How to Use IBISWorld Reports When You're Looking at a Business in an Industry You Don't Know

You found a business listing that looks interesting. The price is right, the location works, the seller seems motivated. There's just one problem: you have no idea how a spa actually makes money, or what "good" looks like in the wellness industry.

This is where most small business buyers get stuck. You can't do proper diligence on a business when you don't understand the industry fundamentals. What should margins look like? Is this market growing or dying? Are there seasonal patterns you need to know about?

IBISWorld reports are designed to solve exactly this problem, and they're surprisingly practical once you know what to look for. Let me walk you through exactly how to use one—with a real example.

The Deal We're Evaluating

Let's say you're looking at a health and wellness spa in Jacksonville, Florida. Here's what the broker sent over:

• Asking Price: $2,000,000
• Annual Revenue: $2,000,000
• Claimed SDE: $400,000 (that's a 20% margin)
• Employees: About 25 people

Looks pretty good on paper, right? But you've never owned a spa. You don't know if a 20% margin is normal or suspicious. You don't know if Jacksonville is oversaturated with spas or underserved. You need to get smart on this industry fast.

This is where IBISWorld earns its keep.

The 5-Minute Scan: Start With "At a Glance"

When you open an IBISWorld report, don't read it cover-to-cover. Go straight to the "At a Glance" section (usually page 3 or 4). This gives you the quick vital signs of the industry.

Here's what I found for Health & Wellness Spas:

In five minutes, you've already learned something crucial: that 20% margin claim needs serious investigation. Either this spa is exceptionally well-run, the owner is working 60 hours a week without paying themselves fairly, or the numbers need a closer look.

You've also learned this is a cash flow play, not a growth play. The industry is mature and growing at basically the rate of inflation. You're buying for the income stream, not because you expect the market to double.

The Financial Benchmarks: Your BS Detector

Most people skip the financial benchmarks section. Don't. This is where you figure out if the seller's numbers make sense.

IBISWorld provides over 70 financial ratios including debt service coverage ratio (DSCR), profit margins, revenue per employee, and working capital requirements. These numbers tell you what "normal" looks like in this industry.

For spas, the average cost structure looks like this:

Now let's apply this to our Jacksonville spa. If they're doing $2M in revenue and the industry says wages should be about 61% of revenue, we'd expect to see roughly $1.22 million in labor costs.

Ask the broker for the P&L and check that wages line. If it shows $900,000 in wages, you need to ask: Are they understaffed? Is the owner doing three jobs? Are they paying below market and about to lose their best therapists?

The same logic applies to every line item. If rent is showing 8% of revenue when the industry average is 1.8%, that's a massive variance that changes the economics of the deal. If marketing is zero, you might be buying a business that's been coasting on reputation—which could be good (loyal customers) or bad (no pipeline).

Here's a simple exercise: Make a two-column table. Put the industry benchmark percentages in one column, and the target business's actual percentages in the other. Any variance bigger than 5 percentage points needs an explanation.

The benchmarking tools also help you compare a business's performance to competitors, which is critical when you're trying to determine if the asking price makes sense. A business performing at the 75th percentile of its industry deserves a different multiple than one at the 25th percentile.

Geographic Analysis: Is Jacksonville a Good Market?

IBISWorld breaks down where businesses are located by state and region. This is gold for evaluating a specific deal.

Here's what I found for Florida:

• Florida has 12.4% of all US spa establishments
• But Florida only has 7% of the US population

Translation: Florida is oversaturated with spas relative to its population. There's more competition per capita than the national average. That's not necessarily a dealbreaker—Florida has tourism, retirees with money, and year-round warm weather that supports the spa lifestyle. But it means you can't assume there's untapped demand waiting for you.

The report also notes that the Southeast sees strong spa demand in tourist areas. But here's the thing: Jacksonville isn't Miami or Orlando. It's not a major tourist destination. So this spa is probably serving locals, not vacationers.

