Dry Cleaning Business Valuation Benchmarks

Business owners, prospective buyers, and industry investors rely on a diverse set of financial benchmarks to assess the value of a business. We have compiled data from current BizBuySell listings and sold businesses to provide insight into the business for sale market and important benchmarks for pricing and evaluating dry cleaner businesses relative to industry standards.

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Highlights of Dry Cleaner Businesses Sold on BizBuySell

Dry cleaning businesses listed and sold on BizBuySell are comprised primarily of locally owned small businesses engaging in the washing of clothes, bedding, furniture coverings, and other fabric materials using chemicals and solvents instead of water. Most of these businesses are independent brands, though occasionally franchise units are sold as well. These businesses often include complementary components such as limited sewing or alterations services.

Dry Cleaning Business Transaction Trends

The median sale price of dry cleaning businesses sold on BizBuySell has grown 41% in the five years from 2020 through 2024, which is nearly twice the rate of the business for sale market as a whole. In general, dry cleaning businesses were negatively affected by the Covid-19 pandemic, but the industry has largely recovered as work-from-home trends seem to be abating.

Dry Cleaning Business Valuation Multiples

Valuation, or pricing, multiples are financial tools that allow for comparisons between businesses that have different levels of revenue and earnings. They represent the sales price of a business relative to its financial performance, and given enough individual business sales data, they represent what the market is willing to pay for a business given its revenue and earnings.

Valuation Trends

Business values and associated multiples fluctuate over time, influenced by a variety of macroeconomic factors such as interest rates, inflation, consumer spending, and overall economic growth.

Valuation multiples of dry cleaning businesses reported sold on BizBuySell have been largely flat, with the average earnings multiple hoverign around 2.0 between 2020 and 2024. However, the average revenue multiple increased from 0.67 to 0.77 at the same time, thanks to improving profit margins (more on that below).

Earnings Multiples

Earnings multiples represent the value of a business relative to its owner’s discretionary earnings or "cash flow". Arguably the most important valuation metric - as seller's discretionary earnings will often dictate how much a buyer is able to borrow to finance the business acquisition - most valuations will hinge on the earnings multiple.

Revenue Multiples

Revenue multiples represent the value of a business relative to its overall sales or revenue. In conjunction with an earnings analysis, revenue multiples are commonly used to value a business based on its overall sales.

How to Interpret These Multiples

Recent Listings vs. Sold Businesses

We calculate and provide valuation multiples from two sources: Current and recent listings of dry cleaner businesses for sale, and our database of "comparable" businesses sold on BizBuySell. Multiples based on listing data are generally higher due to owners setting asking prices above what their businesses might typically sell for. This occurs either intentionally as a negotiation strategy, or incidentally due to business owners’ common tendency to overvalue their own businesses.

Multiples based on comparable businesses - "comps" in business broker parlance - are much more useful as they represent the prices at which businesses ultimately get sold. Business brokers and valuation professionals will always turn to local comps when pricing businesses for sale or evaluating businesses for acquisition. We provide both sets of data at the national level to offer general context. Local business sale comps by sales class suitable for pricing and negotiations are available in BizBuySell's Business Valuation Report.

Quartiles, Median, and Average

No two businesses are identical, and as such, valuation multiples exist in a range. We have carved out four common values within this range: Lower quartile represents the value under which the lowest 25% of valuation multiples fell. Upper quartile represents the value above which the highest 25% of multiples fell. Median is the middle of the range, and average is the mean of the set. Mean is almost always higher than the median, driven by a minority of high volume, high value businesses sold at multiples above the upper quartile.

Businesses with consistent financial performance, above average revenue and earnings, demonstrable growth potential, low owner involvement, unique competitive advantages, and a seller willing to finance will command a multiple at or above the upper quartile. Lower volume businesses with thin profit margins, full-time owner involvement, and many direct competitors will trade at or below the lower quartile. Most businesses will fall somewhere in the middle.

Based on this data, half of dry cleaning businesses are valued between 1.4 and 2.5 times their annual seller discretionary earnings, with 25% of exceptional, large businesses trading above this range, and 25% of smaller, less desirable businesses trading below.

Financial Benchmarks

To determine how a business compares in terms of revenue and earnings relative to industry peers, it’s necessary to have some insight into industry standards. "Benchmarking" describes the practice of comparing a business’s financial performance to typical industry standards to determine where a business falls relative to other businesses in the same industry. These benchmarks can help guide owners and investors towards appropriate valuation multiples from the range above.

To that end, we have aggregated industry financial ranges useful for comparing an individual dry cleaner to its peers in the market.

Dry Cleaner Business Revenue and Earnings Trends

Median revenue of dry cleaner businesses sold on BizBuySell was slow to recover from the Covid-19 pandemic until 2023 and 2024, as return to office mandates increase demand for dry cleaning services. Seller's discretionary earnings improved at an even greater rate, adding nearly 50% during the same five-year period. It's likely that the less financially sound dry cleaners did not survive the pandemic, leaving the rest to benefit from better profit margins.

Earnings Ranges

Discretionary earnings (used interchangeably with the terms "cash flow" and seller's discretionary earnings or SDE) is often the crux of business valuations, so it is important to benchmark it relative to other businesses traded on the market. Below you will find discretionary earnings ranges for dry cleaning businesses sold over the past five years, as well as recent for sale listings.

Revenue Ranges

Sales volume plays a large role in business valuation, as it measures the size of the potential income opportunity for new ownership. It's not uncommon for buyers to select an earnings multiple range based on overall revenue. The table below includes revenue ranges of dry cleaning businesses sold over the past five years, as well as recent for sale listings.

How Revenue and Earnings Level Affects Business Values

Clearly higher levels of earnings lead to higher valuations, even given the same multiple. However, valuation multiples also tend to rise with business sales volume. Larger dry cleaners that generate higher sales (and maintain reasonable profit margins) tend to sell for earnings multiples on the higher end. So, a dry cleaner consistently generating sales over $500k annually may sell for an earnings multiple of 2.5 or better, where a smaller dry cleaning business with sales below $200k may trade closer to 1.4 times earnings.

This tendency for higher sales volumes to fetch higher valuation multiples is largely driven by the economics of business acquisition financing. Higher volume businesses give buyers more cushion to cover debt service obligations and still have enough left over to pay the new owner a reasonable income.

Sector Comparisons

For a more complete understanding of the market and valuation standards, consider comparisons within the broader service sector when benchmarking dry cleaning businesses. The chart and table below includes key metrics from sales of service businesses on BizBuySell between 2020 and 2024.

Compared to other businesses in the service sector, dry cleaner values follow the average trend line of size to earnings multiple. Because the average dry cleaner business is relatively small compared to other service businesses, valuation multiples tend to be lower as well.

Sales volume is the biggest driver of business values relative to financials. Dry cleaners with above average revenue will fetch higher earnings multiples when they sell.

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