Q1 2009 Costs to Buy a Business
How Much Is My Detroit Business Worth?
BizBuySell.com has just released its Detroit, Michigan business valuation data for First Quarter 2009.
Q1 2009 Business Valuations in Detroit, MI
According to statistics issued by BizBuySell.com, Detroit business-for-sale listings in Q1 2009 had a median asking price of $243,500.
That compares to a median ask price of $199,900 in Q1 2008. Because the median ask price for businesses for sale in Detroit has risen year over year, we can conclude that many smaller firms in Detroit are holding off on selling.
Please understand that this is the median asking price for a business. If you want to buy a business, you may be able to buy a Detroit company for much less. However, some Detroit businesses may be selling for much more.
Also, this is the asking price for a Detroit business. When an owner lists a business for sale, they typically set a price that ends up being more than the eventual sale price. A sale-to-ask ratio typically might be between 0.85 and 0.90, but of course it varies considerably. That means a company listed for $200,000 might be sold for between $170,000 and $180,000.
Number of Detroit Businesses for Sale in the Dataset
The study data comprised 158 listings in the Detroit-Warren-Livonia, MI metro area. As such, some of the businesses used to derive the median valuation might be outside of Detroit, but they are in the area and so are likely representative of Detroit business valuations.
In Q1 2008, just one year ago, there were 189 Detroit listings in the BizBuySell.com dataset. As a result of the recession, fewer Detroit business owners are selling because they hope to weather the storm and sell after the economy turns around.
Q1 2009 Revenue Multiples In Detroit, MI
In the Detroit-Warren-Livonia, MI metro area, businesses will usually sell for 0.87 times the selling company's revenues. That was the mean revenue multiple for Q1 2009 in this area of the country.
In other words, a business that has revenues of $200,000 might list for $174,560. Keep in mind that this is just an average for revenue multiples in Detroit and surrounding communities. Some entities will have higher revenue multiples and others will have lower revenue multiples.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $376,902 in Q1 2009.
To put this in perspective, the Q1 2008 revenue multiple was 0.91 and the median revenue for listed businesses was $318,820.
Q1 2009 Cash Flow Multiples In Detroit, MI
Cash flow multiples are another common way to value a business.
For Q1 2009, the average cash flow multiple for listed businesses in the Detroit-Warren-Livonia, MI metro area was 3.55.
So, a business with cash flows of $150,000 might have an asking price of $532,065. That's only if the firm complies with the local average. Most businesses will not conform to industry- or area averages.
In case you were wondering what typical cash flows are for a business in Detroit, BizBuySell.com reports that the median cash flow for Detroit area businesses was $86,330 in Q1 2009. In Q1 2008, cash flow multiples clocked in at 3.39 and the median cash flow was $80,835.
Things to Consider When Selling a Business in Detroit, MI
When choosing a business broker, look for a broker that can maintain confidentiality and simultaneously get you the most qualified buyers. In addition, make sure the business broker has a good track record in facilitating negotiations between buyer and seller in a way that arrives at the best possible transaction. This helpful tip comes from Domenic Rinaldi, managing partner of Sun Acquisitions, a leading business brokerage firm.
Business Valuations for Detroit, MI Businesses
If you are contemplating buying a business or selling a business and would like to look at comparables in the area, we suggest you try the BizBuySell.com Business Valuation Tool. You can modify the dataset that creates business valuation estimates to meet your specific criteria. As a bonus, access to the tool is very affordable -- less than $100.
More Information on BizBuySell.com's Quarterly Reports
The BizBuySell Insight Report is published every quarter. If you find these trends interesting, take a moment to visit BizBuySell.com Insights Report for more information.
Historical Data for Detroit, MI Business Valuations
If you are interested in trends in business-for-sale asking prices, here are the median asking prices for businesses for sale in the Detroit-Warren-Livonia, MI metro area for the last 9 quarters.
Here is how median revenue multiples are trending in the Detroit area, based on BizBuySell.com's data.
The table below shows how cash flow multiples are trending in the Detroit area, based on BizBuySell.com's quarterly reports.
Flow Multiple
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