Let’s take a look at how you can put a value on your portable restroom service company.
People in the industry often ask me how to value a portable restroom service company. It’s a great question since businesses and marketplaces can be so different. Although I’ve covered this topic before, I thought it was a good time to review the basic valuation formula that has helped so many others put an accurate price tag on their businesses.
Show me your EBITDA
To get a ballpark figure for what your portable restroom company is worth, you’ll have to tackle something called EBITDA. This tongue twister stands for earnings before interest, taxes, depreciation and amortization.
It’s basically a metric that allows you (and a potential buyer) to value your company based on its cash flow. EBITDA makes it easier to compare your business with other service companies that might be subject to different tax and depreciation rates and debt levels.
Work with your accountant to calculate your EBITDA. The process involves adding back items (like interest expenses and taxes) into your net profit. Then you establish the cost of depreciation and determine the cost of amortization before adding these back into your net profit, as well.
What’s your price?
Once you’ve calculated your EBITDA, decide what multiple of that number you think is a reasonable price to ask of a potential buyer.
In my experience, portable restroom service companies have sold for three to six times their EBITDA. Remember, these multiples are just a benchmark. Every company and every marketplace is unique.
Obviously, a buyer will be willing to pay higher multiples for companies that are profitable, with well-maintained trucks and restrooms, high-density routes, a solid reputation in the marketplace, and plenty of growth potential.
In other words, if you’re running an outstanding service company, you should receive an excellent multiple for it.
On the other hand, if you are at the lower end of the pricing spectrum in your hometown and your equipment needs work, you are likely to be disappointed in the EBITDA multiple your company can command at the time of sale.
I hope this helps — and best of luck to you!