Natural Foods Merchandiser

Industry expert's letter to the editor clarifies sales number

To the Editor,

Over the last 20 years we believe our company has appraised and facilitated in the sale of more natural product stores than any other firm. As such, the article penned by Vicky Uhland, "Don't fly solo when selling your business" in the February Natural Foods Merchandiser caught our eye.

With the paramount question in business owners' minds relating to how much their business is worth, we felt it was important to step up and correct the inaccuracy reported in the article. The statement attributed to attorney Ned Minor that "stores are worth 1.5 percent to 2 percent earnings, before interest, depreciation, taxes and amortization" is neither understandable nor correct. With due respect to Mr. Minor, we are assuming he was inaccurately quoted here.

Having data in our files on the sales of more than 200 natural products businesses we are happy to provide some accurate information on what industry average stores are selling for. Although we recommend a complete appraisal be completed for any business before selling, here are the current average valuation ranges for retail natural product businesses, based on annual sales volume from actual business sales transaction data:

Less than $1 M, 2.5 to 3.25 times EBITDA
$1 M - $3 M, 3.25 to 3.75 times EBITDA
$3 M - $5 M, 3.75 to 4.25Â times EBITDA
$5 M - $10 M, 4.25 to 5.25 times EBITDA
$10 M - $25 M, 5.25 to 6.25 times EBITDA
$25 M - $50 M, 6.25 to 7.50 times EBITDA
$50 M - $75 M, 7.50 to 8.50 times EBITDA
$75 M - $100 M, 8.50 to 9.50 times EBITDA

We agree that it is not wise to use averages, because there are many factors involved in pricing each business. These include profitability, annual growth, competitive environment, branded products, new stores in development, seasoned management staying on, etc. that make each valuation unique.

In each of the revenue ranges listed above there are businesses that sold for multiples greater or lesser than these averages. However, for those looking to hold a wet finger in the air to get a general temperature reading of what they can expect to receive for their business, the data above will provide an accurate average guideline. Anyone looking to sell their business, should use this only as a general guide and not for final pricing on their business.

Danny Wells
President, Danny Wells & Associates Inc.
Vaca Valley, Calif.

Natural Foods Merchandiser volume XXVIII/number 5/p. 16

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