Buying a Business
Cost to Buy a Business in Los Angeles
Planning on buying a Los Angeles, California business? You're no doubt wondering how much a typical Los Angeles, California business costs to buy.
The good news is a company called BizBuySell.com has made some data available on what businesses are going for in Los Angeles.
BizBuySell.com is the largest online marketplace for business-for-sale transactions. 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 California, peruse the BizBuySell California listings to get instant access to business-for-sale listings for Los Angeles and other California cities.
Business Valuations in Los Angeles, CA
According to BizBuySell.com, the median asking price for an Los Angeles business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $238,000.
That was based on 3915 listings in the Los Angeles-Long Beach-Santa Ana, CA metro area. As such, some of the businesses used to derive the median valuation might be outside of Los Angeles, but they are nearby and so are probably representative of Los Angeles 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 Los Angeles business for much less. At the same time, some Los Angeles businesses may cost much more.
Importantly, this is the asking price for an Los Angeles business. Typically, when a business owner lists a business for sale, they start with an asking price that is higher than the ultimate sale price. The sale-price-to-asking-price ratios depend on deal specifics but typically might be between 0.85 and 0.90. As an example, a company listed for $275,000 might sell for between $233,750 and $247,500.
If you are interested in trends in business-for-sale asking prices, here are the median asking prices for businesses in the Los Angeles-Long Beach-Santa Ana, CA metro area for the last 8 quarters.
Revenue Multiples In Los Angeles, CA
In the Los Angeles-Long Beach-Santa Ana, CA metro area, companies will usually sell for 0.79 times the selling company's revenues. That 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 $158,663. 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 Los Angeles area, based on BizBuySell.com's quarterly reports.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $380,000 in Q4 2008.
Cash Flow Multiples In Los Angeles, CA
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 Los Angeles-Long Beach-Santa Ana, CA metro area was 3.01.
So, a business with cash flows of $120,000 might have an asking price of $361,467. That's if the business fits the area average. Most businesses will not conform to industry- or area averages.
Here is how cash flow multiples are trending in the Los Angeles area, based on BizBuySell.com's quarterly reports.
In case you were wondering what typical cash flows are for a business in Los Angeles, BizBuySell.com reports that the median cash flow for Los Angeles area businesses was $96,000 in Q4 2008.
Tips for Los Angeles, CA Business Buyers
Bidding too little for a company is a bad strategy. Lowball bids are very rarely accepted. By making too low of a bid for a business, you risk offending the seller and ruining your chances of completing a deal. This helpful tip comes from Domenic Rinaldi, managing partner of Chicagoland Sunbelt, a leading business brokerage firm.
Business Valuations for Los Angeles, CA 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 additional information.
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