When it comes to buying a business, there is no one-size-fits-all answer to the question “how much is it to buy a business?”. The cost of a business depends on a variety of factors, including the size, age, and profitability of the business, as well as the market it operates in. Financing companies usually require buyers to contribute 10% (with few exceptions) of the project cost, known as the “equity injection”.

How Much Does Buying into a Business Typically Cost?

The median sale price of a business has been in the range of $150,000 to $200,000 for the last 4 years, according to the U.S. Small Business Administration. It slipped slightly from 2014 ($189,000). The amount of money the buyer has to contribute to the purchase price depends on the type of business. Here are some common types of businesses and their approximate cost to buy:

  • Up to $25,000 – Microbusinesses
  • Up to $50,000 – Home-based franchises
  • Up to $100,000 – Small to medium-sized businesses
  • Over $100,000 – Large businesses

It is common for buyers to pay between 20 to 25 percent of the purchase price. For example, if the business is valued at $200,000, the buyer should pay around $80,000 to $100,000 for the business.

The Owner Benefit Method for Valuation

The Owner Benefit valuation method is an excellent, practical approach to determining how much to pay for a small business. This method looks at the value of the business based on the Return on Investment (ROI) that the buyer will receive. The buyer should also consider other factors such as the size, age, and profitability of the business, as well as the market it operates in.

For buyers who need help with the valuation process, there are companies that provide valuation services. Typically, these services cost around $3,000 to $5,000, but they can save buyers thousands of dollars by helping them make a well-informed decision.

Are you looking to buy a business in Texas? Browse over 1500 Texas businesses for sale on Atlantabusinesses.com, a great resource for answers to your questions about business brokers and about selling a business in Atlanta.

What is the required initial payment to purchase a business?

Generally, the down payment for the purchase of a business is between 10-15% of the total amount required for the transaction. This cost will include all fees, taxes and other expenses related to the sale.

What is the typical selling price of a business?

A typical sale price for a business is two to four times the seller’s discretionary earnings (SDE). Most sales fall within the 2 to 3 range. For example, if the business’s annual cash flow is $200,000, the estimated selling price would be between $400,000 and $600,000.

What is the valuation of a business that has $1 million in sales?

The value of a business with $1 million in sales could be anywhere from $1 million to $5 million, based on the profitability of the business and any assets it may have. Generally, the worth of a business is estimated to be between one and five times its annual sales.

What is the expense of starting a business?

Calculate the amount of money you need to launch your business. The United States Small Business Administration (SBA) states that typically, the startup costs of a microbusiness are around $3,000 and most home-based franchises cost between $2,000 and $5,000. Experts have some advice to help you ascertain the amount of funds you will need.