It’s been tough, you spend 14 hours a day working, and you’re emotionally invested in the business that you’ve built from the ground up. Your members value your coaching and the community you’ve created. Now, you’re thinking about selling. How do you put a number on all that time and effort?
Gyms are bought and sold every day. It’s a long process that takes a lot of time and organization. In this article, we will talk through preparing your gym business and the steps you need to take to sell. Skip ahead to:
- Preparing to Sell a Gym Business
- 9 Steps to Sell a Gym Business
- Know Your Numbers
- Determine Your Gym’s Value
- What’s Your Brand Worth?
- Get Organized
- Create a Detailed Income and Outcome Spreadsheet
- Find the Best Buyer
- Consult a Business Attorney
- Provide On-Going Consulting
- Tell Your Business and Members the News
Preparing to Sell a Gym Business
There are numerous reasons a gym owner may decide it’s time to sell up. Perhaps you’re heading towards retirement, or you just fancy a change of scenery. Either way, it pays to know what you’re doing.
Plenty of Lead Time
It doesn’t matter whether you’re selling a fitness franchise or a business you built from the ground up, you need plenty of lead time. There’s a big checklist to get through to sell. Take this time to get your gym in order. Give yourself the best chance of finding the right buyer and maximize all the time and hard work you put into your business.
Get Your Accounts in Order
Do you have evidence to support your financial claims? All your accounts, licenses, insurance, and paperwork should be up-to-date. Make it as easy as possible for potential buyers to do their own financial due diligence. Impress buyers with your professionalism and organization.
9 Steps to Sell a Gym Business
Look at your business through the eyes of a potential buyer. When you’re trying to sell your business, right the wrongs, fix any issues and make sure your gym looks fantastic booth aesthetically and financially. Let’s take a look at nine steps to take to sell a gym business.
Know Your Numbers
Start by focusing on solid accounting and knowing your numbers. Clean and well-organized books will attract the best type of buyer. Accurate and thorough record-keeping will make it easier for a buyer to get a real view of your business. Proper accounting forms the basis of determining your gym’s worth.
Whether you do your own accounting or have an accountant to do the work for you, a successful gym sale begins at good book-keeping. This will give you a firm grasp on your cash flow, payroll, profit, sales, and all other financial activities in the business.
Here are some of the best accounting books for small businesses to make sure your accounts are fully in order:
- Simple Numbers, Straight Talk, Big Profits – you’ll need to have some understanding of your financial statements already to benefit from some of the chapters in this book. This is a great resource to help small business owners take action with their finances.
- Accounting Made Simple: Accounting Explained in 100 Pages or Less – if you have little to no free time, then this is the book for you. The author avoids using technical jargon and explains accounting with real-life examples.
- Accounting for the Numberphobic – if you’re scared of numbers and try to avoid your accountant at all costs, then this book is very beneficial. It’s one of the most straightforward books on accounting for small business owners.
Determine Your Gym’s Value
This step is one of the most crucial in selling a gym business. You need a realistic idea of what your fitness center is actually going to sell for. A lot of the time, this can be the hardest part for gym owners as it may be less than you had in mind.
Most businesses, including health clubs and gyms, are valued based on a multiple of the cash flow the company generates. This cash flow is often referred to as earnings before interest, taxes, depreciation, and amortization or EBITDA. The sale price will also include equipment, fixtures, any other assets, or items that are used within the gym, loans and commitments, and revenue predictions in the future.
To get the full picture, it’s essential to work with an objective third party to get a valuation. For an accurate assessment, talk with a business broker or merger & acquisition advisor specializing in representing gyms and health clubs. They will evaluate every part of your business so that there is no money left on the table.
What’s Your Brand Worth?
The next step to think about is how much your brand is worth. Is your affiliate name or website valuable? If you’re selling an Orangetheory Fitness asset, it’s probably not worth anything as you’re not the license holder. In terms of the website, you can’t sell the domain name as technically it’s not your intellectual property. You don’t own the name, marketing collateral, or signage.
On the other hand, if you own a brand with a good name and reputation, it could be worth something. Think about all the ways your brand saves the buyer money when trying to put a value on your brand. This could include things like a staff playbook, website, signage, flyers, and t-shirts. The value of the brand is how much money it would save the new owner.
It sounds like an obvious one, but if you’re not organized, it could hinder every level of the selling process from your records, accounts, and paperwork to your marketing strategy and physical appearance of your gym. If you don’t organize your business and your time well, you could end up attracting the wrong buyer or lose a valuable buyer due to a lack of organization.
