The year 2024 marked a significant shift in the small business market, with health and wellness businesses surging in popularity while once-thriving sectors like ice cream shops and hair salons saw a decline in value. This trend, highlighted by data from BizBuySell, an online marketplace for small businesses, reflects a broader cultural movement towards health and fitness, coupled with the challenges posed by economic pressures and changing consumer preferences.
### The Rise of Fitness: A New Era in Small Business
The fitness industry experienced a remarkable surge in 2024, with the price-to-revenue multiples for gyms increasing by 18%, the largest gain among the 23 small business sectors tracked by BizBuySell. This shift is not just about numbers; it signals a cultural transformation. Americans are prioritizing health and wellness more than ever before. U.S. health club memberships reached a record high of over 70 million in 2023, according to the Sports & Fitness Industry Association, and more people are engaging in individual fitness activities like running and walking.
This trend is further fueled by the “Make America Healthy Again” initiative, a health movement championed by Robert F. Kennedy Jr., who has played a pivotal role in shaping the national conversation around fitness and nutrition. The movement has been supported by policy changes, such as an executive order establishing the President’s Make America Healthy Again Commission, which aims to address chronic diseases and declining life expectancies. Additionally, the rise of weight-loss drugs like Ozempic has contributed to a shift in eating habits, further reducing demand for indulgent foods and fostering an environment where fitness businesses can thrive.
### The Decline of Indulgence: Ice Cream Shops and Hair Salons
While fitness businesses are booming, other industries are struggling to maintain their value. Ice cream shops and hair salons tied for the worst performance, each seeing their price-to-revenue multiples drop by 4% in 2024. For ice cream shops, this decline can be attributed to several factors, including the rising costs of ingredients, staffing challenges, and a cultural shift away from sugary treats. Many ice cream shops rely on low-wage, seasonal workers, making it difficult to maintain profitability in a competitive market.
Hair salons are facing a different set of challenges. The rise of the “chair rental” model, where stylists rent space in a salon rather than working as employees, has made traditional salon ownership less appealing to buyers. This model allows stylists to operate as independent contractors, reducing the overhead costs associated with running a full salon. As a result, many potential buyers see salons as a way to secure a steady income rather than a lucrative investment opportunity.
### Beyond Gyms: Other Winning Industries
While fitness businesses are leading the charge, other sectors are also benefiting from the changing market dynamics. Day care centers and convenience stores emerged as two of the biggest winners in 2024. Day care centers saw their price-to-revenue multiples rise by 16%, driven by the return to in-office work and a reduction in supply due to closures during the COVID-19 pandemic. Convenience stores, which have long been a stable investment, saw increased interest due to stricter U.S. immigration policies. Many immigrants view convenience stores as a viable pathway to entering the country, making them a more attractive option for buyers.
### The Cyclical Nature of Fitness Trends
While fitness businesses are currently in high demand, it’s important to recognize that the industry is not immune to trends. Fitness fads come and go, and today’s popular gym chains could be tomorrow’s relics. For example, franchises like Curves, which once dominated the market with over 7,000 locations, have seen a significant decline in recent years, with fewer than 200 Locations remaining in the U.S. Even newer trends like spin classes and CrossFit have started to lose momentum, with participation dropping by more than 5% over the past five years.
This cyclical nature of the fitness industry was highlighted by Emmet Apolinario, a veteran business broker with over two decades of experience. According to Apolinario, fitness trends typically last four to six years before they start to fade. He predicts that the current fitness boom, which began around 2021 or 2022, will likely start to decline within the next year and a half. This makes it crucial for buyers to carefully consider the long-term viability of their investments before jumping into the fitness market.
### The Struggles of Other Industries
While some industries are thriving, others are struggling to stay afloat. Grocery stores and restaurants, for example, are known for their razor-thin profit margins and high competition, making them less attractive to buyers. Nail salons, massage businesses, and bakeries are also facing challenges, as they require consistent foot traffic and long hours to remain profitable. Juice bars, once a booming trend, have seen a decline in popularity as consumers increasingly favor low-sugar drinks.
Car dealerships ranked at the bottom of the list, selling for just 0.23 times revenue. Despite the high volume of sales in this industry, profit margins are extremely thin, typically around 4% for new cars. Rising inventory costs and fluctuating demand have made car dealerships a less attractive option for buyers. Funeral homes, laundromats, and insurance agencies, on the other hand, are seeing steady demand due to their essential services and predictable revenue streams.
### Looking Ahead: Future Trends and Challenges
As the small business market continues to evolve, it’s important to keep an eye on emerging trends and potential challenges. Lisa Riley, a business broker based in Arizona, predicts that construction and manufacturing businesses will remain in demand, particularly in regions with strong economic growth. On the other hand, Emmet Apolinario points to a growing interest in doggy daycare centers, which averaged 1.18 times sales in 2024, as a potential area of growth.
However, not all industries are expected to fare well in the coming years. If a national E-Verify program becomes part of President Trump’s immigration reforms, it could negatively impact industries that rely heavily on undocumented labor, such as HVAC, construction, and landscaping. These businesses may see their values decline as labor costs rise and availability becomes more uncertain.
In conclusion, the small business market in 2024 was defined by a clear shift towards health and wellness, with fitness businesses leading the charge. However, this trend is not without its challenges, and buyers must be cautious of the cyclical nature of the fitness industry. As the market continues to evolve, it’s crucial to stay informed about emerging trends and potential challenges, whether you’re considering investing in a gym, a convenience store, or any other type of small business.
