Buying a Business
Cost to Buy a Business in Boston
Considering purchasing a company in Boston, Massachusetts? You're no doubt wondering how much a typical Boston, Massachusetts business costs to buy.
The good news is the team at BizBuySell.com has made some data available on what it costs to buy a business in Boston.
BizBuySell.com is the biggest business-for-sale listings site on the Internet, offering over 50,000 businesses for sale at any given time. Their listings include almost all of the available listings from business brokers nationwide. In addition, many business owners who are selling on their own, without a broker, will place listings on BizBuySell.com.
If you are looking to buy a business in Massachusetts, check out the BizBuySell Massachusetts listings to get instant access to business-for-sale listings for Boston and other Massachusetts municipalities.
Business Valuations in Boston, MA
According to BizBuySell.com, the median asking price for an Boston business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $199,000.
That was based on 613 listings in the Boston-Cambridge-Quincy, MA-NH metro area. As such, some of the businesses used to derive the median valuation might be outside of Boston, but they are in the area and so are likely representative of Boston business valuations.
Note 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 Boston business for much less. The flip side is that some Boston businesses may cost much more.
Importantly, this is the asking price for an Boston business. Typically, when an owner lists a company for sale, they start with an asking price that is higher than the eventual sale price. The sale-price-to-asking-price ratio varies considerably but typically might be between 0.85 and 0.90. That is to say, if an owner lists a business for $150,000, it might sell for between $127,500 and $135,000.
If you are interested in trends in business-for-sale asking prices, here are the median asking prices for businesses in the Boston-Cambridge-Quincy, MA-NH metro area for the last 8 quarters.
Boston, MA Revenue Multiples
In the Boston-Cambridge-Quincy, MA-NH metro area, small businesses will usually sell for 0.80 times the selling company's revenues. The data indicates that is 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 $159,402. 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 moving in the Boston area, based on BizBuySell.com's quarterly reports.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $359,850 in Q4 2008.
Cash Flow Multiples In Boston, MA
Another common method to value a business is through cash flow multiples.
For Q4 2008, the average cash flow multiple for listed businesses in the Boston-Cambridge-Quincy, MA-NH metro area was 2.95.
So, a firm with cash flows of $120,000 might have an asking price of $354,480. That's if the business fits the area average. Most businesses will not conform to industry- or area averages.
The table below shows how cash flow multiples are trending in the Boston area, based on BizBuySell.com's quarterly reports.
Flow Multiple
If you are interested in what cash flows are for a business in Boston, BizBuySell.com reports that the median cash flow for Boston area businesses was $96,034 in Q4 2008.
Tips for Boston, MA Business Buyers
Sellers want to be sure their business will continue to be successful. They want to find a buyer who has experience and will take care of the company's employees. As such, you are selling yourself to the current business owner and the professional team that represents the seller. You may think you are buying, but you also need to be selling. This useful tip for buying a business was provided by Domenic Rinaldi, managing partner of Chicagoland Sunbelt, a leading business brokerage firm.
Business Valuations for Boston, MA 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 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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