ValuAdder Business Valuation Blog

Business valuation tips, updates and advice. Pick up a few suggestions on how to value a business. Feel free to browse the contents or share your thoughts by leaving a comment.

If you are valuing a women’s apparel store, there a number of important factors to consider:

Apparel retail business value drivers

  • Rental expenses for successful stores are kept to within 10% of the gross revenues.
  • Labor costs are a significant factor that contributes to the store profitability and business value. The industry norm is to keep labor expenses under 18% of gross revenues.
  • Product costs and gross margins. Successful retailers have their COGS within 50% of sales.
  • Product and market differentiation. Many apparel retailers have carved out lucrative niches – with bridal, maternity, men / women product mix, gifts and special occasion offerings.
  • Quality of customer service. Often the store’s image and its ability to attract and retain customers depends on the quality of its service staff.

Valuation multiples for womens clothing stores

Owner-operator managed small apparel retailers are frequent acquisition targets. You can use such private business sale comparables to estimate your own business market value. The standard technique is to develop valuation multiples that relate the business likely selling price to its financial performance.

Here are the valuation multiples that your industry peers use most often when pricing a women’s clothing store for sale:

One reason that the apparel stores are mostly priced on business gross revenues is that many buyers make considerable changes to the store after they take over. This is done in order to reduce the operating expenses and improve the business profitability.

Other business valuation methods

You can also value a women’s clothing store using a number of well-known business valuation methods under the market, asset, and income valuation approaches.

Valuing a business as a multiple of earnings

For small retailers the Multiple of Discretionary Earnings method offers a great way to assess your business value based on its earnings and a set of key financial and operational performance factors.

Business valuation based on cash flow and risk

For larger, multi-location retailers, the Discounted Cash Flow valuation method is preferred. Using this business appraisal technique you can determine your business worth based on its earning capacity and risk.

Business goodwill estimation for established retailers

Well-established women’s clothing store command considerable goodwill in their market. You can determine the value of business goodwill using the classical Capitalized Excess Earnings method.

Be careful to adjust the business assets to their market values. One asset that often calls for such an adjustment is inventory. If you carry inventory in excess of 1 year’s worth – reduce it to good and salable levels.

Valuation of an Apparel Retail Business

Consider using a number of well-known business valuation methods to create an accurate, defensible appraisal of an apparel retail store.

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