That's actually useful information. A spa dependent on local repeat customers has more stable revenue than one dependent on tourist traffic. But it also means growth is limited by the local population.

Questions to add to your due diligence list:

• What percentage of revenue comes from repeat customers vs. first-timers?
• How far do customers typically drive to get here?
• Are there new residential developments nearby that could grow the customer base?

Understanding the Competitive Landscape

The Companies chapter identifies prominent players in the industry with actual performance metrics like revenue, growth rates, profit margins, and analyst insights. Companies with 5% or greater market share get detailed analyst commentary.

The IBISWorld report has a great line: "No single company accounts for more than 5% of total industry market share."

This is exactly what you want to see as a small business buyer. It means you're not going to get crushed by some national chain with unlimited marketing budget. The biggest franchise in the space (Massage Envy) has over 1,000 locations but still doesn't dominate the market.

Look at the growth rates of the major players versus the industry average. If the big companies are growing faster than the industry, that's usually a sign that scale matters and small operators are getting squeezed. If the industry is growing but the major players aren't gaining share, there's probably room for a well-run small business to succeed.

The flip side? Barriers to entry are rated "Low." That means it's relatively easy for a competitor to open up down the street. Your moat isn't going to be some proprietary technology or regulatory license—it's going to be reputation, staff quality, and customer relationships.

This tells you what to focus on in due diligence:

• How strong are the Google and Yelp reviews?
• What's the staff turnover like? Will key therapists stay after you buy?
• Are there non-compete agreements in place?
• How much of the business is the current owner's personal relationships vs. the brand itself?

Use the Data Wizard to Validate Your Target Industry

Before you get too deep into analyzing one specific business, use the Data Wizard to narrow down industries worth targeting. You can filter for stable, growing markets that align with your search criteria.

If you're looking at a business in an industry that's projected to decline 3% annually over the next five years, you better have a very specific thesis for why this particular business will buck that trend. Most of the time, you're better off looking at industries with structural tailwinds rather than headwinds.

The key trends section in each report tells you what's actually driving industry performance—regulatory changes, demographic shifts, technology disruption, consumer behavior changes. These are the forces that will determine whether your business grows or shrinks regardless of how hard you work.

For spas, the key external drivers are:

• Per capita disposable income — When people have more money, they spend on spas
• Consumer confidence — Spas are a "feel good" purchase that gets cut when people are worried
• Time spent on leisure — More free time = more spa visits

All of these are basically saying the same thing: this is a discretionary spending business tied to economic conditions.

The Risk Section: What Could Go Wrong

Every IBISWorld report includes an industry structure assessment. For spas, here's what stood out:

Revenue Volatility: Very High

This is important. The spa industry took a 37.5% revenue hit in 2020. That's not a typo—more than a third of industry revenue vanished in a single year. It recovered quickly (43% growth in 2021), but this tells you something fundamental: spas are discretionary spending. When the economy sneezes, spa revenue catches pneumonia.

What to do with this information:

• Ask for monthly revenue data from 2019-2021. How did this specific spa handle COVID?
• Did they take on debt to survive? Is that debt still on the books?
• Build a stress test into your financial model. What happens if revenue drops 20%? Can you still service the debt and pay yourself?

Labor Intensity: Wages are 61% of Revenue

This is a people business. You're not buying machines that crank out widgets—you're buying a team of therapists, estheticians, and front desk staff. That creates specific risks:

• Minimum wage increases hit you hard
• Therapist shortages are real (most states require specific licenses)
• If your best massage therapist leaves, their loyal clients might follow

Due diligence questions:

• What's the current pay structure? Hourly, commission, or hybrid?
• Are any key employees significantly underpaid vs. market? (If so, budget for raises.)
• What's the turnover been like over the past three years?

