Clothing & Fabric 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 clothing, fabric, and other textile manufacturing businesses relative to industry standards.

See also: Retail Clothing Business Valuation Benchmarks

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Highlights of Clothing & Fabric Manufacturing Businesses Sold on BizBuySell

Textile manufacturing businesses listed and sold on BizBuySell engage in the production and sale of clothing and garments, drapery and upholstery materials, quilts, sheets, blankets, and bedding materials, fabric decor, and related products. These companies vary widely in size and scale, from small boutique clothing manufacturers to larger textile mills.

Clothing & Fabric Manufacturing Business Transaction Trends

Sale prices of textile manufacturing businesses have generally been increasing over the past five years, with dips in 2020 and 2022, likely driven by the Covid-19 pandemic and increasing interest rates, respectively. More, and larger, textile and clothing manufacturers have been entering the market as values improve and demand for domestic manufacturing grows in response to global supply chain disruptions and tariffs.

Clothing & Fabric 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. Textile manufacturing valuation multiples have largely moved with the rest of the manufacturing sector, surging in 2021 as demand for domestic manufacturing businesses grew, then falling with increasing interest rates and associated rise in business acquisition loan costs.

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 textile 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 clothing and textile manufacturing businesses are valued and sold between 1.60 and 3.48 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 textile manufacturing business financial ranges useful for comparing an individual business to its peers that have sold and are for sale.

Clothing & Fabric Manufacturing Business Revenue and Earnings Trends

Over the past five years, median revenue of clothing and textile manufacturing businesses sold on BizBuySell has increased 285%, as more, larger businesses sell. At the same time, median owner earnings has increased 85% as profit margins decrease. Pressure are margins are likely caused by inflation, driving up cost of goods sold, though clothing and fabric manufacturing remains one of the more profitable areas of small business.

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 of clothing and fabric manufacturing businesses sold over the past five years, as well as from recent manufacturing 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 clothing and fabric manufacturing businesses sold over the past five years and recent businesses listed for sale.

How Revenue and Earnings Level Affects Business Values

Naturally, 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 textile mill with annual revenue over $2MM may sell for an earnings multiple of 3.5 or higher, where a smaller boutique clothing manufacturing business with sales below $350k may trade below 1.6 times its owner's 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.

Textile and clothing manufacturers tend to be valued in line with other manufacturing businesses. Average multiples are lower only because there tend to be more, smaller businesses in this subsector. Revenue and earnings multiples improve as business size increases, all other things being equal. 

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