Q1 2009 Costs to Buy a Business
How Much Is My San Francisco Business Worth?
We just received the latest San Francisco, California business valuation data for First Quarter 2009.
Q1 2009 Business Valuations in San Francisco, CA
Based on data compiled by BizBuySell.com, San Francisco business-for-sale listings in Q1 2009 had a median asking price of $250,000.
That compares to a median ask price of $325,000 in Q1 2008. Given that San Francisco, CA median business asking prices appear to be dropping, it suggests that larger San Francisco businesses in may be holding off on selling until the economy turns around.
To be clear, this is the median asking price for a business. If you want to buy a business, you may be able to buy a San Francisco company for much less. Alternatively, some San Francisco businesses may be selling for much more.
Another thing to remember is that this is the asking price for a San Francisco business. When a business 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. As an example, a company listed for $125,000 would often sell for between $106,250 and $112,500.
Number of San Francisco Businesses for Sale in the Dataset
The study data comprised 319 listings in the San Francisco-Oakland-Fremont, CA metro area. As such, some of the businesses used to derive the median valuation might be outside of San Francisco, but they are close by and so are probably representative of San Francisco business valuations.
One year ago, in Q1 2008, the BizBuySell.com dataset for San Francisco spanned 367 listings. The downward trend in the number of San Francisco business-for-sale listings is indicative of the current down economy.
Q1 2009 Revenue Multiples In San Francisco, CA
In the San Francisco-Oakland-Fremont, CA metro area, businesses will usually sell for 0.70 times the selling company's revenues. The data indicates that is the mean revenue multiple for Q1 2009 in this area of the country.
In other words, a firm with revenues of $200,000 might list for $139,044. Remember, however, that this is in fact an average for revenue multiples in the area. Some firms 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 $500,000 in Q1 2009.
As a reference point, the Q1 2008 revenue multiple was 0.83 and the median revenue for listed businesses was $520,000.
Q1 2009 Cash Flow Multiples In San Francisco, CA
Cash flow multiples are another popular technique to value a business.
For Q1 2009, the average cash flow multiple for listed businesses in the San Francisco-Oakland-Fremont, CA metro area was 3.08.
So, a business with cash flows of $150,000 might have an asking price of $461,810. That calculation is dependent on the business selling for the area's average multiple. In practice, cash flow multiples can vary considerably from one business to another.
In case you were wondering what typical cash flows are for a business in San Francisco, BizBuySell.com reports that the median cash flow for San Francisco area businesses was $103,000 in Q1 2009. In Q1 2008, cash flow multiples clocked in at 3.45 and the median cash flow was $120,000.
Things to Consider When Selling a Business in San Francisco, CA
A diversified customer base is a great selling point to buyers. If you are preparing to sell a business and your customer base is not diversified, think about how you can diversify your customer base and thereby lower the risks for a buyer. By doing so, you can sell a business for a higher price. Ideally, no single customer should account for more than 10% of your revenues. This advice comes from Domenic Rinaldi, managing partner of Sun Acquisitions, a leading business brokerage firm.
Business Valuations for San Francisco, CA 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 additional information.
Historical Data for San Francisco, CA Business Valuations
If you are interested in trends in business-for-sale asking prices, here are the median asking prices for businesses in the San Francisco-Oakland-Fremont, CA metro area for the last 9 quarters.
Here is how median revenue multiples are trending in the San Francisco area, based on BizBuySell.com's quarterly reports.
Here is how cash flow multiples are trending in the San Francisco area, based on BizBuySell.com's quarterly reports.
Flow Multiple
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