Business Valuation Blog | Understanding Buying / Selling a Company

What's Involved in a Dry Cleaners Business Valuation?

Posted by Business Valuation Specialists LLC on Feb 17, 2020 8:00:00 AM

Dry cleaner business valuation

When your business is dry cleaning, clothes, customers and constant movement. Whether it's your racks, machinery or premises, there's always something on the go. But how do you put a value on your loyal customers, the services you provide and your reputation in the community? A dry cleaners business valuation can provide you with a wealth of information on your company, beyond a simple calculation of value. But how does it work? What's involved in the process? Here's a quick look at how a valuation is performed on this type of business.

What's Involved in a Dry Cleaners Business Valuation?

Dry cleaning businesses often have a range of aspects that are common to other companies, such as receivables, expenses and assets, but also has a number of areas where it stands out. Generally speaking, companies are valued as the appraiser considers finances, intangible assets such as community goodwill, competition and the current market conditions. These factors are adjusted for the specific business, any unusual activity and similar aspects.

When a dry cleaning business is appraised, there tend to be three specific areas that stand out compared to other industries. These aspects can quickly change the value of the business, as market factors change. 

First, the dry cleaning industry is dependent on consumer spending. When the economy is poor, many consumers switch to using wash and wear clothing rather than bearing the expense of dry cleaning more expensive clothing. This can rapidly change the value of your business, causing you to lose value during hard times and gain it during good times. For that reason, having a plan in place to reduce expenses, provide better value to your customers and similar approaches can help boost your income during the tough times.

Secondly, the operating efficiency of the business is of vital importance in determining value. If you're employing a lot of people who are not actively working, if your equipment is inefficient or if you're not making the most of your customer contacts, your business will have high overhead expenses and low profitability. Improving efficiency by upgrading equipment, optimizing employee workflow or creating a rewards program for customer referrals will help you boost efficiency and profitability while reducing your overhead cost percentage.

Thirdly, the location of the business is an important factor in constant income. If your business is in a poor location, if the neighborhood becomes undesirable or changes in local roadways makes it hard to reach or park near your business, you can quickly lose business as patrons change to more convenient, safer or easier-to-find locations. Changing location can make it much easier to gain back lost income, but your location must always remain a prominent part of your business plan.

There's no doubt that a dry cleaners business valuation can provide you with a wide range of benefits for your business, and knowing what's involved in the process makes it easier to understand the factors underlying your company's value. However, it's of vital importance that you have your valuation performed by an accredited business valuation specialist. This qualification means that the appraiser has been through rigorous, specialized training to properly calculate your business' value using standardized methodologies that have been tested in a wide range of real-world situations.

Topics: Dry Cleaning Business Appraisal