 10%, the valuation is near $2M. The condition of equipment and building may increase or decrease the valuation a bit. Obviously, if the business is not showing a net profit, then the business is book value. Value of the land plus the structure.

 

[Greg_T]

I just looked at this thread hoping that someone could multiply my income!

 

[Greg Pack]

GIM varies so widely that I can't apply it anywhere consistently enough to be more than a starting point or sanity check. I do agree that the lower revenue washes have a lower GIM. I've seen some washes I wouldn't pay a 2 or even a 1X GIM for. You can take two washes, one that grosses 50K and one that grosses 300K and apply a GIM of 5 and the lower gross wash doesn't look very attractive to most investors or entrepreneurs. There's just not enough net left to be of interest. But at 300K grosser a 5X GIM makes sense to the same investor, even higher in some circumstances. Also agree that a car wash is not a passive investment and should yield much higher than a passive investment.

 

[Rfreeman]

What multiplier are people using to determine valuations?
Example property is absolute turnkey IBA/SS
What is the maximum GIM (Gross Income Multiplier)
What multiplier are you using for EBITDARL or EBITDA?

I use GR multipliers and cap rates to evaluate any carwash opportunity. I still go by the 3 to 5 range that is often referenced on this thread. The multiplier I use all depends on the opportunity or deal I'm analyzing.

Then I look at a cap rate which can vary widely from geographical location, macro and micro economics etc etc...

Ultimately IMO it cones down to you and what your comfortable with in terms of return, time invested, risk tolerance and your goals personal and with the property.

 

[Eric H]

I have an appraisal on 2 washes. The appraiser used EBITARL and multiplied by 8 an came up with a value. The value seems VERY high to me. There were 5 “similar” properties listed in the comparisons section. The properties all had a gross income lower than the subject properties The multipliers used were 6.59,8.33,6.03, 8.0, 8.25 for an average of 7.44.
We don’t know the details on these sales except that they are all carwashes.
I guess the important question I need answered is: how is the multiplier determined using EBITDA or EBITDARL?

 

[traveler17]

I have an appraisal on 2 washes. The appraiser used EBITARL and multiplied by 8 an came up with a value. The value seems VERY high to me. There were 5 “similar” properties listed in the comparisons section. The properties all had a gross income lower than the subject properties The multipliers used were 6.59,8.33,6.03, 8.0, 8.25 for an average of 7.44.
We don’t know the details on these sales except that they are all carwashes.
I guess the important question I need answered is: how is the multiplier determined using EBITDA or EBITDARL?

I’ve never heard of any multipliers that high except for someone who really wants the business/ property. 3 to 4x’s is what I’ve always gone by

 

[OurTown]

I’ve never heard of any multipliers that high except for someone who really wants the business/ property. 3 to 4x’s is what I’ve always gone by

He is talking about using the net income (without depreciation and a few other line items) as a multiplier. I assume you are using gross income for the 3-4 times calculation.

 

[OurTown]

I have an appraisal on 2 washes. The appraiser used EBITARL and multiplied by 8 an came up with a value. The value seems VERY high to me. There were 5 “similar” properties listed in the comparisons section. The properties all had a gross income lower than the subject properties The multipliers used were 6.59,8.33,6.03, 8.0, 8.25 for an average of 7.44.
We don’t know the details on these sales except that they are all carwashes.
I guess the important question I need answered is: how is the multiplier determined using EBITDA or EBITDARL?

Around here from what I can see (I can't always see the net) those would be low multipliers. We just had our wash appraised and I think it was over the 10 multiplier. (need to double check that) That is why we still have only one wash at this time. Except for a few that got away the prices are a little nutty for what I consider to be a business on the risky side. Maybe I'm too greedy? It would be nice to survive the next Carwashageddon like we had in 2008-2010. Many washes around here went back to the bank then. I had to look up EBITDARL and from what I read if the wash included the land and was not leasing it or leasing equipment then it would have the same result as EBITDA. It just strips out another expense that the EBITDA didn't already and either of those should show higher profitability than the actual net. (which should be a higher multiplier than the net also) With all that said I did see recently a few washes that sold very recently that would be more in line with your multipliers.

 

[Randy]

The income multiplier is out the window here. There are 3 car washes that listed for sale here. One at $850,000 another one listed at $875,000 and one listed at $1.3 million. All 3 of these are total dumps. There are a couple more that are listed privately and they want $700,000 for those 2.

 

[traveler17]

He is talking about using the net income (without depreciation and a few other line items) as a multiplier. I assume you are using gross income for the 3-4 times calculation.

I was. Sorry I failed reading comprehension

 

[Roz]

The income multiplier is out the window here. There are 3 car washes that listed for sale here. One at $850,000 another one listed at $875,000 and one listed at $1.3 million. All 3 of these are total dumps. There are a couple more that are listed privately and they want $700,000 for those 2.

Land value is higher than business value, happens in some parts of the country but that should be changing as interest rates rise, and rise, and rise....it will return to a more rational level eventually

 

[Keith Baker]

What multiplier are people using to determine valuations?
Example property is absolute turnkey IBA/SS
What is the maximum GIM (Gross Income Multiplier)
What multiplier are you using for EBITDARL or EBITDA?

My recent sale was for a moderately busy six bay SS. Nothing fancy but everything worked and up to date. A solid following in the neighborhood. My books showed accurate data and could be backed with tax returns for three years.
I'm not comfortable giving dollar figures, but will give you some ratios from the transaction.
An agent approached me with a prospect interested in my operation. We showed him the gross sales and the EBITA. I explained to him there was no management fees and labor involved in that figure.
I took that figure and deducted an amount to represent 25 hours per week of mixed management and labor. I appraised it at an 8% cap rate of that figure.
The amount that I received was worth 6.5 years income.

 

[soonermajic]

My recent sale was for a moderately busy six bay SS. Nothing fancy but everything worked and up to date. A solid following in the neighborhood. My books showed accurate data and could be backed with tax returns for three years.
I'm not comfortable giving dollar figures, but will give you some ratios from the transaction.
An agent approached me with a prospect interested in my operation. We showed him the gross sales and the EBITA. I explained to him there was no management fees and labor involved in that figure.
I took that figure and deducted an amount to represent 25 hours per week of mixed management and labor. I appraised it at an 8% cap rate of that figure.
The amount that I received was worth 6.5 years income.

So you're saying you got 6x the gross amount? If so, u didn't sell it, u robbed them.
But, PT Barnum said "there's a sucker born every day"...

 

[Kar B Kleen]

So you're saying you got 6x the gross amount? If so, u didn't sell it, u robbed them.
But, PT Barnum said "there's a sucker born every day"...

If he was a car dealer, he'd be a crook. But as a land/business owner, he a smart businessman.

 

[Keith Baker]

If he was a car dealer, he'd be a crook. But as a land/business owner, he a smart businessman.

I would prefer to see myself as the latter of the two.
Listen, the wash is busy in a part of town that is growing. Sales have been growing 15% per year the last three years. The place is profitable and he will easily be able to pay it off early. And his bank's appraiser agreed to the purchase price.
As far as the earlier post that said I robbed him, those are the kind of comments that you would expect from an Oklahoma fan.

 

[soonermajic]

Listen Keith, I legit hope yall get it turned around. UN fans deserve to be = to Ohio St.
w/out all the arrogance!
Glad Bake planted that flag on those arrogant pricks!!