About a quarter of investors looking to buy a business are keen on restaurants

About a quarter of investors looking to buy a business are keen on restaurants.

Is it a seller’s market for restaurants?

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There is good news if you want to sell your restaurant. A just-released survey from Internet business for sale marketplace BizBuySell finds there are plenty of potential buyers who have the money and motivation to make any sale happen in a hurry. Surprisingly, sellers are the ones dragging their feet on potential transactions right now.

BizBuySell surveyed both prospective buyers and sellers of small businesses to produce its snapshot of marketplace conditions. The firm analyzed data from 1,700 current U.S. small business owners and 1,300 prospective small business buyers.

Restaurants were the most appealing sector to buyers, with 26 percent of respondents wanting to get into the restaurant business. Retail (21 percent), internet-based (21 percent), manufacturing (20 percent) and bar/tavern (19 percent) businesses also drew plenty of interest.

Much of the survey focused on the how changing U.S. demographics are affecting the overall marketplace.

BizBuySell found that “the small business seller community is largely comprised of white, college educated, married men over 50 years old. Seventy-eight percent of sellers are male compared to 22 percent female, a ratio that strays dramatically from the overall U.S. population.”

The next round of buyers will be more diverse, particularly when it comes to gender and age. Even better, many of them already have the income they’ll need to make deals work. One-quarter of potential buyers reported they generate more than $150,000 in annual income, and another 22 percent already earn between $100,000 and $149,000 per year. The remainder have less than $100,000 in income.

These buyers primarily want to buy established independently owned businesses. Ninety-three percent expressed this sentiment. In contrast, just 26 percent would consider a new franchise, while 35 percent would look at purchasing an existing franchise.

On the financial front, 58 percent of potential buyers plan to purchase their business with cash. Those who don’t have cash will seek funding from a variety of other sources. Fifty-one percent say they will rely on bank financing, while 45 percent will look for deals that offer seller financing. Forty-one percent hope to get a Small Business Administration loan, and roughly one-quarter will tap their 401(k) or other personal investments to fund their small business purchase.

So how much are they willing to spend? Moderately priced restaurants are the sweet spot in the market. More than half of buyers—53 percent—are targeting businesses priced in the $100,000-$499,999 range. That’s where 40 percent of current sellers value their businesses.

Among higher rollers, 10 percent of buyers are looking at businesses in the $500,000-$1 million bracket, and nine percent want a business priced at $1 million or more.

On the lower end of the market, 28 percent of buyers would like to acquire a business priced at less than $100,000. That’s almost a perfect match for the 29 percent of business sellers who value their operation in that same bracket.

These potential owners are fueled by the same ambition and entrepreneurial drive shared by restaurant operators everywhere. Here are the reasons these buyers cite as some of their primary motivations for buying a business.

• 63 percent said “be my own boss.”

• 52 percent said “better income opportunity.”

• 43 percent said “better lifestyle.”

• 32 percent cited a desire for a side business/supplemental income.

• 25 percent said “I want to get out of corporate America.”

“The chance to be your own boss and potentially earn a higher income holds universal appeal for most business buyers,” BizBuySell points out. “These motivations are even more pronounced among Millennials, whereas older buyers are more likely to be driven by the opportunity to leave corporate America behind.”

Perhaps the most surprising finding was the lack of urgency among current restaurant owners to make the most of the favorable selling climate now in place.

“Buyers and sellers are operating on two different speeds,” BizBuySell concludes. “Although almost half of buyers today want to take over a small business within the year, very few sellers are prepared to start the sale process in the near term. If sellers hope to capitalize on buyers’ growing demand, they’ll need to equip themselves with the right resources—from researching current trends in small business transactions, to enlisting trustworthy business brokers and attorneys to facilitate the sale.”

Thinking about selling your place in the near future? Be sure to look at this article as you develop your exit plan.

Contact Bob Krummert: [email protected]

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