Buying a fitness center is exciting, but it requires a great deal of information and patience to make the right decision. Figuring out which gym to buy is a complicated process. When embarking on buying a fitness facility, you must do your due diligence and weigh up the risks.
Opening a fitness center requires a huge time and initial investment, but buying an established gym tends to be less risky than starting one from scratch. Nonetheless, it’s a decision that you need to take with the utmost care and consideration. This article discusses the top mistakes to avoid when buying a fitness center and 11 things you need to consider on your purchase journey.
- Why Buy an Existing Fitness Club or Gym?
- 3 Mistakes to Avoid When Buying a Fitness Facility
- How to Buy a Fitness Center: 11 Things to Consider
Why Buy an Existing Fitness Club or Gym?
Owning a fitness center or gym can be a financially rewarding venture. Being your own boss and having complete control over your fitness business is exciting. In general, fitness entrepreneurs have two options when it comes to owning a business. They can either start from scratch and build from the ground up or purchase an existing facility. The best choice is really down to you. But buying an existing fitness center or gym comes with its own perks.
Skip the Initial Set-Up
Although building a new gym from the ground up can be very rewarding, it can also be extremely stressful. You need a strong idea and the skills and resources to make it happen. For people who want to avoid the difficulties of setting up a gym, buying an existing fitness facility allows them to skip the initial set-up. Essentially, you’re walking into an already profitable business that’s generating revenue.
Buy an Established Fitness Business
One of the perks of buying an established gym business is that you already have existing and loyal members. By purchasing an established gym or fitness center, you have a workforce who understand the customer and a proven track record of success. In the early days of a new start-up business, there is a significant financial risk. When buying an existing gym, you should see revenue from the business quickly. Although you still need to put in a grueling amount of work to run your business, it’s not like starting a small business from scratch.
Existing and Loyal Members
Attracting and retaining gym members is a challenge for all membership-based businesses. If you’re looking for a gym for sale, a significant benefit is that it already has members. Although you will likely be growing the business and expanding, starting with a set of members is hugely beneficial.
Whether you’re a start-up or buying a fitness center, it still takes hard work and time. The Fitness Founders Podcast has a great episode on what it takes to be a successful fitness entrepreneur right now. Eric Malzone, a fitness industry consultant and podcast host, talks about the great opportunity in the first industry at the moment and the qualities you need to succeed.
3 Mistakes to Avoid When Buying a Fitness Facility
Whether you want to buy a fitness franchise location or an independent fitness studio, you can find something that’s right for you.
Finding a great fitness facility to purchase takes time. You need to get your investigator hat on, ask questions and dig deep into your potential business. Here are three mistakes to avoid when buying a fitness facility.
1. Pay for Potential
Be wary of sellers that try to show you the potential value of a business. Paying for potential is a mistake. It’s down to you to create potential value for your gym franchise or studio. When you buy a business, you want to pay for the actual value. The value of the gym is based on its condition at the time you purchase it. By looking at current numbers and values, you can make a well-informed decision; paying for potential is a big red flag and can bring up the asking price.
2. Not Enough Cash Reserves
Like many businesses, running a gym requires capital. If you go into your new venture without enough cash reserves, you could end up in a tricky cash flow situation. If your expenses are higher than your revenue, you need some financial cushioning to cover the gap. If you spend all of your budgets acquiring the new facility, you could face troubles down the line. You will also need cash reserves if you want to renovate the facility or buy new equipment.
3. Unrealistic Expectations
When you’re in the market for a new gym, having unrealistic expectations can cause bumps along the road. It’s not enough to just purchase a gym; you need to make sure that you have realistic expectations about running a business. Do you have a business plan, money, time, and a way to maximize every inch of your new fitness facility? Be realistic with your resources and take the time to analyze a potential business under a microscope.
How to Buy a Fitness Center: 11 Things to Consider
One of the biggest challenges of buying a fitness center is that there is often a great deal of competition. There tend to be more sellers than buyers. Many buyers evaluate hundreds of health clubs, gyms, and fitness centers to find the one that is worth purchasing. From hidden liabilities to incomplete financial records, several factors can put a dent in your buying process. To help you find the best fitness facility, here are 11 things to consider to increase your chances of securing the right business opportunity.
1. Match Your Skills and Expertise
It’s important to choose a gym that matches your skills and expertise. If you have experience and passion for kickboxing, it makes sense to go in this direction. Whether you have a personal training background or martial arts, the gym should thrive and grow because of your strengths.
