Retail Business Valuation Benchmarks

Business owners, prospective buyers, and industry investors rely on a diverse set of financial benchmarks to assess the value of a business. We have compiled data from current BizBuySell listings and sold businesses to provide insight into the business for sale market and important benchmarks for pricing and evaluating retail stores and shops relative to industry standards.

See also: E-Commerce Business Valuation Multiples & Financial Benchmarks

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Highlights of Retail Businesses Sold on BizBuySell

Retail businesses listed and sold on BizBuySell include a wide variety of shops and stores, from grocery, liquor, and convenience stores to bike, flower, and smoke shops. These businesses are nearly all independent, locally owned and operated, though franchised retail businesses may also be listed and included in this data.

Retail Business Transaction Trends

The median sale price of retail businesses sold on BizBuySell peaked in 2021, buoyed by strong business financials. Prices have since come down as increasing interest rates and inflationary pressures tempered spending, but median sales price remains well above pre-pandemic levels.

Retail Business Valuation Multiples

Valuation, or pricing, multiples are financial tools that allow for comparisons between businesses that have different levels of revenue and earnings. They represent the sales price of a business relative to its financial performance, and given enough individual business sales data, they represent what the market is willing to pay for a business given its revenue and earnings.

Valuation Trends

Business values and associated multiples fluctuate over time, influenced by a variety of macroeconomic factors such as interest rates, inflation, consumer spending, and overall economic growth.

Average valuation multiples of retail businesses have been increasing modestly, but consistently. Valuations of retail businesses generally outpaced valuations across the broader business for sale market until 2023, when all business valuation came down as a result of increasing interest rates. The rebound in 2024 is in line with the broader business-for-sale market.

Earnings Multiples

Earnings multiples represent the value of a business relative to its owner’s discretionary earnings or "cash flow". Arguably the most important valuation metric - as the seller's discretionary earnings will often dictate how much a buyer is able to borrow to finance the business acquisition - most valuations will hinge on a reasonable earnings multiple.

Revenue Multiples

Revenue multiples represent the value of a business relative to its overall sales or revenue. In conjunction with an earnings analysis, revenue multiples are commonly used to value a business based on its overall sales.

How to Interpret These Multiples

Recent Listings vs. Sold Businesses

We calculate and provide valuation multiples from two sources: Current and recent listings of retail businesses for sale, and our database of "comparable" businesses sold on BizBuySell. Multiples based on listing data are generally higher due to owners setting asking prices above what their businesses might typically sell for. This occurs either intentionally as a negotiation strategy, or incidentally due to business owners’ common tendency to overvalue their own businesses.

Multiples based on comparable businesses - "comps" in business broker parlance - are much more useful as they represent the prices at which businesses ultimately get sold. Business brokers and valuation professionals will always turn to local comps when pricing businesses for sale or evaluating businesses for acquisition. We provide both sets of data at the national level to offer general context.

Quartiles, Median, and Average

No two businesses are identical, and as such, valuation multiples exist in a range. We have carved out four common values within this range: Lower quartile represents the value under which the lowest 25% of valuation multiples fell. Upper quartile represents the value above which the highest 25% of multiples fell. Median is the middle of the range, and average is the mean of the set. Mean is almost always higher than the median, driven by a minority of high volume, high value businesses sold at multiples above the upper quartile.

Businesses with consistent financial performance, above average revenue and earnings, demonstrable growth potential, low owner involvement, unique competitive advantages, and a seller willing to finance will command a multiple at or above the upper quartile. Lower volume businesses with thin profit margins, full-time owner involvement, and many direct competitors will trade at or below the lower quartile. Most businesses will fall somewhere in the middle.

Based on this data, half of retail businesses are valued between 1.58 and 3.00 times their annual seller discretionary earnings, with 25% of exceptional, larger stores trading above this range, and 25% of the smaller, less desirable shops trading below.

Financial Benchmarks

To determine how a business compares in terms of revenue and earnings relative to industry peers, it’s necessary to have some insight into industry standards. "Benchmarking" describes the practice of comparing a business’s financial performance to typical industry standards to determine where a business falls relative to other businesses in the same industry. These benchmarks can help guide owners and investors towards appropriate valuation multiples from the range above.

To that end, we have aggregated financial ranges useful for comparing an individual retail business to its peers in the market.

Retail Business Revenue and Earnings Trends

Retail business revenue peaked in 2021, at the height of pandemic driven spending and economic stimulus. Sales have since return to pre-pandemic levels - dropping 10% from 2020 - though owner earnings remain up slightly at 2.5%. Stronger profit margins are likely due to inflation, where retail pricing increased more than wholesale.

Earnings Ranges

Discretionary earnings (used interchangeably with the terms "cash flow" and seller's discretionary earnings or SDE) is often the crux of business valuations, so it is important to benchmark it relative to other businesses traded on the market. Below you will find discretionary earnings ranges for retail businesses sold over the past five years, as well as recent for sale listings.

Revenue Ranges

Sales volume plays a large role in business valuation, as it measures the size of the potential income opportunity for new ownership. It's not uncommon for buyers to select an earnings multiple range based on overall revenue. The table below includes revenue ranges of retail businesses sold over the past five years, as well as recent for sale listings.

How Revenue and Earnings Level Affects Business Values

Clearly higher levels of earnings lead to higher valuations, even given the same multiple. However, valuation multiples also tend to rise with business sales volume. Popular and well-located retail stores that generate higher sales (and maintain reasonable profit margins) tend to sell for earnings multiples on the higher end. So, a clothing store consistently generating sales over $1.4MM annually may sell for an earnings multiple above 3, where a smaller store with sales under $400k would likely sell for an earnings multiple closer to 1.6 or less.

This tendency for higher sales volumes to fetch higher valuation multiples is largely driven by the economics of business acquisition financing. Higher volume businesses give buyers more cushion to cover debt service obligations and still have enough left over to pay the new owner a reasonable income.

Sector Comparisons

For a more complete understanding of the market and valuation standards, consider comparisons within the broader retail sector when benchmarking local retail businesses. The chart and table below includes key metrics from sales of select retail businesses on BizBuySell between 2020 and 2024.

With few exceptions, all retail businesses tend to fall on the same trend line of sales to earnings multiple. Other factors like real estate requirements, licensing and regulations, and staffing levels affect relative values, but sales volume is the primary lever of valuations. Greater sales volume at benchmark profit margins will return greater valuation multiples come sale time.

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