Retail Business Valuation

Retail (at least the bricks and mortar style of retail business) - like the proverbial duck - a smooth glamorous business on the outside with furious activity hidden in the back room.

They are experiencing a perfect storm right now:

  • High store rents

  • High labour costs

  • Increased online competition 

  • Low inflation (and so price increases are difficult to implement)

  • Low wages growth and reducing discretionary expenditure

Industry revenue has been declining for some time in real terms, and low discretionary income means many people are buying the necessities and not the nice to haves.

Many of the smaller retailers do not make enough profits to pay a market wage AND make a commercial profit.  


So what does this mean for retail business valuations?

Revenue growth is incredibly low - and unlikely to increase in traditional sectors for some time.  The EBITDA margins we have seen on some businesses are very low and in some cases negative.  It has to be said that for a large number of business their valuations are, and will continue to be, based on net tangible assets. 

There is rarely any goodwill in the retail business valuations I have seen lately.

That said, good retail business valuations do exist, and common themes and initiatives I have seen include:

  • Having an effective and enhancing online presence - online is the "new black" for retail, and is where the significant growth opportunities exist.

  • Stock levels must be kept low along with a low level of non-cash working capital.

  • Integrate all your systems to keep office and business management costs low but maintain regular daily, weekly and monthly reporting to stay on top of trends.

  • Low cost of sales margin is critical - source your retail goods carefully.

  • Expand into new markets - either new customer segments or new product segments.

  • Enhance your sales with additional services as these often have a higher level of margin and also help to lock in repeat customers.

  • Have expert knowledge of online promotion and marketing - it is now so critical that even if online promotion and marketing is being outsourced - make sure you understand what is being done so that you can manage the expectations.

  • Invest in people - train them in the products and services sold, customer service, merchandising, store operations - everything.  Great service is an intangible benefit but it keeps customers returning.

Key Drivers of a Retail Business Valuation

A retail business valuation is typically driven by key factors below that influence profits and hence business valuations. 

These include:

  • Ratio of stock to floor space

  • Customer numbers and spend per customer

  • Location, level of foot traffic past store and 

  • Market awareness

  • Gross profit margin

  • Proportion of staff costs per revenue

  • Rent 
  • Use of technology to streamline processes and automate reporting with key management functions.

  • Staff training and productivity
  • Online presence and e-commerce capacity.

EBITDA Margins have been as low as 5% to a high of 15% - 20% depending on size of stores, level of local competition, systems, technology and staff productivity.

EBITDA Multiples for retail businesses will vary considerably across sub-sectors, and will be heavily influenced by size and profitability.  Typical EBITDA Multiple ranges we have observed are:

  • Revenue < $1m: 0.5x - 1.5x

  • Revenue $1m - $5m: 1.0x - 2.5x

  • Revenue $5m - $10m: 2.0x - 3.5x

  • Revenue $10m - $20m: 3.0x - 4.0x

Key Industry Statistics

According to IBISWorld, the overall retail sector grew 1.0% pa for the five years to 2019 to $569bn.  Some key statistics for the industries include:

  •   Supermarkets and Grocery Stores: Revenue growth 2.1% pa for 2014 - 2019, with total revenue of $103bn in 2018.

  • Convenience Stores: Revenue growth 0.3% pa for 2014 - 2019, with total revenue of $5bn in 2018 and an average revenue per business of $616k.

  •   Department Stores: Revenue contracted 0.2% pa for 2014 - 2019, with total revenue of $19bn in 2018. 
  • Clothing Stores: Revenue grew 2.1% pa for 2014 - 2019, with total revenue of $17bn in 2018 and an average revenue per business of $1.6m.
  • Consumer Goods Retail: Revenue grew 0.5% pa for 2014 - 2019, with total revenue of $174bn in 2018 and an average revenue per business of $2.3m.
  • Hardware and Building Retail: Revenue grew 2.7% pa for 2014 - 2019, with total revenue of $22bn in 2018 and an average revenue per business of $4.2m.


We have collated industry performance statistics based on ABS data and detailed them in a whitepaper, which can be downloaded from the link below.

What Makes a Business Highly Valuable?

SME Performance Whitepaper

Sell my business

DIY Online Business Valuation Calculation Guide

Our Business Valuation Experience

Our retail business valuations Melbourne, as well as retail business valuations Sydney and Brisbane experience has included including valuations for:

  • Multi-site menswear retailer

  • Regionally located haberdashery

  • Regionally located footwear business

  • Melbourne based multi-site footwear business

  • Regionally located multi-site hardware business

  • ACT-based tools and hardware franchisee

  • Regionally based Telstra outlet

  • Bedroom furniture franchisee (two sites)

  • Furniture retail business

  • Automotive products retail business

  • Electronics and tool retail business (Brisbane​

© 2017 by Exit Value Advisers Pty Ltd. Proudly created with

  • White LinkedIn Icon
  • Twitter
  • Exit Value Advisers
  • White YouTube Icon

Based in Melbourne (Victoria) we deliver business valuations all over Australia using expert business valuers and resources that allow us to work remotely.

We have completed:

Contact Us

L3/162 Collins St, Melbourne, 3000

0421 069 717