Buying a Business
Cost to Buy a Business in Providence
Considering purchasing a company in Providence, Rhode Island? Your first question will probably be "How much does it cost to buy a business in Providence?"
Fortunately, the folks at BizBuySell.com have made some data available on what it costs to buy a business in Providence.
BizBuySell.com is the largest online marketplace for business-for-sale transactions. 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 want to buy a company in Rhode Island, peruse the BizBuySell Rhode Island listings to see the latest business-for-sale listings for Providence and other Rhode Island towns.
Business Valuations in Providence, RI
According to BizBuySell.com, the median asking price for an Providence business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $165,000.
That was based on 262 listings in the Providence-New Bedford-Fall River, RI-MA metro area. Many of the businesses in the dataset are outside of Providence, but they are in the area and so are probably representative of Providence 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 Providence business for much less. At the same time, some Providence businesses may cost much more.
Another thing you should know is that this is the asking price for an Providence 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. 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 Providence-New Bedford-Fall River, RI-MA metro area for the last 8 quarters.
Revenue Multiples In Providence, RI
In the Providence-New Bedford-Fall River, RI-MA metro area, businesses will usually sell for 0.74 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 firm with revenues of $200,000 might list for $147,135. Remember, however, that this is just an average for revenue multiples in Providence and surrounding communities. Some entities will have higher revenue multiples and others will have lower revenue multiples.
Here is how median revenue multiples are moving in the Providence area, based on BizBuySell.com's data.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $343,436 in Q4 2008.
Cash Flow Multiples In Providence, RI
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 Providence-New Bedford-Fall River, RI-MA metro area was 3.16.
So, a firm with cash flows of $120,000 might have an asking price of $378,696. 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 Providence area, based on BizBuySell.com's quarterly reports.
Flow Multiple
If you are interested in what cash flows are for a business in Providence, BizBuySell.com reports that the median cash flow for Providence area businesses was $76,581 in Q4 2008.
Tips for Providence, RI Business Buyers
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 Providence, RI 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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