Having the right information when it comes to buying a business is vital. In this article, we’ll discuss how the cost of buying a business can vary widely, depending on the size and type of business, the market, and the financing you pursue. We’ll also discuss the common methods of determining a fair purchase price and the different types of financing available to make a purchase.

How Much to Buy a Business?

Finance companies usually require that buyers contribute 10% of the project cost as an “equity injection” or “down payment”. The median sale price of a business has been in the range of $150,000 to $200,000 for the last 4 years. The purchase price for a business can vary widely based on the size and type of business, the market, and the financing pursued. Common methods of determining a fair purchase price include the Owner Benefit valuation method and an ROI (Return on Investment) consideration.

When buying a small business, the buyer should typically pay between $80,000 and $100,000, which is 20 to 25 percent of the purchase price. If the business is SBA financeable, SBA down payments range from 15% to 25% depending on how much goodwill vs. tangible assets make up the deal value.

How Much Does Buying into a Franchise Cost?

The cost of buying into a franchise can vary widely, depending on the size and type of franchise, the market, and financing pursued. Common costs associated with buying a franchise include:

  • Up to $25,000
  • Up to $50,000
  • Up to $100,000
  • Over $100,000

Valuation services, which can be found online or through word of mouth, cost around $3,000 to $5,000, but they can save you thousands more in the long run.

Conclusion

The cost of buying a business or entering a franchise can vary greatly depending on the size and type of business, the market, and the financing pursued. Common methods of determining a fair purchase price include the Owner Benefit valuation method and an ROI consideration. Valuation services can help you get a better understanding of the value of a business.

At Atlanta Businesses we provide expert advice and assistance to help you find the right business for you. We have a team of experienced brokers and advisors to help guide you through the process of buying a business. Visit atlantabusinesses.com for answers to your questions about business brokers and about selling a business in Atlanta.

What is the minimum amount of money required to purchase a business?

When applying for an SBA 7(a) loan program to buy a business, it is best to plan for a down payment of 15%, as the SBA requires a minimum of 10%. It is important to be prepared for the possibility of a higher rate than the minimum.

What is the typical selling price of a business?

The expected sale price of a business will usually be somewhere between two and four times the amount of the seller’s discretionary earnings (SDE). Most businesses are sold within the two to three times range. For example, if the annual cash flow is $200,000, the price tag is likely to be between $400,000 and $600,000.

What is the estimated expense for a business?

Calculate an estimate of your expenses. The U.S. Small Business Administration states that the majority of microbusinesses cost around $3,000 to initiate, while most home-based franchises cost between $2,000 and $5,000. Every business has its own financial needs, yet experts have some advice to help you figure out how much money you will need.

What is the value of a business with $1 million in sales?

The worth of a company with $1 million in sales would vary based on the profits it makes and its assets. Generally, the value of a business is somewhere between one and five times the yearly revenue. Therefore, this business would be worth between $1 million and $5 million.

Would it be beneficial to purchase an already established business?

Purchasing an existing business is definitely less hazardous than starting one from the ground up because it already has a good reputation, is up and running, has customers, workers, systems, suppliers, and financial records, a place or multiple locations, and the seller may even be willing to finance it.

What steps do I need to take to purchase a business from the beginning?

1. Locate a company to buy.
2. Estimate its value.
3. Bargain for the cost.
4. Submit a Letter of Intent.
5. Do a thorough investigation.
6. Secure the necessary funding.
7. Finalize the deal.