Buying a Gym for Sale
Gyms for sale are all around us. There are a number of factors to consider when buying a gym, and plenty of questions to ask once you have settled on a couple of possibilities. Learn as much as you can before taking the big leap.
Examine the Financials
Check over the gym’s profit-and-loss sheets and cash flow statements. You should know everything there is to know about how much money has come into the gym, where it went, and what are the projections for future earnings. Enlist the services of an accountant or CPA to assist with these efforts. Pay special attention to the gym’s liabilities, as new owners usually acquire these along with the gym’s assets. The due diligence package should also include the gym’s income tax returns, legal filings, articles of incorporation, and information on lawsuits both past and pending.
Understand Why the Gym is For Sale
Everyone has his or her own reason for wanting to sell a gym or health club. Retirement is a popular choice, as is the desire to change fields, move to a different city, or use the funds to purchase a larger business elsewhere. But the reason you hear may not necessarily be the truth. You will want to carefully explore this situation and avoid taking the seller’s word without question. Is there an ongoing problem between the owner and employees, or is their relationship so tight that everyone plans to abandon ship when the gym finally gets sold? Is the location a poor one, or possibly so terrific that a major competitor is planning to open up across the street in a few months? Knowing these things before you sign on the dotted line can prevent you from making a huge mistake.
Observe the Gym in Action
Hang around for a week and see if the traffic matches the claims made by the seller. Chat with members and find out what they like about the gym and what they would like to see changed. Scope out the competition, see how they operate, and compare the kind of traffic they enjoy with that of the gym you’re thinking of buying.
Determine the Value of the Gym and Line Up Financing
The seller will have placed a price on the business. As the buyer, you are responsible for determining whether it is a fair price. Here you may wish to consult a consultant or gym business broker, as they oftentimes have a better handle on valuation issues, which can vary depending upon the type of gym it operates. Fast-growing gyms will normally sell for a higher price, as the potential for greater future earnings is factored into the equation. You will then need to determine if the price is something you can handle financially. Your banker and accountant will be of considerable assistance here, as each helps you to reconcile monthly net earnings against the cost of buying a gym.
Ask For the Seller’s Help
Under most circumstances, the seller wants out at least as much as you want in. If you plan to meet the asking price – or at least provide a reasonable negotiating position – it never hurts to ask the gym owner to provide some of the financing. You will probably get better terms from the seller than you would from a bank, including a lower interest rate and longer payback term, and the seller will therefore be motivated to see you succeed. To that end, you may even ask the gym owner to stay on for a while – receiving a fair consultant’s fee, of course – to help with the transition period and make sure you know what you’re doing as the new owner of the gym.
