When it comes to alarm company sales, we get a lot of questions from buyers who are looking to sell their alarm companies for top dollar. Most are curious about the value of their business and are wondering how they can capitalize on that value to increase the profitability of the sale when they ultimately choose to put their company on the market.
One key question we hear a lot in relation to alarm business valuations and company sales is: what is a multiplier and why is it important when it comes to selling an alarm company?
Here, we’ll delve into this hot topic and give you the key details you need to move forward knowledgeably as you work to sell your company for maximum profit.
What is a Multiplier When Selling an Alarm Company?
One of the very preliminary steps you’ll need to take as you prepare to sell your alarm business is securing an accurate company valuation. You’ll need to determine how much your business is truly worth in order to determine how much you should be looking to sell it for.
Multipliers are the values used to multiply a business’ profit in order to calculate the company’s value. They are calculated based on a variety of factors and components related to the business, including risk, potential profitability, cash flow, potential growth, and overall desirability of the organization in the eyes of buyers.
While many businesses are valued using the EBITDA model, alarm businesses are valued primarily based on the recurring monthly revenue they generate. Despite this difference, multipliers are often still used to help calculate the value of alarm companies.
How Do Multipliers Impact Sales?
Multipliers impact sales in that they help to determine the value of your alarm business, which in turn helps to determine how much you can realistically sell it for and how much profit you’ll make.
What Multiplier Should I Use If I Want to Sell My Alarm Company for Top Dollar?
Multipliers can vary significantly and it’s important to choose the correct one in order to ensure that your business’ sale is as profitable as possible. Choose too high and buyers will be skeptical. Choose too low and you may miss out on sale profitability.
Typically, the safer and more profitable the business, the higher the multiplier. However, the appropriate multiplier varies from alarm business to alarm business so there’s no one right answer to this question. Your best bet is to work with an experienced alarm company broker who knows the market, understands your business, is familiar with the pool of buyers, and can provide you with an accurate valuation based on the appropriate multiplier for your specific business.
Choose The Right Multiplier When Selling Your Alarm or Security Business
If you want to understand what your business is worth in the eyes of buyers and how much it should realistically sell for, choosing the right multiplier is key. The best way to obtain an accurate valuation by determining the appropriate multiplier? Work with an alarm business broker like AFS.
Interested in learning more about how to determine the value of your alarm business? Check out our “What Is My Alarm Company Worth?” blog post to find out which key factors impact the value of your alarm business.
Thinking about exiting the industry? If so, it’s time to make sure that you have an effective exit strategy in place. Learn more about how to develop a successful exit plan for your security business.
Ready to pursue the sale of your organization? Contact Rory Russell at AFS today. Give him a call at (800) 354-3863 (his personal cell, 24/7 availability) or complete this easy online contact form to get in touch with him directly.