If you don’t know anything about the type of facility, you will lose valuable time getting the right knowledge to successfully lead your business. This can end up being a timely and costly issue. Think about the training programs and services the fitness center runs successfully. From cardio and barre to CrossFit and outdoor boot camps, think about what the gym is known for.
2. Do Your Due Diligence
Not everything may be as it seems. As the new gym owner, it’s your responsibility to do your due diligence for all potential business purchases. The current owner can show you glowing financial statements to prove it’s a successful and thriving business. But don’t leave it there.
Dig deep to find an accurate picture of the current valuation, condition of the fitness center, and any real estate issues. This includes investigating any past legal problems. You don’t want to buy a gym only to find a massive pile of bills and an income that has yet to arise. Substantial due diligence will help you avoid purchasing the wrong facility or paying more than you should.
3. Be Realistic with Finances
Think about how much money you have and buy a gym that you can afford. You need to be realistic with your finances as well as delve deep into the gym’s finances. Your finances determine the size and square feet of the facility you can afford.
You need to be ready to prove how you will pay for the fitness gym. Whether it’s personal finances, loans, assets, you will need to show your proof of funds. At the same time, you will need to examine the facility’s finances. Look at income, expenses, and any upcoming payments. You don’t want any nasty surprises after signing the dotted line.
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4. Get Professional Help and Advice
The buying process is complex. There’s a lot of factors at play and multiple elements to consider when purchasing a fitness center. It’s a good idea to get professional help and advice wherever you can.
Speak to your accountant, business broker, and lawyer and ask as many questions as you need. They have the expert knowledge to help make the process much smoother. Although it costs money to seek professional help, it will save you time, money, and effort in the long run.
5. Examine Future Risks
When purchasing a fitness center or any business for that matter, weighing up the potential risk is a big part of the decision-making process. Examine any future risk of the gym.
What will affect your future success, and how will you beat out the competition? How does the future outlook of the fitness center look? Find out as much information as possible so that you can weigh up the risks and make the best decision.
6. Understand Demographics and Location
Before you commit to any purchase, think about the demographics and location. Make sure it’s a great location. You could have expert knowledge in fitness but may not understand the demographics of the area. This can have a significant impact on the future success of your business.
You need to have a full understanding of the location, the competition, and your target audience. If you spot a few gyms for sale in the same area, there may be an underlying reason. Check the city’s planning department to see if there are any significant changes set to happen. A new road or construction zone can quickly turn a prime location sour.
7. Look at Staffing
The last thing you want to happen is all your gym staff leave after they hear the business is being sold. Employees play a significant role in delivering excellent customer service and revenue. They are apart of why your potential business is so successful.
Build out a plan to keep employees on during the transfer of ownership. You can then evaluate employees yourself. A smooth transfer of ownership is critical for retaining members and delivering the type of service they expect.
8. View the Fitness Center Facilities
One of the first steps in buying a fitness center is viewing the facilities. You want to get an idea of what the place really looks and feels like. Walk around the health club and check that everything is in working order. You want to feel confident that you are getting what you pay for.
Has the gym equipment recently been serviced, is it state-of-the-art, and how well is the building maintained? Find out the age and condition of the building and the preventative maintenance that’s in place.
9. Know Your Member Numbers
Although the obvious question is to ask how many members are at the gym, you want to take this a step further. Find out how many members are charged every month and how many actually pay in full. Sometimes fitness club owner-operators forget to cancel memberships in their database. This can make it look like they have more members than they do.
If you find out the number of paying members is much less than on paper, you can avoid a costly mistake. Try to get an idea of what members really think of the place by reading plenty of online reviews and client testimonials.
10. Current Marketing and Sales Strategies
Find out what current marketing and sales strategies are in use to figure out how you can grow the business further. This will help you to find opportunities to target new members. Check all marketing collateral like social media channels, the website, brand app, and content marketing.
Does the website receive high traffic? If you find that the current website is unresponsive and not user-friendly, you can pinpoint the website as an area for improvement. This will help you to reach even more members and convert leads into paying customers.
11. Management Software and Technology
Gym management software streamlines the business and allows you to manage members, billing, payments, accounting, and more. If the current system is poor, it may slow down business operations. The right management software can make a ton of difference.
On top of management, you will also want to find out what technology and hardware the gym uses. This will help you to figure out if you will need to invest in something new in the future.
When buying a gym, fitness studio, or health club, there are many factors to consider. Lean on experts and find out as much information as possible to determine if your gym will be a good investment. Owning a fitness center is a unique opportunity that can be highly rewarding. Analyzing all the information you have available and doing your due diligence will help you avoid making the wrong decision.