More and more entrepreneurs are buying and selling gyms. The Two Brain Business has an excellent podcast on the topic. In episode 19 How to Sell Your Gym, host Chris Cooper is joined by Jason Ackerman. Ackerman is selling two gyms while setting up a third. The pair discuss valuing your fitness business, reasons for selling, and methods for valuation. You can listen to further insights on what a gym needs to be successful in this episode of The Fitness Founders Podcast with Chris Cooper.
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Create a Detailed Income and Outcome Spreadsheet
Now it’s back to the numbers, again. It comes as no surprise that the selling process requires a ton of number crunching and documenting. You’re already on top of your accounting, and your books are in a solid position to sell. You also need to put documents together that prove your earnings and potential future earnings. Your profit and loss documents should be clear. Make sure you have substantial numbers and data to support all your current and future earning predictions.
Your buyer will be doing their due diligence. They will be digging into your data and looking for errors. Find any mistakes before your buyer does otherwise, they might start to lose trust in you. Whether they are innocent mistakes or not, your buyer will start to question all of your numbers.
Find the Best Buyer
Finding a buyer is tough. If your members find out you’re selling, they might cancel their membership with you and go with another gym. But, if no one knows you’re selling, how do you find a buyer in the first place. Like a lot of things in business, selling your gym is a real balancing act.
So, who can you sell your business to? You may already have someone in mind — a key employee or manager you’ve been grooming to take over or buy the business. If you’re coming up a blank as to who to sell to, start with your coaches or trainers – they’re passionate about fitness and might be ready to take the next step in their career.
The next option is to look for owners nearby. Is there a gym owner you get on well with and could see them buying your gym? Invite them to lunch. Ask them to sign an NDA beforehand to keep the news under wraps that you’re selling. While some gym owners may see the situation as an opportunity to recruit your clients, others might jump at the chance to own multiple gyms.
If you’re desperate to sell quickly, you can use an online listing service. These online services can be beneficial, as you can list anonymously, so your clients are unlikely to see the ad. While owners who are actively looking for a new opportunity will see the ad, when creating your ad, think about what sets your business aside from the competition, such as state-of-the-art facilities, large and loyal membership base, big social media following or a great location.
Consult a Business Attorney
The smartest thing you can do during the selling process is to consult a business attorney. Unless you’re an attorney or you’ve already been through the process, there will be things you don’t know. There will be certain legalities you need to know about, and this is what your attorney will walk you through.
Arrange a meeting and have your business attorney go through the whole process. They’ll talk you through the entire journey and help make the selling process as smooth as possible. As the seller, you can consider asking your buyer to cover any legal expenses incurred during the sale. Some buyers may refuse, but it’s always worth asking.
Provide On-Going Consulting
You’ve built a successful gym business from the ground up – depending on your buyer’s background, they might want your advice. If the new gym owner isn’t from a gym background, they might need your help getting off the ground.
Offer your services for a monthly fee. On top of the lump of cash from the sale, you’ll also receive a monthly paycheck for your consulting services. Teach your buyer everything they need to know about running a gym successfully.
On-going consulting can be very useful, especially for new business owners. As well as this, make sure to train up members of staff so that the day-to-day running of the gym isn’t heavily reliant on the gym owner. Provide any resources that your team or the new owner may find helpful. If you’re the only person that can update a particular system or piece of equipment, this could be very off-putting to a buyer. Aim to make the transition period between ownership as seamless as possible.
Tell Your Business and Members the News
So, your paperwork is in order, and your brain is probably overfilling with numbers by now. But, you’re committed to selling your gym business. It’s now time to tell your company and members the news, but this needs to be done carefully.
When it comes to your employees, you’re talking about something that impacts their livelihood and income. If they feel like their position is at risk because of the sale, they could jump ship quickly, which could affect the sale. Approach the conversation gently and assure all your employees understand that their jobs are safe and secure.
Again, if your members hear you’re selling, they might rush to switch to a gym they know is going to be around for the foreseeable future. Inform all your members that the gym is changing ownership but that this will not have any impact whatsoever on the fantastic service they receive. Either send out a text, personalized email, or speak to members in-person. If your members and staff start to panic, it could put off buyers.
The sales process is by no means easy. If you want to profit from the sale of your gym, it’s vital that you make your gym as successful as possible before going to market. Of course, there are several different reasons for selling a gym. If you’re ready to move on to a new opportunity, it’s time to get your house in order and start the selling process.