Buying a Business
Cost to Buy a Business in Cleveland
Considering purchasing a company in Cleveland, Ohio? You're no doubt wondering how much a typical Cleveland, Ohio business costs to buy.
Fortunately, the folks at BizBuySell.com have made some data available on what it costs to buy a business in Cleveland.
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 are looking to buy a business in Ohio, check out the BizBuySell Ohio listings to see the latest business-for-sale listings for Cleveland and other Ohio cities.
Cleveland, OH Business Valuations
According to BizBuySell.com, the median asking price for an Cleveland business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $180,000.
That was based on 100 listings in the Cleveland-Elyria-Mentor, OH metro area. As such, some of the businesses used to derive the median valuation might be outside of Cleveland, but they are in the area and so are probably representative of Cleveland 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 Cleveland business for much less. At the same time, some Cleveland businesses may cost much more.
Another thing you should know is that this is the asking price for an Cleveland business. Typically, when a business owner lists a business 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. 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 Cleveland-Elyria-Mentor, OH metro area for the last 8 quarters.
Revenue Multiples In Cleveland, OH
In the Cleveland-Elyria-Mentor, OH metro area, businesses will typically sell for 0.72 times the selling company's revenues. That was the mean revenue multiple for Q4 2008 in this part of the country.
In other words, a business that has revenues of $200,000 might list for $144,691. Keep in mind that this is simply an average for revenue multiples in Cleveland and surrounding communities. Some companies will have higher revenue multiples and others will have lower revenue multiples.
Here is how median revenue multiples are trending in the Cleveland area, based on BizBuySell.com's quarterly reports.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $308,678 in Q4 2008.
Cash Flow Multiples In Cleveland, OH
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 Cleveland-Elyria-Mentor, OH metro area was 3.45.
So, a firm with cash flows of $120,000 might have an asking price of $413,490. 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 Cleveland area, based on BizBuySell.com's quarterly reports.
Flow Multiple
If you are interested in what cash flows are for a business in Cleveland, BizBuySell.com reports that the median cash flow for Cleveland area businesses was $65,332 in Q4 2008.
Things to Consider When Buying a Business in Cleveland, OH
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 Cleveland, OH 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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