Key Success Factors: What Makes Spas Actually Work

IBISWorld lists what successful operators get right:

1. Skilled workforce — You need licensed, talented people who show up and don't leave
2. Efficient operations — Modern booking software, not paper appointment books
3. Diverse service mix — Don't be a one-trick pony
4. Good location with parking — Sounds obvious but matters a lot
5. Loyal customer base — Repeat clients are everything

Use this as a checklist when you visit the business:

• Are they using modern scheduling/POS software?
• What services do they offer? (Compare to the industry mix: 33% massage, 21% skincare, 14% salon, 12% retail)
• Is parking easy? Is the location visible and accessible?
• What does customer retention look like?

If the spa is doing $2M in revenue but has no retail product sales, that's a potential upside opportunity. The industry average is 12% of revenue from retail. That's $240K they might be leaving on the table.

Putting It All Together: The Quick Assessment

After 30 minutes with the IBISWorld report, here's where I'd land on our Jacksonville spa:

The Good:

• Industry is large, stable, and fragmented (good for small operators)
• This business is above-average size ($2M vs. $1.1M industry average)
• No dominant competitors to worry about
• COVID recovery shows the industry bounces back

The Concerns:

• That 20% margin claim is more than 2x the industry average—needs verification
• Florida is oversaturated with spas (more competition)
• Very high revenue volatility (recession risk)
• Low barriers to entry (new competitors can pop up)
• Growth forecast is basically flat (1.1% annually)

My Recommendation: Proceed to deeper due diligence, but with specific focus on:

1. Verifying the margin claim against industry benchmarks
2. Understanding COVID-era performance
3. Assessing staff retention and customer loyalty
4. Stress-testing the financials for a recession scenario

This isn't a "run away" situation, but it's also not a slam dunk. The numbers need to check out, and you need a clear thesis for why this particular business will perform above industry average—because that's what the seller is claiming.

How to Access IBISWorld

Here's the practical reality: IBISWorld subscriptions are expensive (think $10K+ per year). But there are ways to access reports without paying full freight:

• Public libraries — Many major metro library systems (New York, Chicago, LA, Houston) offer free IBISWorld access with a library card. Seriously. Check yours.
• University libraries — If you have alumni access or know a current student
• SBA and SCORE offices — Some Small Business Development Centers have access
• Ask your broker — Some brokers will pull industry reports for serious buyers
• Acquisition communities — Groups like Acquisition Lab sometimes have shared resources

IBISWorld maintains over 1,500 US industry reports, which is comprehensive coverage for nearly any business you'll encounter. The reports are designed for professionals doing prospecting and business development, which means they're built for decision-making, not academic research. They get updated regularly, so you're working with current data, not insights from three years ago.

What IBISWorld Won't Tell You

Let's be clear about the limitations. These reports won't tell you:

• If this specific owner is honest
• Whether the employees are any good
• If the equipment is held together with duct tape
• Whether there are lawsuits pending or environmental issues

IBISWorld tells you what "normal" looks like in an industry. It's your job to figure out if this specific business is normal, better than normal, or hiding something.

But that's exactly why it's valuable. When you know the benchmarks, the outliers become obvious. When you understand the industry dynamics, you can ask better questions. When you see that wages should be 61% of revenue and the seller shows 45%, you know exactly where to dig.

Use IBISWorld to get smart on the industry quickly, then use that knowledge to do better diligence on the specific business. That's the sequence that works.

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Looking at a deal and want to gut-check the industry? The IBISWorld report code for Health & Wellness Spas is OD4186 (or NAICS 812199). That'll get you to the right report.

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Sources

• Small Business Banking Best Practices - IBISWorld
• Premier Sales Streamlines M&A Deal Preparation with IBISWorld
• Your Guide to Productive Sales Prospecting - IBISWorld
• IBISWorld for Sales and Business Development
• Business Brokers in the US Industry Analysis, 2025 - IBISWorld
• IBISWorld Homepage
• The Complete Guide to Industry Research - IBISWorld
• Lippincott Library - IBISWorld