How to Value a Printing Company
Printing businesses provide print services for various markets including manufacturers, publishers, and advertisers. Printing services include printing on paper, textile products, glass, metal, etc… In recent years, the printing industry has generated over $87 billion in revenue. As such, buying, growing, or selling a printing shop can be lucrative. Whether you are entering or exiting the printing industry, it is helpful to know how to value a printing company.
To learn how to value a printing company, it is best to receive a business appraisal. As part of a business appraisal, business appraisers determine the fair market value of a printing company. In addition, they will discuss the risks and opportunities associated with your printing company. With this information, you can begin to increase the value of a printing company.
As a professional business appraiser, Peak Business Valuation values printing companies across the nation. We are happy to provide you with a business appraisal for a printing company you are buying or selling. In addition, Peak can discuss any inquiries you may have on how to value a printing company. Start now by scheduling a free consultation with Peak Business Valuation below!
How to Value a Printing Company
When deciding how to value a printing company, business appraisers assess several common business valuation approaches. At Peak, our valuation analysts often utilize the market approach and/or the income approach. Each approach offers a different perspective on the value of a printing company. As such, business appraisers will determine which method is best as part of the valuation process. This may include using a combination of valuation methods.
Valuing a Printing Company Using the Market Approach
The market approach is one of the most common valuation approaches for valuing a printing company. This approach is similar to the real estate appraisal process. When valuing a home, real estate appraisers assess similar properties that recently sold in the area. This helps them determine a fair value for the home. Similarly, business appraisers look at similar companies that recently sold when valuing a printing company. If the printing company is privately owned, valuation analysts gather relevant information from private transaction databases.
Multiples for a Printing Company
When using the market approach, valuation experts work with valuation multiples. These are financial ratios which measure the value of printing companies based on metrics including cash flow, sales, and earnings. To find the appropriate valuation multiples for a printing company, business appraisers apply the proper NAICS or SIC code. In the following section, we discuss SDE, EBITDA, and REV multiples for a printing company.
SDE (Seller’s Discretionary Earnings) Multiples for a Printing Company
- The SDE multiple is common when valuing a printing company. This multiple measures the value of a printing business in relation to its seller’s discretionary earnings.
EBITDA Multiples for a Printing Company
- EBITDA multiples reflect a printing company’s earnings before interest, taxes, depreciation, and amortization. This helps experts understand the return on investment (ROI) printing companies can expect.
REVENUE or SALES Multiples for a Printing Company
- REVENUE or SALES multiple analyzes the value of the company in relation to the earnings of the print shop.
To learn more on how to value a printing company using the market approach, see Valuation Multiples for a Print Shop.
Valuing a Printing Company Using the Income Approach
The income approach is another common business valuation method. This valuation approach assesses the income potential of a printing business. In addition, the income approach looks at the risks associated with buying, growing, or selling a printing company. Below, we discuss a few common risks in this industry.
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- Financial Performance: The printing industry has experienced adverse financial conditions in recent years. To succeed, it is vital to have strong financial planning skills.
- Location: The location of a printing company has a strong influence on its value. It is ideal to locate near key markets such as manufacturers, publishers, and advertisers.
- Competition: The printing industry is extremely competitive. As such, operators need to find ways to differentiate from competitors.
- Machinery: Printing businesses use a variety of printing machinery and equipment. It is important to acquire high-quality machinery and equipment to succeed. In addition, you may consider obtaining a machinery and equipment appraisal to understand how your machinery affects the value of your printing company.
Methods to Value a Printing Company Using the Income Approach
There are several variations of the income approach. The most common income approaches are the capitalization of cash flow method and/or the discounted cash flow method. Both of these approaches assess the income potential of a printing company. Below, we discuss how to value a printing company using the capitalization of cash flow method and/or the discounted cash flow method.
Capitalization of Cash Flow Method
The capitalization of cash flow method is ideal if your printing company has a long and stable history. When using this method, valuation analysts determine a reasonable amount of income for one period. The income is then divided by a capitalization rate which indicates the rate of return investors can expect. Additionally, the capitalization of cash flow method assesses any risks associated with buying or selling a printing company. We highlight a few of these risks above.
Discounted Cash Flow Method
The discounted cash flow method is best for printing companies with strong financial histories and/or reliable forecasts. This income approach involves projecting future cash flows over a 3-5-year period. Then, valuation analysts apply a discount rate rather than a capitalization rate to take the time value of money into account. Keep in mind, the discounted cash flow method is less common since it relies on future cash flow estimates which can be arbitrary.
Summary
Whether you are buying, expanding, or selling a printing company, it is helpful to understand how to value a printing company. The most common business valuation methods for valuing a printing company are the market approach and the income approach. To learn which method is most suitable for your printing company, receive a business valuation. During a business valuation, a business appraiser will also calculate the value of a printing company. This information can help you take the next steps in increasing the value of a printing company.
Peak Business Valuation, business appraiser, values printing companies on a regular basis. We are happy to provide you with a business valuation for a printing company! In addition, Peak can answer any questions you may have on valuing a printing company. Start now by scheduling a free consultation with Peak Business Valuation, below!
See also Valuing a Printing Business, Valuation Multiples for a Print Shop, and Value Drivers for a Printing Companies.
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