Appraising the value of a service business
Service businesses mainly sell their customers the hard work of their team, not manufactured products. The appraisal or valuation of a service business can vary widely, but similar types of business sell for similar multiples of their sales revenue. The following are a few examples.
(%) x (annual sales revenue) = (rough value).
PERSONALITY-BASED SERVICES (25% - 35%)
Hair and nail salons, real estate agencies, construction trades, and travel agencies fetch some of the lowest valuations largely because their customers choose them based on a relationship with the business owner. If the owner tries to sell the business, only part of the customers will transfer to the new owner.
HOME MAINTENANCE SERVICES (25% - 60%)
Appliance repair, handyman, garage doors, HVAC, plumbing, collect 25% to 40%. Carpet and window cleaning, general maid services, landscaping and holiday lighting, get the next tier up at 40% to 60%.
AUTO CARE AND MAINTENANCE (30% - 50%)
Auto shops specializing in brakes, transmissions, mufflers, and general repair are worth about 30% to 40% of sales. Auto detailing, lube, and glass are worth more, in the 40% to 50% range.
TRANSPORTATION AND RENTAL SERVICES (35% - 50%)
Transportation services including taxi and limo, bus chartering, ambulance services, and auto and trailer rentals.
SALES AND MARKETING (40% - 60%)
Firms in advertising, marketing consulting, website development, SEO and social media, get about half of their annual sales in value. The more residual, the better the value.
MEDICAL PRACTICES (40% - 70%)
General medical practices are on the lower side of the scale, with specialist towards the middle. Dentists, optometrists, chiropractors, and physical therapy enjoy the highest valuations. As if you needed another reason to envy your dentist, he's building a practice worth around 60% to 70% of sales!
FINANCIAL SERVICES (75% - 150%)
Want to grow a business with tons of value? Go to the money industry. These are insurance and investments, bookkeeping and accounting, check cashing and alternative lending. Payroll services and investment advisory services command the highest value rates.
Need more information for appraising your business? Contact us for a FREE approximation of value.
NOTE - Value ranges shown are based on our own research across thousands of actual recorded business sales. The value of your business may be different from what's shown here. This post should not be considers financial or legal advise of any kind, nor a statement of value for your particular business.