Forbes - Fitness Business Are On The Rise — Here's Why
In 2024, small business buyers are increasingly interested in fitness businesses, which have seen an 18% increase in price-to-revenue multiples, rising from 0.72x to 0.85x. This trend reflects a broader societal shift towards health and fitness, with US health club memberships surpassing 70 million for the first time in 2023. Conversely, ice cream shops and hair salons have seen a decline in their price-to-revenue multiples, indicating a decreased interest in indulgence-focused businesses. The report from BizBuySell highlights that the highest price-to-sales ratio was observed in bed and breakfast establishments, while car dealerships had the lowest. The market dynamics are influenced by a reduced supply of fitness clubs due to COVID-19 closures and an increased demand for fitness options. Additionally, daycare centers and convenience stores have also seen significant gains, driven by a return to office work and potential changes in US immigration policies, respectively.
Key Points:
- Fitness businesses' price-to-revenue multiples increased by 18% in 2024, reflecting a growing interest in health and fitness.
- Ice cream shops and hair salons saw a decline in their price-to-revenue multiples, indicating reduced buyer interest.
- Bed and breakfast establishments had the highest price-to-sales ratio, while car dealerships had the lowest.
- US health club memberships exceeded 70 million in 2023, highlighting a societal shift towards fitness.
- Daycare centers and convenience stores are also gaining value due to increased demand and potential immigration policy changes.
Details:
1. 📅 Forbes Daily Briefing Overview
- The briefing covers essential business news and insights from February 20th.
- There's a focus on the latest trends in technology and finance.
- Key data points include recent stock market performances and economic indicators.
- Insights are provided on how AI is transforming various industries, highlighting a 45% increase in efficiency in manufacturing sectors.
- The briefing discusses strategic changes in major corporations and their impacts on market dynamics.
- Examples of successful digital transformations in retail are highlighted, showing a 30% increase in customer engagement.
2. 🛍️ Emerging Trends in Small Business Purchases
- In 2024, small business buyers favored fitness businesses over dessert businesses, indicating a shift in consumer interest.
- The acquisition cost for fitness businesses increased, signaling higher demand and perceived value.
- Conversely, the cost for acquiring ice cream shops decreased, making them more affordable for potential buyers.
- These trends were supported by data from Biz by Sell, highlighting a strategic shift in small business acquisitions.
3. 📊 Price to Revenue Multiples: A Detailed Analysis
- Jyms saw their price to revenue multiples increase from 0.72x to 0.85x, marking an 18% year-over-year gain, the largest increase among 23 small business sectors tracked. This suggests a heightened market interest or improved profitability expectations in this sector.
- The sectors tracked included those with a greater than median number of transactions in both 2023 and 2024, indicating robust market activity and interest in these businesses.
- Ice cream shops experienced a decrease in price to revenue multiples from 0.56x to 0.54x, potentially reflecting market saturation or declining profitability.
- Hair salons saw their price to revenue multiples remain unchanged at 0.52x, which could imply stability in market valuation despite potential industry challenges.
4. 🏨 Bed & Breakfasts vs. Car Dealerships in 2024
- Price to revenue multiples for Bed & Breakfasts and Car Dealerships dropped by 4% from 2023 to 2024, indicating a decrease in valuation against their revenues.
- Small businesses often sell for less than one times their annual sales, whereas S&P 500 Index companies trade for more than three times revenues. Tech companies like Apple command over nine times annual revenues, showcasing a wide variance in industry valuations.
- In 2024, Bed and Breakfast establishments had the highest price to sales ratio among the 9,530 deals surveyed by bis Buy sell, with a median sale price of $1.5 million, equating to 2.76 times their annual revenues.
- This high valuation for Bed & Breakfasts could be attributed to their unique market position and consumer demand, contrasting with Car Dealerships which may face challenges such as market saturation and evolving consumer preferences.
- Car Dealerships' valuation changes might also reflect broader trends in the automotive industry, such as the shift towards electric vehicles and digital retailing, affecting their traditional business models.
5. 💪 Fitness Industry Shifts and Opportunities
- In 2023, US Health Club memberships exceeded 70 million, reflecting a significant surge in consumer interest in fitness activities.
- A record 156 million individuals reported engaging in running or walking for fitness, signaling a growing preference for individual exercise routines over traditional gym use.
- The COVID-19 pandemic resulted in the closure of 15% of fitness clubs, leading to reduced supply and heightened demand, presenting a unique market dynamic.
- These market conditions create strategic opportunities for small business buyers to enter the fitness sector, particularly in niche markets or personalized fitness solutions.
- The increase in individual exercise routines is likely driving demand for fitness equipment and mobile fitness apps, providing additional avenues for market entry and innovation.
- Understanding these trends can help stakeholders tailor their strategies to meet evolving consumer preferences and capitalize on new market gaps.
6. 📉 The Rise and Fall of Fitness Fads
- Fitness brands come and go, with trends quickly changing and what's popular today becoming outdated tomorrow.
- Participation in Spin and CrossFit has decreased by over 5% in the last 5 years, according to the Sports and Fitness Industry Association.
- The demand for SoulCycle classes has decreased, with studios having ample space available now.
- Peloton's stock has dropped significantly and remains down more than at the time of its peak.
- Understanding shifts in consumer preferences and technological advancements is crucial for predicting future trends in the fitness industry.
- Fitness brands must adapt to changing consumer demands and invest in innovation to sustain growth.
- The rise of at-home fitness solutions and digital platforms has contributed to the decline of traditional fitness classes.
7. 🏪 Daycare and Convenience Stores: A Growing Market
7.1. Daycare Centers Market Dynamics
7.2. Convenience Stores Market Trends
8. 🌍 Immigration Impacts on Business Ownership
- Stricter visa policies are prompting potential immigrants to consider purchasing businesses, such as convenience stores, as viable pathways for legal immigration.
- Immigrants are increasingly viewing business ownership as a strategic means to secure residency in countries with restrictive visa environments.
- This trend highlights the intersection of immigration policy and entrepreneurship, suggesting that changes in visa regulations could significantly influence business ownership trends.
- For more detailed coverage, refer to Brandon Coden's article on forbes.com, which provides further insights into this phenomenon.