Buying a Business
Cost to Buy a Business in Cambridge
Planning on buying a Cambridge, Massachusetts business? Your first question will probably be "How much does it cost to buy a business in Cambridge?"
Fortunately, the folks at BizBuySell.com have made some data available on what it costs to buy a business in Cambridge.
BizBuySell.com is the Internet's largest and most heavily trafficked business for sale marketplace. The vast majority of business brokers in the country put their business listings on BizBuySell.com. They also have many FSBO (for sale by owner) business-for-sale listings.
If you want to buy a company in Massachusetts, peruse the BizBuySell Massachusetts listings to to be on the inside track with the newest business-for-sale listings for Cambridge and other Massachusetts towns.
Cambridge, MA Business Valuations
Based on the BizBuySell.com data, the median asking price for an Cambridge business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $199,000.
That was based on 613 listings in the Boston-Cambridge-Quincy, MA-NH metro area. As such, some of the businesses used to derive the median valuation might be outside of Cambridge, but they are nearby and so are likely representative of Cambridge 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 Cambridge business for much less. At the same time, some Cambridge businesses may cost much more.
Another thing you should know is that this is the asking price for an Cambridge business. Typically, when a small 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. 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 Boston-Cambridge-Quincy, MA-NH metro area for the last 8 quarters.
Revenue Multiples In Cambridge, MA
In the Boston-Cambridge-Quincy, MA-NH metro area, businesses will typically sell for 0.80 times the selling company's revenues. The data indicates that is 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 $159,402. Keep in mind that this is just an average for revenue multiples in the area. Some firms will have higher revenue multiples and others will have lower revenue multiples.
Here is how median revenue multiples are trending in the Cambridge area, based on BizBuySell.com's economic data.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $359,850 in Q4 2008.
Cash Flow Multiples In Cambridge, MA
Another common method to value a business is through cash flow multiples.
For Q4 2008, the average cash flow multiple for listed businesses in the Boston-Cambridge-Quincy, MA-NH metro area was 2.95.
So, a business with cash flows of $120,000 might have an asking price of $354,480. 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 Cambridge area, based on BizBuySell.com's quarterly reports.
If you are interested in what cash flows are for a business in Cambridge, BizBuySell.com determined that the median cash flow for Cambridge area businesses was $96,034 in Q4 2008.
Things to Consider When Buying a Business in Cambridge, MA
Don't buy a company simply because you love the type of business. In buying a business, you are buying a livelihood that will need to meet you salary expecations. So, before you move forward, consider how much you can realistically expect to pull out of the business and whether thay will support your desired lifestyle. Always be conservative in making these projections. This helpful business buying counsel comes from Domenic Rinaldi, managing partner of Chicagoland Sunbelt, a leading business brokerage firm.
Business Valuations for Cambridge, MA Businesses
If you have a specific business in mind and want to find out how much a business is worth, 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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