Buying a Business
Cost to Buy a Business in San Francisco
Considering purchasing a company in San Francisco, California? You're no doubt wondering how much a typical San Francisco, California business costs to buy.
Fortunately, the folks at BizBuySell.com have made some data available on what it costs to buy a business in San Francisco.
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, check out the BizBuySell California listings to to be on the inside track with the newest business-for-sale listings for San Francisco and other California towns.
San Francisco, CA Business Valuations
According to BizBuySell.com, the median asking price for an San Francisco business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $250,000.
That was based on 333 listings in the San Francisco-Oakland-Fremont, CA metro area. As such, some of the businesses used to derive the median valuation might be outside of San Francisco, but they are close by and so are probably representative of San Francisco business valuations.
Remember 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 San Francisco business for much less. At the same time, some San Francisco businesses may cost much more.
Importantly, this is the asking price for an San Francisco 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. 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 San Francisco-Oakland-Fremont, CA metro area for the last 8 quarters.
Revenue Multiples In San Francisco, CA
In the San Francisco-Oakland-Fremont, CA metro area, businesses will typically sell for 0.69 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 firm with revenues of $200,000 might list for $138,562. 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 changing in the San Francisco area, based on BizBuySell.com's quarterly reports.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $444,500 in Q4 2008.
Cash Flow Multiples In San Francisco, CA
Another useful technique to value a business is through cash flow multiples.
For Q4 2008, the average cash flow multiple for listed businesses in the San Francisco-Oakland-Fremont, CA metro area was 3.13.
So, a business with cash flows of $120,000 might have an asking price of $375,835. That math only works if the business sells for the area's average multiple. Actual cash flow multiples can vary considerably from one business to another.
Here is how cash flow multiples are trending in the San Francisco area, based on BizBuySell.com's quarterly reports.
Flow Multiple
If you are interested in what cash flows are for a business in San Francisco, BizBuySell.com reports that the median cash flow for San Francisco area businesses was $104,000 in Q4 2008.
Things to Consider When Buying a Business in San Francisco, CA
Many buyers want to look at all available options, thinking they'll recognize what they're looking for when they see it. That approach is actually a waste of valuable time and energy and can lead to frustration. A better strategy is to define what you are looking for and then only look at businesses that meet your criteria. This useful business buying advice comes from Domenic Rinaldi, managing partner of Chicagoland Sunbelt, a leading business brokerage firm.
Business Valuations for San Francisco, CA Businesses
If you have a specific business in mind and want to look at comparables in the area, 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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