Business valuation of a shoe store

If you are considering valuation of a retail shoe store, here are some interesting industry stats to bear in mind:

In the US alone there are over 28,000 shoe store businesses classified under SIC code 5661 and NAICS 44821. Together they generate a combined revenue of $26.9B annually. The industry employs 3,233,000 staff. The average independently owned shoe store is small business with sales of $944,000 and a staff of between 7 and 8.

Business valuation for shoe stores

Profitable footwear retailers with a strong presence in their market are often sought after by business buyers. If you need to determine the value of a shoe store, recent selling prices of similar businesses offer you a great comparison basis.

You can use the prices from closed business sales divided by the companies’ key financials. This gives you what is known as valuation multiples to calculate the value of any other shoe store.

The most useful valuation multiple for this retail industry sector is based on the business yearly gross revenues or net sales.

Example: Shoe store business valuation based on its revenue

Consider an average shoe store with annual gross revenue of $1,000,000 and inventory of $250,000. Let’s pick a set of valuation multiples to use in valuing this company as follows:

Note that the value of inventory is added on top of the business value determined using the valuation multiples. This is a convention used in valuing retail companies. One reason for valuing a company in this way is that retail inventories tend to fluctuate with time as business people build up or deplete the stock of products offered for sale.

See Valuation Tour