Sell your Health Club for More Than it’s Worth
By: Jim Thomas
Is it time to go fishing? Would you like to sell your gym? This may be more challenging than you think. Nearly half of all gym owners who try to sell their business can’t get it done.
However, if done properly, nearly every gym will sell and many times for the asking price.
What’s the secret? You need to get the timing right. The biggest mistake we see is that most gym owners do not plan their exit strategy from the very beginning.
We see this over and over….gyms owners wait until something goes wrong and when that happens the gym is typically trending downward and it’s not making as much money as it once was. The best time to sell your gym is when your business is doing well….when it’s tending up, not trending down.
Be sure you have clean books.
If you want to sell your gym for the maximum value, you need to be sure your books are in order. I once asked to see a club’s books and they handed me a shoe box full of receipts. That won’t work.
In order to decrease the tax liability many gym owners run personal expenses and non-recurring expenses through the business, such as travel, meals, entertainment, repairs, etc., and this is really discretional earnings so we have to go through all the books and records and add those personal and non-recurring expenses back to the bottom line.
It’s crucial to know your numbers, and not just tax returns, balance sheets, profit and loss statements. You also need track everything you’re doing in new member sales and marketing such as if your advertising is paying off and how many leads you need to get a new member and how much those leads cost you. This should be standard operating procedure.
Know what makes your gym valuable.
In order for your gym to be attractive to a prospective buyer, you will need multiple sources of income, a healthy member dues base, and a solid management team in place.
Buyers will look at how well branded the gym is and if that gym has any intellectual property in place. They look to see if the gym has any contracts in place that are perhaps transferrable.
And if you are your gym’s only employee you don’t have much to sell.
Buyers want to be sure that the gym has employees and a management team in place because they don’t want to buy a job.
Keep it quiet.
The best way to ruin a gym is to tell people you’re selling it because employees, customers, vendors, and landlords worry they won’t like something about a new owner of the gym. In fact, the only people who are happy to hear that a gym is selling are your competitors who will shout from the rooftops that you’re “going out of business,” not “selling” your business.
Selling a gym is very different than selling your home. Many people think it’s the same, but it’s completely different. We can’t just put a “For Sale” in front of your gym.
Hire a good fitness industry business broker.
But you need to be careful. Many business brokers have about the same rate of success as gym owners do in selling their business. The key is finding a business broker with a proven track record in the fitness industry. To do that, we suggest asking any potential broker these questions:
- What gyms have you sold?
- Do you have a database of buyers?
- What are those buyers looking for?
Most gyms selling for under a few million dollars shouldn’t have to pay any upfront fees but will be expected to pay a fee of between 10 and 12 percent upon a sale.
If now is the time, get your club ready for a sale! Call us at 800-929-2898 for a free broker’s opinion of value.
Jim Thomas is the founder and president of Fitness Management USA Inc., a management consulting and turnaround firm specializing in the fitness and health club industry. With more than 25 years of experience owning, operating and managing clubs of all sizes, Thomas lectures and delivers seminars and workshops across the country on the practical skills required to successfully build teamwork and market fitness programs and products. Visit his Web site at: www.fmconsulting.net or www.jimthomsondemand.com