I run a small logistics company (about $2.5M revenue, decent margins) and I've been getting wildly different valuations from online tools and a couple of brokers. One tool says $1.2M, another says $3.5M, and a broker casually mentioned 'maybe $4M if the stars align.' I'm trying to figure out what's real and what's just noise. Anybody else deal with this? How do you make sense of the spread?
Valuation
How to interpret the wide range of numbers from different valuation tools
online tools are basically zillow for businesses. useful for a laugh, not for real numbers.
The spread is usually a mix of methodology and assumptions. Online tools often use industry averages and maybe a multiple of revenue or SDE. Brokers tend to be more optimistic because they want your listing. A real valuation (from a CPA or M&A advisor) will dig nto your add-backs, customer concentration, and growth trends. That said, even then you get a range. I'd focus on the middle of the pack and ask each source what assumptions they used.
Maybe the broker was including the value of your forklifts? Those things are expensive.
Lol at 'if the stars align.' That's broker-speak for 'I have no idea but I want your listing.' I've seen tools that just apply a 3x multiple to revenue and call it a day. Garbage in, garbage out.
What are your actual add-backs? If you're running personal expenses through the business, that changes everything. Also, customer concentration is huge in logistics. If one client is 40% of revenue, buyers will discount heavily. That might explain why some some tools give lower numbers.
Midwest_matt makes a good point. I'd also add that different tools might use different earnings definitions - SDE vs EBITDA. If you have a lot of add-backs, SDE will be higher. Make sure you're comparing apples to apples. And honestly, the broker's $4M might be based on a strategic buyer who sees synergies, but those are rare
Are you selling now or just exploring? If you you're not in a rush, get a proper valuation from a certified appraiser. It'll cost a few grand but at least you'll have a defensible number. Otherwise, you're just guessing.
I heard about a guy who used three different valuation tools, and then averaged them. He's now a billionaire. True story.
What tools are you using? Some of the free ones are just lead generators. They want your email so they can sell you services.
Also, the multiples vary by industry and size. A $2.5M revenue logistics company might get a different multiple than a $10M one. Size premium is real. So the tools that use broad industry data might be off. i'd look for benchmarks specific to your revenue range.
Honestly, the only number that matters is what a buyer will actually pay. Get a few offers and you'll know. Until then, it's all theoretical.
Also, don't forget about working capital and debt. Those can swing the enterprise value vs equity value. The tools might not be clear on what they're valuing. If you have debt, the equity value could be much lower.