There are many methods of valuing a label company such as the market approach, income approach and asset approach. The market approach compares sales of similar companies in ratio form. The income approach is based on the value of future earnings while the asset approach typically estimates the value of assets minus liabilities. Sometimes all are used, other times one is preferred.
The market approach is one of the least complicated and most widely used methods overall and in the label industry. It is based upon pricing multiples derived from comparable business sales, typically a multiplier to the 'normalized' annual earnings before interest, taxes, depreciation and amortization, also called EBITDA. Some use EBITDA as a proxy for cashflow. Other like it because it's less dependent on arbitrary accounting principles and how you finance your company.
The key is which multiplication factor to use. We have seen many deals being made at ratios between 3 - 6. The more unique the company, the higher the ratio.
The first step in selling your company is to have a good understanding of the value. 3-6 times 'normalized' earnings before interest, taxes and depreciation will give you a first indication. The price you get for your company then has to be split between you, the owner, and the debt holders.
The market approach is one of the least complicated and most widely used methods overall and in the label industry. It is based upon pricing multiples derived from comparable business sales, typically a multiplier to the 'normalized' annual earnings before interest, taxes, depreciation and amortization, also called EBITDA. Some use EBITDA as a proxy for cashflow. Other like it because it's less dependent on arbitrary accounting principles and how you finance your company.
The key is which multiplication factor to use. We have seen many deals being made at ratios between 3 - 6. The more unique the company, the higher the ratio.
The first step in selling your company is to have a good understanding of the value. 3-6 times 'normalized' earnings before interest, taxes and depreciation will give you a first indication. The price you get for your company then has to be split between you, the owner, and the debt holders.
