Business valuation of mail box rental and shipping companies
If you own a private mailing business or need to appraise one for a client, here are some interesting statistics to consider:
Mail box rental and shipping companies are classified under the SIC code 7389 and NAICS 561. This business services sector has just under 1,500,000 firms that generate over $301B in annual revenues.
The business services industry segment employs some 3,639,000 people. Yet the average firm is definitely small business: with annual sales of $200,000 and a staff of just 2.
Business valuation methods for mail box rental and shipping firms
Successful private mailing companies sell quite often. You can develop a very good idea of your business value by comparing it to the companies that sold recently. Using the valuation multiples derived from such business sales, you can calculate the fair market value of your business based on its revenues, gross profit, net income, EBIT and EBITDA, the business asset base and owners’ equity.
Example: valuing a mail box rental business using valuation multiples
To demonstrate this market approach to valuing a business, let’s take a typical mail box rental and shipping firm with the following financials:
-
- Annual gross revenue: $200,000.
- Net sales: $185,000.
- Gross profit: $120,500.
- Net income: $17,000.
- EBIT: $18,900.
- EBITDA: $19,250.
- Seller’s discretionary cash flow (SDCF): $75,000.
- Furniture, fixtures and equipment assets (FF&E): $50,000.
- Inventory: $4,500.
- Total business assets: $61,500.
- Book value of owners’ equity: $44,000.
We next pick a set of sensible valuation multiples to calculate the value of our example business as its potential selling price:
| Multiple | Multiple value | Business value |
|---|---|---|
| Price to gross revenue | 0.65 | $134,500 |
| Price to net sales | 0.70 | $129,500 |
| Price to gross profit | 1.1 | $132,550 |
| Price to net income | 7.1 | $120,700 |
| Price to EBIT | 7.45 | $140,805 |
| Price to EBITDA | 7.5 | $144,375 |
| Price to SDCF | 2.1 | $162,000 |
| Price to FF&E assets | 3.5 | $179,500 |
| Price to total assets | 2.5 | $153,875 |
| Price to owners equity | 3.0 | $132,000 |
| Average Business Value | $133,738 | |
Other business valuation methods for private mailing service companies
No business valuation is complete without the use of several methods under each approach: Asset, Income and Market. Since many mail box rental and shipping businesses are owner operated, the Multiple of Discretionary Earnings method is an excellent complement to verify your market value assessment.
Using this well-known income-based valuation method, you can create a comprehensive appraisal based on the business earnings and 14 critical financial and operational performance factors.
If the business has established itself in its market place over many years, chances are there is considerable goodwill. To determine the value of business goodwill, consider using the classical Capitalized Excess Earnings method. Known as the Treasury Method, this valuation technique lets you calculate the value of business goodwill and total company value.
See Valuation Tour