Buying a Business
Cost to Buy a Business in Kansas City
Considering purchasing a company in Kansas City, Missouri? You'd do well to learn a little bit about trends in Kansas City, Missouri business valuations.
Fortunately, the folks at BizBuySell.com have made some data available on what businesses are going for in Kansas City.
BizBuySell.com is the largest online marketplace for business-for-sale transactions. The vast majority of business brokers in the country put their business listings on BizBuySell.com. In addition, many business owners who are selling on their own, without a broker, will place listings on BizBuySell.com.
If you want to buy a company in Missouri, check out the BizBuySell Missouri listings to see the latest business-for-sale listings for Kansas City and other Missouri towns.
Business Valuations in Kansas City, MO
According to BizBuySell.com, the median asking price for an Kansas City business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $195,000.
That was based on 141 listings in the Kansas City, MO-KS metro area. As such, some of the businesses used to derive the median valuation might be outside of Kansas City, but they are in the area and so are likely representative of Kansas City business valuations.
Remember that this is the median asking price for a business. If you are in the market to buy a company, you may be able to buy an Kansas City business for much less. At the same time, some Kansas City businesses may cost much more.
Another thing you should know is that this is the asking price for an Kansas City business. Typically, when an owner lists a business for sale, they start with an asking price that is higher than the ultimate sale price. The sale-price-to-asking-price ratio varies considerably but typically might be between 0.85 and 0.90. For example, a business listed for $250,000 would go for between $212,500 and $225,000.
If you are interested in trends in business-for-sale asking prices, here are the median asking prices for businesses in the Kansas City, MO-KS metro area for the last 8 quarters.
Revenue Multiples In Kansas City, MO
In the Kansas City, MO-KS metro area, small businesses will typically sell for 0.73 times the selling company's revenues. That was the mean revenue multiple for Q4 2008 in this area of the country.
In other words, a business that has revenues of $200,000 might list for $145,101. Remember, however, that this is just an average for revenue multiples in the area. Some firms will have higher revenue multiples and others will have lower revenue multiples.
Here is how median revenue multiples are changing in the Kansas City area, based on BizBuySell.com's quarterly reports.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $400,000 in Q4 2008.
Cash Flow Multiples In Kansas City, MO
Another popular way to value a business is through cash flow multiples.
For Q4 2008, the average cash flow multiple for listed businesses in the Kansas City, MO-KS metro area was 2.80.
So, a business with cash flows of $120,000 might have an asking price of $335,726. That's if the business fits the area average. Actual cash flow multiples can vary considerably from one business to another.
The table below shows how cash flow multiples are trending in the Kansas City area, based on BizBuySell.com's quarterly reports.
Flow Multiple
In case you were wondering what typical cash flows are for a business in Kansas City, BizBuySell.com reports that the median cash flow for Kansas City area businesses was $89,000 in Q4 2008.
Things to Consider When Buying a Business in Kansas City, MO
Credit is tight in this economy. Given that banks may be unwilling lend you money for the purchase of a business, you may want to look for seller financing. When a seller gives you financing, it shows they have confidence in the business, as well as confidence in your being able to run the business well enough to pay off the seller note. This advice on financing a business purchase comes from Domenic Rinaldi, managing partner of Chicagoland Sunbelt, a leading business brokerage firm.
Business Valuations for Kansas City, MO Businesses
If you have a specific business in mind and want to look at comparables in the area, we recommend the BizBuySell.com Business Valuation Tool. You can refine the dataset that generates business valuations to meet your specific needs, and access to the tool is very affordable -- less than $100.
More Information on BizBuySell.com's Quarterly Reports
The BizBuySell Insight Report is published on a quarterly basis. If you find this data interesting, be sure to visit BizBuySell.com Insights Report for more information.
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