Biz Buy Sell has released their Insight Report for the fourth quarter of 2015. This nationally-recognized economic indicator tracks the health of the United States economy by measuring sales of small businesses.
BizBuySell says during the October to December 2015 time period, businesses sold nationwide declined by 3.6% over the prior year for the same time period. They say, "a total of 7,222 closed transactions were reported in 2015, nearly matching the 7,494 transactions in 2014, which was the highest year-end total reported since BizBuySell started tracking data in 2007." That transaction count included 1890 restaurant sales.
Surprisingly, the report indicates that "The restaurant industry drove much of the transaction lag in Q4 2015, experiencing an 11 percent drop from the same time last year. While transactions were down for the restaurant industry, financials were up" according to the industry giant. They also showed that the median asking price and sale price of restaurants were up from $175,000 to $185,000 and $149,000 to $160,000 respectively.
The results from the restaurant brokers at We Sell Restaurants differed significantly from the national reporting. The firm had a 100% growth rate over the prior year in units sold. President Eric Gagnon says, "We are continuing to achieve record growth and the specialized nature of our practice seems to be producing much greater than industry results." Robin Gagnon, a franchise resale specialist and princple in the firm says, "Doubling our unit counts in fourth quarter was part of a annual trend for 2015. We do see other brokers struggling to meet the same level of results. We attribute our results at We Sell Restaurants to both stronger marketing efforts, best in class training as well as a process based system which we have franchised."
The Insight Report stated that 1590 restuarants were sold across the country in the fourth quarter at an average multiple of 2.01. The restaurant brokers found multiples to be closer to three times earnings based on the high count of franchise restaurant resales in their inventory mix. BizBuySell indicates an average sales price of $155,000 for restaurants and $180,000 for Bars and Taverns.
Bizbuysell released the following chart showing national units sold by quarter since 2011 for the entire industry.
Other statistics from the report indicate growth in median income for sold businesses in this time period. This grew to $449,462, up from $417,562 in 2014 while the median cash flow crept up to $102,000 from $100,000 in 2014.The report indicates that while transaction count delined, "Improved financials allowed sellers to both ask for and receive a higher price for their businesses in 2015. The median asking price grew 12.5 percent from $200,000 in 2014 to $225,000. The median sale price also increased a solid 7.6 percent year-over-year, from $185,000 to $199,000. The average sale to asking price ratio of 90% remained flat from 2014 to 2015." These statistics are displayed in teh chart below.
"After a very active 2013 and 2014, this year's small drop in transactions suggests the large rush of business owners waiting to sell during the recession may have now exited the market and we are left with a more stable, balanced environment," Bob House, Group GM of BizBuySell.com and BizQuest.com said. "Overall, the business-for-sale market remains strong. Business financial indicators are strengthening and owners are receiving stronger valuations, leveling out what has been a strong buyer's market in recent years."
BizBuySell also surved the business broker community in December of 2015. Fifty-two percent of all surveyed brokers believe the market still favors buyers, down from 59 percent in 2014 according to the survey results issued by the company.
"Overall, small business indicators continue to point toward a healthy market for buying and selling," House said. "While both sellers and buyers should keep their eye on the upcoming election and possible regulatory changes, it's unlikely either event would unhinge what has been an increasingly active business-for-sale environment. As small business financials improve and the market finds its balance, transaction activity should continue to be strong in 2016."
While results for restaurants lagged last year on the national level, they still represented 21% of total transactions nationally as shown in the chart below.
Source: Small business transactions reported on BizBuySell.com during the fourth quarter of 2015