Buyers first look at cash flow from operations as the main factor in determining value. They think of your business as a stream of cash for which they try to come up with a value. Cash flow may include measurements such as EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and EBIT (Earnings before Interest and Taxes). In the label industry - as in many other manufacturing industries - typically the EBITDA is used as a proxy for cash flow.
In addition to the cash flow there are many other factors which will impact the business’ valuation. These factors may include fixed and current assets to be transferred to a buyer, liabilities including interest bearing debt to be assumed by a buyer, lease and contract rights and obligations, past and projected future growth and profits.
Unfortunately for the business owner, a single formula to compute the value of a business does not exist. Nonetheless, a valuation of 3-6 times a label company’s EBITDA is a good starting point. You are welcome to contact us for a confidential, no-obligation discussion.