According to the U.S. Brewers Association, there is continuous growth in the brewing industry. The rise of the business is due to increasing and consistent demand for the unique and flavored taste of the drink. On the flip side, passionate producers are working hard to meet consumers’ demands. But, sometimes, due to unfavorable situations, business professionals in Dallas or Austin have to sell their brewpub or craft brewery business. Selling a brewery business is not easy without determining the company valuation and understanding if the price justifies selling the business.
Factors To Consider During the Brewery Valuation
Valuation is a crucial aspect of owning a brewery business (even when you are not considering the idea of selling). Since it is the process of determining the worth of a brewery, it requires a thorough assessment of all the assets, liabilities, and multitude of relevant factors that influence the value of the business. While understanding that there are fundamental factors, there are also certain things that people fail to understand during a brewery valuation process, which can result in inaccurate valuations. In this blog, Adam Noble Group will discuss several factors that you should not fail to consider during a brewery valuation.
1. The Brewing Equipment
The equipment utilized in a brewery is a fundamental component of the business. The valuation of a brewery must include the used fair market value of the brewing equipment. Moreover, while calculating the valuation, consider the equipment’s age, condition, functionality and cost to replace with like condition used equipment. The condition of the equipment should also be adjusted based on its maintenance, repair and reconditioning history.
2. The Inventory
The inventory of a brewery is another crucial factor that should be considered during a brewery company valuation process. The value of the inventory should be assessed based on a combination of cost and added value, depending on the degree of finishing. Raw materials such as hops, grain and packaging are typically valued at current cost. The value of finished goods and work in progress should include the added value of production labor and relevant overhead. The inventory should also be adjusted for any spoilage, waste, or damage that has occurred. Obsolete inventory should be noted and excluded from value.
3. The Licenses
A brewery must have the necessary licenses and permits to operate in DFW, Houston, Austin, or other Texas city. NOTE: brewery license and permits vary for EACH state. The value of these licenses may also be included in the brewery valuation, depending on the type of business appraisal. For instance, a buyer will be required to obtain new licensing and permits in an asset sale. The value of the licenses can also vary depending on the location and the license type. Some licenses may require renewal fees, which may also be taken into account during the valuation.
4. The Brand Value
The brand value of a brewery is an intangible asset often reflected by the relative production and sales of the brewery, which, in turn, can significantly impact the value of the business. The brand value is affected by the brewery’s reputation, customer loyalty, and market position. The value can also be affected by factors such as marketing strategies and advertising campaigns.
5. The Financial Records
The financial records of a brewery are essential in determining the value of the business. The valuation should consider the revenue, expenses, and profits of the brewery. The financial records need to be provable and verifiable. The Cash Flow to owner (often called adjusted EBITDA) includes the business net income plus all provable owner comp and perq’s, further adjusted for one-time, non-recurring income or expenses. Additionally, the valuation should also consider the financial projections and forecasts for the business. This information can provide insights into the future growth potential of the brewery.
Call the Professionals for Craft Brewery Valuation!
The brewery valuation process is complex and requires a thorough assessment of many factors that influence the value of the business. While the brewing equipment, inventory, and financial records are critical components of the company valuation, the licenses and brand value should not be overlooked. A comprehensive valuation in Dallas or Houston that considers all these factors will provide an accurate assessment of the brewery’s worth and help ensure a successful transaction.
If you have been asking “how to buy out my partner” or “how to complete a business valuation”, then contact the experts at Adam Noble Group, LLC. Whether you are planning to sell or purchase a business, our experts can provide you an independent, third party business valuation.
During 3 decades of M&A service, Jeff Adam has successfully completed the sale of over 700 businesses and advised or completed 1,000’s of business valuations and exit plans. An entrepreneur in his own right, Jeff has started and grown 12 companies in fields including international finance, B2B services, business valuation, construction, screen printing, Mergers & Acquisitions, engineering, and manufacturing. Jeff has donated his time as a distinguished speaker at numerous national & international conferences since 1977 covering topics such as environmental services, engineering, media, craft breweries, exit planning, business valuation, charitable giving, management, business brokerage and M&A fields.
Jeff is President of Adam Noble Group, LLC, a national M&A Advisory firm, professionally valuing and confidentially selling profitable businesses owned by exit-motivated business owners to qualified strategic, corporate, private equity, partners, management, and first-time buyers. Jeff establishes rapport, builds trust, and educates business owners in the steps to meet their goals as they prepare and achieve the discreet, confidential exit of their business. Jeff exclusively represents sellers of $1M-25M value enterprises and endeavors to transfer their businesses to qualified, capable acquirers who will build upon the seller’s vision, goals, culture, and history. Jeff maintains lifelong repeat and referral relationships with sellers, their acquirers, and service providers.
Adam Noble Group has multiple M&A and business broker specialties: Manufacturing, Defense Industry, Oilfield services, Construction trades, Craft Breweries, Partnership Buyouts, Manufacturing, Service, and Wholesale Distributors.
Our M&A advisors and business brokers are all multi-industry entrepreneurs who have successfully exited their own companies. Jeff has walked in your shoes! Jeff wants to put the BIGGEST CHECK of your life in your pocket! Please contact Jeff, and he will confidentially answer all your questions.