Buying a Business
Cost to Buy a Business in Washington
Considering purchasing a company in Washington, District of Columbia? You're no doubt wondering how much a typical Washington, District of Columbia business costs to buy.
Fortunately, a company called BizBuySell.com has made some data available on what it costs to buy a business in Washington.
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. They also have many FSBO (for sale by owner) business-for-sale listings.
If you are looking to buy a business in District of Columbia, take a look at the BizBuySell District of Columbia listings to get instant access to business-for-sale listings for Washington and other District of Columbia towns.
Washington, DC Business Valuations
According to BizBuySell.com, the median asking price for an Washington business-for-sale listing in Q4 2008, the quarter when they most recently released their data, was $250,000.
That was based on 908 listings in the Washington-Arlington-Alexandria, DC-VA-MD-WV metro area. As such, some of the businesses used to derive the median valuation might be outside of Washington, but they are in the area and so are likely representative of Washington 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 Washington business for much less. The flip side is that some Washington businesses may cost much more.
Another thing you should know is that this is the asking price for an Washington business. Typically, when an entrepreneur 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 means a business listed for $200,000 might be sold for between $170,000 and $180,000.
If you are interested in trends in business-for-sale asking prices, here are the median asking prices for businesses in the Washington-Arlington-Alexandria, DC-VA-MD-WV metro area for the last 8 quarters.
Washington, DC Revenue Multiples
In the Washington-Arlington-Alexandria, DC-VA-MD-WV metro area, businesses will typically sell for 0.75 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 firm with revenues of $200,000 might list for $149,461. Remember, however, 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 Washington area, based on BizBuySell.com's quarterly reports.
According to BizBuySell.com, the median revenues for its business-for-sale listings was $420,000 in Q4 2008.
Cash Flow Multiples In Washington, DC
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 Washington-Arlington-Alexandria, DC-VA-MD-WV metro area was 3.08.
So, a firm with cash flows of $120,000 might have an asking price of $369,520. That's if the business fits the area average. The distribution on revenue multiples for a given set of businesses can be quite wide-ranging.
The table below shows how cash flow multiples are trending in the Washington area, based on BizBuySell.com's quarterly reports.
If you are interested in what cash flows are for a business in Washington, BizBuySell.com reports that the median cash flow for Washington area businesses was $100,000 in Q4 2008.
Things to Consider When Buying a Business in Washington, DC
Before you start shopping for a business to buy, establish your acquisition criteria. It's important to define the parameters of your search. Include geographic requirements, criteria on the transaction size, and other business attributes that are important to you. Having set criteria will help you demonstrate that you are a thoughtful and committed buyer. It will also streamline your business buying process. This helpful advice on how to buy a business comes from Domenic Rinaldi, managing partner of Chicagoland Sunbelt, a leading business brokerage firm.
Business Valuations for Washington, DC 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 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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