# 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.

# Business valuation of tour operators

If you need to value a tour operator company, here are some key industry statistics to consider:

Classified under the SIC code 4725 and NAICS 561520, there are 2,993 firms in the US alone. These tour operators generate a combined annual revenue of \$4,397M with 32,125 staff.

Yet the average tour operator business is a small company with annual sales of \$4,397,000 and 11 employees.

The industry sector revenues have grown about 38% from \$3,190M in 2002 to over \$4,397 in 2007. However the number of firms has declined 4.8% in the same period. Employment has also contracted about 0.71%.

The successful tour operators have grown larger and more efficient with revenue per employee \$135,852; up 39% from 2002.

### Valuation of tour operators – market approach

Such established successful companies are frequent acquisition targets. You can use data on comparable tour operator business sales as a basis to estimate the market value of your company.

The usual tools are valuation multiples calculated from recent tour operator company sales. The valuation multiples are ratios that relate the business selling prices to their financial performance metrics. Some common valuation multiples used in valuing tour operators are:

### Example: Valuation of a tour operator business using multiples

To demonstrate the idea, let’s take a look at an average tour operator business with the following annual financials:

• Revenue: \$4,400,000
• SDCF: \$350,000
• Furniture, fixtures and equipment (FF&E) assets: \$122,000

Now we apply a set of reasonable valuation multiples to calculate the business value below:

Multiple Multiple value Business value
Business value to gross revenues 0.148 \$651,200
Business value to SDCF 2.280 \$798,000
Business value to FF&E assets 5.968 \$728,096
Average Business Value \$725,765

Why such a spread of business value results across the different valuation multiples? This depends on how well our sample company performance compares to other tour operators.

In this example the company is quite profitable and generates above average returns on its fixed assets. However, its gross revenues are just average resulting in a lower business value estimate figure.

# Valuation Multiples for Tour Operators

Recent sales of tour operator companies are a great source of valuation multiples. They help you value your business based on its gross revenues, net sales, profits, EBITDA, cash flow and assets.