Buying a Business
Cost to Buy a Business in Phoenix
If you want to buy a business in Phoenix, Arizona, you're no doubt wondering how much a typical Phoenix, Arizona business costs to buy.
Fortunately, the folks at BizBuySell.com have made some data available on what it costs to buy a business in Phoenix.
BizBuySell.com is the biggest business-for-sale listings site on the Internet, offering over 50,000 businesses for sale at any given time. 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 Arizona, check out the BizBuySell Arizona listings to see the latest business-for-sale listings for Phoenix and other Arizona towns.
Phoenix, AZ Business Valuations
Based on the BizBuySell.com data, the median asking price for an Phoenix business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $200,000.
That was based on 1468 listings in the Phoenix-Mesa-Scottsdale, AZ metro area. As such, some of the businesses used to derive the median valuation might be outside of Phoenix, but they are close by and so are probably representative of Phoenix 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 Phoenix business for much less. At the same time, some Phoenix businesses may cost much more.
Another thing you should know is that this is the asking price for an Phoenix 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 ratios depend on deal specifics but typically might be between 0.85 and 0.90. This suggests that a business listed for $325,000 might be purchased for between $276,250 and $292,500.
If you are interested in trends in business-for-sale asking prices, here are the median asking prices for companies in the Phoenix-Mesa-Scottsdale, AZ metro area for the last 8 quarters.
Revenue Multiples In Phoenix, AZ
In the Phoenix-Mesa-Scottsdale, AZ metro area, businesses will typically sell for 0.88 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 $176,226. Keep in mind that this is simply an average for revenue multiples in the area. Some businesses will have higher revenue multiples and others will have lower revenue multiples.
Here is how median revenue multiples are tracking in the Phoenix area, based on BizBuySell.com's data.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $330,960 in Q4 2008.
Cash Flow Multiples In Phoenix, AZ
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 Phoenix-Mesa-Scottsdale, AZ metro area was 3.19.
So, a company with cash flows of $120,000 might have an asking price of $383,176. That's if the business fits the area average. Actual cash flow multiples are based on business specifics.
The table below shows how cash flow multiples are trending in the Phoenix area, based on BizBuySell.com's quarterly reports.
Flow Multiple
If you are interested in what cash flows are for a business in Phoenix, BizBuySell.com determined that the median cash flow for Phoenix area businesses was $80,946 in Q4 2008.
Things to Consider When Buying a Business in Phoenix, AZ
If you are interested in buying an existing business, you want the business broker you are working with to be selling you to the seller. As such, it's important that you demonstrate that you're a qualified, motivated buyer. Being prepared and serious about your search is an important initial step. This advice comes from Domenic Rinaldi, managing partner of Chicagoland Sunbelt, a leading business brokerage firm.
Business Valuations for Phoenix, AZ 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 additional information.
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