Medical Device 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 medical device manufacturing businesses relative to industry standards.

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Highlights of Medical Device Manufacturing Businesses Sold on BizBuySell

Medical device manufacturing businesses listed and sold on BizBuySell design, produce, and distribute products for a wide variety of medical uses. These can include wheelchairs and ambulatory devices, diagnostic equipment, monitoring devices, therapeutic products, and laboratory equipment.

Medical Device Manufacturing Business Transaction Trends

The median sale price of medical device businesses sold over the past five years has been softening, coming down as interest rates rose in 2022. By 2024, prices had rebounded somewhat, reaching 90% of 2020 levels.

Medical Device 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. Medical device businesses saw valuations peak in 2020 as the Covid-19 pandemic boosted demand, then increasing interest rates brought average multiples back to pre-pandemic levels. Values rose again in 2024 with increasing demand for manufacturing businesses overall.

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 the 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 a reasonable 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 medical device 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. 

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 medical device manufacturing businesses were valued and sold between 1.84 and 3.1 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 medical device manufacturing business financial ranges useful for comparing an individual business to its peers sold and for sale.

Medical Device Manufacturing Business Revenue and Earnings Trends

Median revenue and discretionary earnings of medical device manufacturing businesses sold on BizBuySell saw a boost after the pandemic, first in profit margins, then overall sales. These increases played out over the following years, as business owners typically use trailing 3–5-year financials when selling.

These businesses operate in an industry with fairly consistent demand, and so, barring special circumstances like a global pandemic, financial performance tends to be more consistent than some other areas of manufacturing. Medical device businesses tend to be some of the more profitable small businesses.

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 owner's discretionary earnings ranges for medical device manufacturing businesses sold over the past five years, as well as from recent business 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 medical device manufacturing businesses 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. Businesses that generate higher sales (and maintain reasonable profit margins) tend to sell for earnings multiples on the higher end. So, a wheelchair manufacturer generating over $1.3MM may sell for an earnings multiple over 3.1, where a stethoscope manufacturer with sales below $500k may trade below 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. Note the tight correlation between median revenue and average earnings multiple.

Manufacturing business valuations do not vary materially between individual categories but correlate tightly to sales volume. Because all these categories tend to have similar labor and capital requirements, the main criterion driving valuation is financial performance. Medical device manufacturing businesses tend to be on the smaller end of the spectrum, usually producing and distributing niche products at relatively smaller scale. The result is generally lower valuation multiples. However, relative to their size, they may receive a small premium compared to other manufacturers, though the value is negligible.

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