Better days ahead in sales of Las Vegas businesses

Broker Jeff Nyman barely covered his fees with most small businesses he sold in 2010, though he sees better days ahead based on offers and deals he has in escrow.

The chief executive officer of First Choice Business Brokers said he had more buyers looking at businesses in the last three months of 2010 and January than all of 2009. He sold more businesses funded by Small Business Administration loans during the fourth quarter than in the previous 10 years.

"Business is actually good. Buyers are coming out of the woodwork," Nyman said Wednesday. "We found buyers were willing to buy businesses just like the investors in short sales and foreclosures if the price was right."

Most businesses are listed at an absolute maximum multiple of two times actual net income and usually sell for about one multiple of income, after recasting financials to cover one-time expenses and costs not related to the business, Nyman said.

Unfortunately, a lot of deals were done simply to release the seller from their lease, which leaves great deals for buyers, he said.

Nyman listed a hair salon business for $35,000 that he sold in 2002 for $175,000. He sold a pizza restaurant for $45,000 after the previous owners had invested $300,000 in it.

Jim Puckett bought the pizza place at 2950 S. Durango Drive and converted it to Delmar Cafe and Espresso Bar. A former restaurant owner in Arizona, he looked at 40 to 50 businesses for sale and said the majority of them weren't doing very well.

"I thought there was a niche market in this area and if I could capture a little niche with breakfast and lunch, we'd be happy," Puckett said. "It has its days. We're only two months old. You're not going to be hitting the jackpot right away in Las Vegas in the restaurant business. It's tough, but it's fun and it's a rewarding business. You meet a lot of nice people."

The median asking price for a business in Las Vegas is $179,000, based on 253 businesses listed for sale in the first quarter at BizBuySell.com online marketplace. That's down from $242,000 a year ago.

Median revenue was $334,199, compared with $409,351 last year, while median cash flow fell to $85,400 from $100,000, the firm reported. Business owners in Las Vegas typically ask for a revenue multiple of 0.74 and a cash flow multiple of 2.77, compared with 0.72 and 2.95, respectively, a year ago.

Statistics are based on listings by local business brokers, as well as "for sale by owner" listings.

First Choice, with more than 30 agents, does not report sales to BizBuySell because sellers are reluctant to disclose confidential business information to any outside company, Nyman said.

This year is off to a fast start and prices are definitely better than last year as far as sellers are concerned, the broker said. Business is starting to turn around, which attracts more buyers and gives sellers a competitive advantage.

Nyman said he's seeing new companies such as Texas-based Burger Girl come into Las Vegas again, bringing in new money from out of state and creating jobs.

"What's hurting right now? The bars," he said. "You never saw bars close down before."

The BizBuySell report, which aggregates business-for-sale transaction data provided by participating business brokers, shows a slight increase in business succession activity over the same time period in 2010.

BizBuySell reported 1,172 business sale transactions in the United States in the first quarter, a 2 percent increase from the year-ago period.

"We've been predicting for quite some time that the business-for-sale market would improve as more financing becomes available to buyers," general manager Mike Handelsman said. "While the market is not picking up as quickly as some would like, we expect a modest recovery to continue throughout 2011."

BizBuySell.com also reports positive changes in the metrics that are used to value companies.

Median revenue for businesses sold increased 8.1 percent from $320,000 to $346,000, while median cash flow increased 5.2 percent from $80,000 to $84,175. It's the first quarter in at least a year where both median revenue and median cash flow were up from the prior year.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.