Industrial & Commercial Machinery Manufacturing 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 industrial and commercial machinery manufacturing businesses relative to industry standards.

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Highlights of Industrial & Commercial Machinery Manufacturers Sold on BizBuySell

Industrial and commercial machinery manufacturing companies listed and sold on BizBuySell range from small shops manufacturing niche parts and specialty machines to larger operations producing a range of machinery used in industrial and commercial applications.

Industrial & Commercial Manufacturing Business Transaction Trends

The median sale price of industrial and commercial machinery manufacturing businesses surged in 2020, during the height of the pandemic, due to an atypical number of larger businesses selling, potentially to avoid navigating the economic turmoil. Since then, median sales price has returned to pre-pandemic levels, though 2022 saw another spike due to a rise in valuation multiples.

Industrial & Commercial Manufacturing Business Valuation Multiples

Valuation, or pricing, multiples are financial tools that allow for comparisons between businesses that have different levels of sales and income. 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 industrial and commercial manufacturing businesses tend to be more volatile than other industries, due to the relatively small number of transactions, and the outsized influence of strategic acquisitions. In 2022, a disproportionate number of strategic acquisitions at earnings multiples between six and ten combined with market-wide valuation increases drove average values out of bounds, before interest rate hikes brought them back down.

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 annual sales or revenue. In conjunction with an earnings analysis, revenue multiples are commonly used to value a business based on its top line 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 industrial and commercial machinery manufacturing businesses for sale, and our database of "comparable" businesses sold on BizBuySell. Multiples based on listing data are usually 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. When current listing multiples are lower, that signifies decreasing values or previously inflated values of sold 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.

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. Smaller 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 industrial and commercial manufacturers are valued and sold between 2.21 and 4.26 times their annual seller discretionary earnings, with 25% of exceptional, larger 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 performance 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 financial ranges of industrial and commercial manufacturers that are useful for comparing an individual business to its peers sold and for sale.

Industrial & Commercial Manufacturing Business Revenue and Earnings Trends

Median revenue of industrial and commercial manufacturing businesses sold on BizBuySell tends to hover between $1MM and $1.5MM. Median revenue surged in 2020 as an outsized number of larger businesses with revenues well over $5MM sold, potentially to avoid managing the economic turmoil caused by the Covid-19 pandemic. Since that year, median revenue and earnings have returned to previous levels, though there is fairly consistent growth in this industry.

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 similar businesses traded on the market. Below you will find reported owner's discretionary earnings ranges of industrial and commercial manufacturers sold over the past five years, as well as from recently added 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 industrial and commercial manufacturers sold over the past five years and recent businesses listed for sale.

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. Industrial and commercial manufacturing businesses that generate higher sales (and maintain reasonable profit margins) tend to sell for earnings multiples on the higher end. So, an industrial machinery manufacturer generating revenues over $3MM annually may sell for an earnings multiple around 4.2 or higher, where a smaller commercial parts manufacturer with sales below $1MM may trade closer to 2.2 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 return on the purchase price.

Sector Comparisons

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

Among other categories of manufacturing businesses, industrial and commercial manufacturers tend to fall towards the higher end in terms of average earnings multiple and median revenue. Like most manufacturing businesses, the operating model, capital intensity, and barriers to entry are similar, and so valuations tend to hinge on size and sales volume - though industrial and commercial manufacturers tend to receive a very slight premium compared to other manufacturers.

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