A retail business valuation is the sum where the inventory line matters most: the store's discretionary earnings times the multiple the owner enters, plus the stock on the shelves at cost, and a store that carries a season's stock can have more value in the second line than the first. How to value a retail business is therefore two numbers kept apart, and the hub's tool keeps them apart on purpose. This page works the retail sum on the hub's example, then the ecommerce business, the car dealership and the property management company, which differ in what the second line holds. The free small business valuation tool on this site does the sum from your own figures, with no account, and publishes no multiple.
How to value a retail business: earnings times your multiple, stock at cost
Discretionary earnings are the profit plus the owner's salary, benefits, interest, depreciation and one-off costs; $180,000 on the hub's example. Value is that times the multiple you enter, $450,000 at 2.5; the inventory is added at cost on its own line, $36,000 on the example, for $486,000, which is 2.7 dollars for every dollar of earnings once the stock is in. The stock is counted, not estimated, and at cost rather than retail, because the buyer is paying for what it cost to put on the shelf. Fixtures and equipment are a further line at their agreed value, and the lease is the fact that moves the multiple the owner enters, because a retail location is the business.
Ecommerce business valuation: the inventory, the platform and the traffic
An ecommerce business is valued on the same discretionary earnings at the multiple you enter, with the inventory at cost added and no lease to weigh; what moves the multiple is where the sales come from, a marketplace account that can be suspended or an owned store with its own traffic, and whether the supplier relationships transfer. On the hub's example the earnings value is $450,000 at 2.5 and the stock is added at cost. The owner's hours are the add-back, and the buyer's counter is the cost of the staff or the agency to replace them; the Bureau of Labor Statistics' occupational wage data is where those salaries are read.
How to value a car dealership: the floor plan and the franchise
An auto dealership valuation carries the largest inventory line of any trade, the vehicles on the lot, and the largest offset, the floor-plan financing against them, so the second line is the vehicles at cost less the floor plan, and a dealership with a full lot can show a small or a negative net inventory. The earnings value is discretionary earnings at the multiple you enter, $450,000 at 2.5 on the hub's example, and for a franchised dealership the manufacturer's approval of the buyer is the condition the whole sale hangs on. The parts inventory, the equipment and the real estate, if owned, are their own lines at agreed values, and the IRS Form 8594, linked below, is where the price is allocated across them at closing.
Property management company valuation: the contracts are the asset
A property management company carries no inventory; its value is discretionary earnings at the multiple you enter, and the buyer's question is whether the management contracts transfer and for how long, because the fees are recurring only while the owners stay. On the hub's example the earnings value is $450,000 at 2.5 before any equipment. The owner's salary is the add-back and the replacement manager's salary is the counter, and the multiple the owner enters carries the contracts' terms and the concentration of the portfolio. The Small Business Administration's guide to selling a business covers the sale; the free small business valuation tool on this site does the arithmetic and the report tool turns it into a range.
Questions people ask about retail business valuation
How is a retail business valued?
Discretionary earnings, the profit plus the owner's salary and one-off costs added back, times the multiple you enter, plus the inventory counted at cost on its own line, and fixtures at agreed value. $180,000 at 2.5 is $450,000, $486,000 with $36,000 of stock.
How is a car dealership different?
The vehicles are the inventory line at cost less the floor-plan financing against them, and for a franchised store the manufacturer must approve the buyer. The earnings arithmetic is the same.
What is a property management company worth?
Its discretionary earnings at the multiple you enter, with the transferability and terms of the management contracts as the fact that decides the multiple. The hub publishes none.