Most people assume that the larger the business (i.e. sales and cash flow) the higher the multiple will be when it is purchased. I was curious to see what the baseline Price to Discretionary Earnings (P / SDE) multiple was regardless of industry; so I did a search of all industries in the PeerComps database. What I found was the average business that sold generated $1MM in Sales, $290K in SDE, and sold for 2.8 X SDE. Working on the theory that the larger the business the larger the multiple, any business that generates more than $1MM in Sales and $280K in SDE should sell for a multiple higher than 2.8 X SDE and vice versa – right? Well the majority of the time that would be true . . . yet found an industry that completely defies this theory – Coin Laundries
A search of all Coin Laundries in the PeerComps database (42) yielded some interesting results. The Coin Laundry businesses that sold generated an average of $300K in Sales and $120K per year in SDE and sold for 3.32 X SDE. Compared to the average of all businesses in the database, Coin Laundries are almost 3 times smaller but sell for a multiple of SDE that is 20% higher. Further research shows there are a few key variables that cause this difference; Coin Laundries are a Recession Proof Operation, Generate Stronger Cash Flow Margins (23.6% v. 37.6%), and Require Minimal Owner / Manager Oversight when compared to the average small business. 
So, there you have it. . . another interesting data point from PeerComps. Subscribe to our Blog or click below to get free 24-hour access to the database.
After reviewing business valuations in PEERCOMPS from 2008 through 1st quarter 2010, most company financials were on a downward trend during that time; obvious indications of the recession.
Now, in 2011, the picture is a little different. From a business economic standpoint, lending is beginning to increase, and the volume of transaction data in PEERCOMPS (which is driven by SBA-approved transactions) is increasing from previous years. The PEERCOMPS transaction database shows company financials leveling off while some even show slight increases. Hopefully, these are indicators of a rebound in our economy that parallels the rebound we are seeing in SBA lending. This is positive news for entrepreneurs, and buyers and sellers of small business. Whether its time to retire, expand, acquire or merge, the business comparables data from PEERCOMPS indicates strong growth opportunities across a handful of industries from the types of businesses within niche industries offering proprietary products. For example, professional services companies that offer proprietary technologies or processes that enhance the customer experience show the strongest opportunity for top-line growth, while professional services firms who perform within the status quo will likely struggle to grow or even maintain current revenues.
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