Buying a Business
Cost to Buy a Business in Chicago
If you want to buy a business in Chicago, Illinois, your first question will probably be "How much does it cost to buy a business in Chicago?"
Fortunately, the folks at BizBuySell.com have made some data available on what it costs to buy a business in Chicago.
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. 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 Illinois, peruse the BizBuySell Illinois listings to to be on the inside track with the newest business-for-sale listings for Chicago and other Illinois towns. For the largest selection of Chicago businesses for sale, you'll definitely also want to check out the business listings at Chicagoland Sunbelt.
Business Valuations in Chicago, IL
Based on the BizBuySell.com data, the median asking price for an Chicago business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $275,000.
That was based on 580 listings in the Chicago-Naperville-Joliet, IL-IN-WI metro area. As such, some of the businesses used to derive the median valuation might be outside of Chicago, but they are in the area and so are likely representative of Chicago 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 Chicago business for much less. Having said that, some Chicago businesses may cost much more.
Another thing you should know is that this is the asking price for an Chicago business. Typically, when a company 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 Chicago-Naperville-Joliet, IL-IN-WI metro area for the last 8 quarters.
Chicago, IL Revenue Multiples
In the Chicago-Naperville-Joliet, IL-IN-WI metro area, companies will usually sell for 0.80 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 $159,279. Remember, however, that this is just an average for revenue multiples in the area. Some small businesses will have higher revenue multiples and others will have lower revenue multiples.
Here is how median revenue multiples are trending in the Chicago area, based on BizBuySell.com's quarterly reports.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $443,836 in Q4 2008.
Cash Flow Multiples In Chicago, IL
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 Chicago-Naperville-Joliet, IL-IN-WI metro area was 3.23.
So, a business with cash flows of $120,000 might have an asking price of $388,092. 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 Chicago area, based on BizBuySell.com's quarterly reports.
Flow Multiple
If you are interested in what cash flows are for a business in Chicago, BizBuySell.com determined that the median cash flow for Chicago area businesses was $99,885 in Q4 2008.
Things to Consider When Buying a Business in Chicago, IL
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 Chicago, IL Businesses
If you have a specific business in mind and want to value the business, 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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