Buying a Business

Cost to Buy a Business in Nashville

Considering purchasing a company in Nashville, Tennessee? You'd do well to learn a little bit about trends in Nashville, Tennessee business valuations.

Fortunately, the folks at BizBuySell.com have made some data available on what it costs to buy a business in Nashville.

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. They also have many FSBO (for sale by owner) business-for-sale listings.

If you want to buy a company in Tennessee, check out the BizBuySell Tennessee listings to see the latest business-for-sale listings for Nashville and other Tennessee towns.

Business Valuations in Nashville, TN

Based on the BizBuySell.com data, the median asking price for an Nashville business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $315,000.

That was based on 235 listings in the Nashville-Davidson--Murfreesboro, TN metro area. As such, some of the businesses used to derive the median valuation might be outside of Nashville, but they are close by and so are likely representative of Nashville 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 Nashville business for much less. At the same time, some Nashville businesses may cost much more.

Importantly, this is the asking price for an Nashville business. Typically, when an entrepreneur lists a business for sale, they start with an asking price that is higher than the final sale price. The sale-price-to-asking-price ratios depend on deal specifics 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 Nashville-Davidson--Murfreesboro, TN metro area for the last 8 quarters.

Quarter
Median Ask
Q1 2007
$280,000
Q2 2007
$275,000
Q3 2007
$290,000
Q4 2007
$299,000
Q1 2008
$280,000
Q2 2008
$299,950
Q3 2008
$322,500
Q4 2008
$315,000

Nashville, TN Revenue Multiples

In the Nashville-Davidson--Murfreesboro, TN metro area, small businesses will typically sell for 0.92 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 $183,843. Remember, however, that this is simply 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 Nashville area, based on BizBuySell.com's quarterly reports.

Quarter
Revenue Multiple
Q1 2007
1.41
Q2 2007
1.08
Q3 2007
1.09
Q4 2007
1.10
Q1 2008
1.00
Q2 2008
0.95
Q3 2008
0.94
Q4 2008
0.92

According to BizBuySell.com, the median revenues for its business-for-sale listings was $531,389 in Q4 2008.

Cash Flow Multiples In Nashville, TN

Another popular way to value a business is through cash flow multiples.

For Q4 2008, the average cash flow multiple for businesses listed in the Nashville-Davidson--Murfreesboro, TN metro area was 3.96.

So, a business with cash flows of $120,000 might have an asking price of $475,402. 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 Nashville area, based on BizBuySell.com's quarterly reports.

Quarter
Median Cash
Flow Multiple
Q1 2007
4.33
Q2 2007
4.08
Q3 2007
4.07
Q4 2007
4.30
Q1 2008
4.25
Q2 2008
4.05
Q3 2008
4.00
Q4 2008
3.96

In case you were wondering what typical cash flows are for a business in Nashville, BizBuySell.com determined that the median cash flow for Nashville area businesses was $113,000 in Q4 2008.

Things to Consider When Buying a Business in Nashville, TN

Sellers want to be sure their business will continue to be successful. They want to find a buyer who has experience and will take care of the company's employees. As such, you are selling yourself to the current business owner and the professional team that represents the seller. You may think you are buying, but you also need to be selling. This useful tip for buying a business was provided by Domenic Rinaldi, managing partner of Chicagoland Sunbelt, a leading business brokerage firm.

Business Valuations for Nashville, TN 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 more information.

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