Chart: The Cost of Buying Private Companies

Many people think buying a business is expensive. But, actually, the typical private company sells at a low price.

According to BIZCOMPS, Business Valuation’s data base of private company sales, the median price of the 12,022 companies sold since 1995 on which Business Valuation has data was $166,000, less than half of one year’s revenue. As the chart below shows, only 5.8 percent of private businesses sold for more than $1 million. Nearly two-thirds sold for less than $250,000.

Why does it cost so little to purchase the typical private company? Do people undervalue small private businesses? Or does the low median price reflect the low value of a typical small company?

Share of Private Companies Selling at Different Prices

Created from data from the BIZCOMPS database.

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Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.