Buying a Business
Cost to Buy a Business in Birmingham
Considering purchasing a company in Birmingham, Alabama? You've come to the right place to get statistics and trend data on Birmingham, Alabama business-for-sale transactions.
Fortunately, the folks at BizBuySell.com have made some data available on what it costs to buy a business in Birmingham.
BizBuySell.com is the largest online marketplace for business-for-sale transactions. When a business broker in a local city has a listing, the broker will typically post it 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 Alabama, check out the BizBuySell Alabama listings to see the latest business-for-sale listings for Birmingham and other Alabama towns.
Birmingham, AL Business Valuations
According to BizBuySell.com, the median asking price for an Birmingham business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $332,000.
That was based on 86 listings in the Birmingham-Hoover, AL metro area. As such, some of the businesses used to derive the median valuation might be outside of Birmingham, but they are in the area and so are probably representative of Birmingham 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 Birmingham business for much less. The flip side is that some Birmingham businesses may cost much more.
Importantly, this is the asking price for an Birmingham business. Typically, when a company owner lists a company 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. In other words, a business listed for $100,000 might sell for between $85,000 and $90,000.
If you are interested in trends in business-for-sale asking prices, here are the median asking prices for businesses in the Birmingham-Hoover, AL metro area for the last 8 quarters.
Revenue Multiples In Birmingham, AL
In the Birmingham-Hoover, AL metro area, businesses will usually sell for 0.89 times the selling company's revenues. This was the mean revenue multiple for Q4 2008 in this area of the country.
In other words, a business that has revenues of $200,000 might list for $177,978. Remember, however, that this is strictly an average for revenue multiples in Birmingham and surrounding communities. Some firms will have higher revenue multiples and others will have lower revenue multiples.
Here is how median revenue multiples are trending in the Birmingham area, based on BizBuySell.com's quarterly reports.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $528,500 in Q4 2008.
Cash Flow Multiples In Birmingham, AL
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 Birmingham-Hoover, AL metro area was 3.75.
So, a business with cash flows of $120,000 might have an asking price of $450,334. 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 Birmingham area, based on BizBuySell.com's quarterly reports.
If you are interested in what cash flows are for a business in Birmingham, BizBuySell.com reports that the median cash flow for Birmingham area businesses was $107,510 in Q4 2008.
Tips for Birmingham, AL Business Buyers
Credit is tight in this economy. Given that banks may be unwilling lend you money for the purchase of a business, you may want to look for seller financing. When a seller gives you financing, it shows they have confidence in the business, as well as confidence in your being able to run the business well enough to pay off the seller note. This advice on financing a business purchase comes from Domenic Rinaldi, managing partner of Chicagoland Sunbelt, a leading business brokerage firm.
Business Valuations for Birmingham, AL Businesses
If you have a specific business in mind and want to get a ballpark business valuation, 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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