Buying a Business
Cost to Buy a Business in Memphis
Considering purchasing a company in Memphis, Tennessee? You're no doubt wondering how much a typical Memphis, Tennessee business costs to buy.
Fortunately, the folks at BizBuySell.com have made some data available on what businesses are going for in Memphis.
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. They also have many FSBO (for sale by owner) business-for-sale listings.
If you are looking to buy a business in Tennessee, check out the BizBuySell Tennessee listings to get instant access to business-for-sale listings for Memphis and other Tennessee cities.
Memphis, TN Business Valuations
According to BizBuySell.com, the median asking price for an Memphis business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $240,000.
That was based on 58 listings in the Memphis, TN-MS-AR metro area. As such, some of the businesses used to derive the median valuation might be outside of Memphis, but they are nearby and so are probably representative of Memphis 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 Memphis business for much less. At the same time, some Memphis businesses may cost much more.
Another thing you should know is that this is the asking price for an Memphis business. Typically, when an owner lists a business for sale, they start with an asking price that is higher than the final sale price. The sale-price-to-asking-price ratios depend on deal specifics but typically might be between 0.85 and 0.90. In other words, a business listed for $100,000 might sell for between $85,000 and $90,000.
If you are interested in trends in business-for-sale asking prices, here are the median asking prices for companies in the Memphis, TN-MS-AR metro area for the last 8 quarters.
Memphis, TN Revenue Multiples
In the Memphis, TN-MS-AR metro area, businesses will usually sell for 0.86 times the selling company's revenues. That was the mean revenue multiple for Q4 2008 in this metro area.
In other words, a firm with revenues of $200,000 might list for $172,743. Remember, however, that this is just an average for revenue multiples in the area. Some small businesses will have higher revenue multiples and others will have lower revenue multiples.
Here is how median revenue multiples are trending in the Memphis area, based on BizBuySell.com's quarterly reports.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $327,000 in Q4 2008.
Cash Flow Multiples In Memphis, TN
Another common method to value a business is through cash flow multiples.
For Q4 2008, the average cash flow multiple for businesses listed in the Memphis, TN-MS-AR metro area was 3.15.
So, a business with cash flows of $120,000 might have an asking price of $377,649. That's if the business fits the area average. Most businesses will not conform to industry- or area averages.
Here is how cash flow multiples are trending in the Memphis area, based on BizBuySell.com's quarterly reports.
Flow Multiple
In case you were wondering what typical cash flows are for a business in Memphis, BizBuySell.com reports that the median cash flow for Memphis area businesses was $98,702 in Q4 2008.
Things to Consider When Buying a Business in Memphis, TN
Once you have a business that you would like to buy, it may be time to bring in your attorney. However, refrain from spending lots of money on legal documentation until you are certain you are going to buy the business. Many buyers spend money on legal fees before they are committed to buying a coompany...that's a mistake you'll want to avoid. This helpful tip comes from Domenic Rinaldi, managing partner of Chicagoland Sunbelt, a leading business brokerage firm.
Business Valuations for Memphis, TN Businesses
If you have a specific business in mind and want to find out how much a business is worth, 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 a nationally-recognized economic indicator that tracks the health of the U.S. small business economy. If you find this data interesting, be sure to visit BizBuySell.com Insights Report for more information.
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