Q1 2009 Costs to Buy a Business

How Much Is My Santa Clara Business Worth?

We just received the latest Santa Clara, California small business valuation trend data for First Quarter 2009.

Q1 2009 Business Valuations in Santa Clara, CA

Based on data compiled by BizBuySell.com, Santa Clara business-for-sale listings in Q1 2009 had a median asking price of $260,000.

That compares to a median ask price of $249,000 in Q1 2008. Because the median ask price for businesses for sale in Santa Clara has risen year over year, we can conclude that many smaller firms in Santa Clara are holding off on selling.

Please understand that this is the median asking price for a business. If you want to buy a business, you may be able to buy a Santa Clara company for much less. Similarly, some Santa Clara businesses may be selling for much more.

Another thing to remember is that this is the asking price for a Santa Clara business. When a company owner lists a business for sale, they typically set a price that ends up being more than the eventual sale price. A sale-to-ask ratio typically might be between 0.85 and 0.90, but of course it depends on deal specifics. As an example, a company listed for $125,000 would often sell for between $106,250 and $112,500.

Number of Santa Clara Businesses for Sale in the Dataset

The study data comprised 142 listings in the San Jose-Sunnyvale-Santa Clara, CA metro area. As such, some of the businesses used to derive the median valuation might be outside of Santa Clara, but they are in the area and so are probably representative of Santa Clara business valuations.

In Q1 2008, just one year ago, there were 165 Santa Clara listings in the BizBuySell.com dataset. As a result of the recession, fewer Santa Clara business owners are selling because they hope to weather the storm and sell after the economy turns around.

Santa Clara, CA Q1 2009 Revenue Multiples

In the San Jose-Sunnyvale-Santa Clara, CA metro area, businesses will typically sell for 0.88 times the selling company's revenues. The data indicates that is the mean revenue multiple for Q1 2009 in this metro area.

In other words, a firm with revenues of $200,000 might list for $176,010. Remember, however, that this is just an average for revenue multiples in the area. Some companies will have higher revenue multiples and others will have lower revenue multiples.

According to BizBuySell.com, the median revenues for its business-for-sale listings was $406,582 in Q1 2009.

To put this in perspective, the Q1 2008 revenue multiple was 0.74 and the median revenue for listed businesses was $433,777.

Q1 2009 Cash Flow Multiples In Santa Clara, CA

Cash flow multiples are another popular technique to value a business.

For Q1 2009, the average cash flow multiple for listed businesses in the San Jose-Sunnyvale-Santa Clara, CA metro area was 3.60.

So, a business with cash flows of $150,000 might have an asking price of $539,386. That's only if the firm complies with the local average. Most businesses will not conform to industry- or area averages.

In case you were wondering what typical cash flows are for a business in Santa Clara, BizBuySell.com reports that the median cash flow for Santa Clara area businesses was $100,000 in Q1 2009. In Q1 2008, cash flow multiples clocked in at 3.35 and the median cash flow was $100,000.

Things to Consider When Selling a Business in Santa Clara, CA

A diversified customer base is a great selling point to buyers. If you are preparing to sell a business and your customer base is not diversified, think about how you can diversify your customer base and thereby lower the risks for a buyer. By doing so, you can sell a business for a higher price. Ideally, no single customer should account for more than 10% of your revenues. This advice comes from Domenic Rinaldi, managing partner of Sun Acquisitions, a leading business brokerage firm.

Business Valuations for Santa Clara, CA Businesses

If you are contemplating buying a business or selling a business and would like to look at comparables in the area, we suggest you try the BizBuySell.com Business Valuation Tool. You can modify the dataset that creates business valuation estimates to meet your specific criteria. As a bonus, 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 report that tracks trends in the business-for-sale marketplace. If you find these trends interesting, take a moment to visit BizBuySell.com Insights Report for more information.

Historical Data for Santa Clara, CA Business Valuations

If you are interested in trends in business-for-sale asking prices, here are the median asking prices for companies in the San Jose-Sunnyvale-Santa Clara, CA metro area for the last 9 quarters.

Quarter
Median Ask
Q1 2007
$189,500
Q2 2007
$239,000
Q3 2007
$265,000
Q4 2007
$250,000
Q1 2008
$249,000
Q2 2008
$249,500
Q3 2008
$250,000
Q4 2008
$260,000
Q1 2009
$260,000

Here is how median revenue multiples are trending in the Santa Clara area, based on BizBuySell.com's data.

Quarter
Revenue Multiple
Q1 2007
0.85
Q2 2007
0.79
Q3 2007
0.71
Q4 2007
0.68
Q1 2008
0.74
Q2 2008
0.78
Q3 2008
0.80
Q4 2008
0.82
Q1 2009
0.88

The table below shows how cash flow multiples are trending in the Santa Clara area, based on BizBuySell.com's quarterly reports.

Quarter
Median Cash
Flow Multiple
Q1 2007
2.91
Q2 2007
3.23
Q3 2007
3.00
Q4 2007
2.98
Q1 2008
3.35
Q2 2008
3.28
Q3 2008
3.42
Q4 2008
3.47
Q1 2009
3.60

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