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How to Buy a Gym

With Australians increasingly concerned about their health, the fitness industry is booming. There could scarcely be a better time to buy your own gym.

If you’re still unsure about whether this is the sector for you, on how this $2bn revenue industry is booming off the back of rising health concerns and what it takes to thrive as a gym owner.

If you’re sure you want to buy a gym – read on:

Comparing gyms for sale

What do you want from your gym or fitness business? Familiarise yourself with the types of gym on the market. Find out what works and what doesn’t.

When browsing gyms for sale consider factors like:

  • Location
  • Size – how many members can it accommodate at once and is there room for adding extra equipment or facilities?
  • Standard, range and amount of equipment
  • Composition of current membership
  • Pricing structure – and scope for growing revenues by tweaking it

What about buying a franchise?

You have to follow a formula, but franchises are a typically less risky proposition. Buying into a gym franchise means you are buying into a recognised brand and tried-and-tested business model.

Know your regulations

It’s a good idea to be familiar with relevant regulations before you buy. Think about:

  • Qualifications and credentials
  • How you will adhere to industry code of practices
  • Your professional registration
  • The safety of your customers while in your care

The governing body, Fitness Australia, goes into further detail to help you get your head around these and other regulatory and licensing issues.

Due diligence

Jim Thomas, founder of Fitness Management USA, a management consulting and turnaround firm specialising in the industry, urges buyers not to skimp on due diligence.

“The owner can produce financial statements that show a gym is thriving,” he wrote in a LinkedIn post. “You need to do due diligence to make sure the information presented to you is valid and shows an accurate picture of the condition of the gym.”

He advises that you establish clearly “what items the gym actually owns, what is leased, what is owed to the gym and what the gym owes to others.” Thoroughness in “due diligence will help you avoid buying the wrong gym or paying too much.”

Budgeting

Fitness centres, depending on the facilities, equipment and location, can be a costly enterprise. Make sure you have a well-researched idea of how much money you’ll need – and not just to pay the agreed sale price.

During “times when the revenue is less than the expenses then you need cash reserves to cover the shortfall,” says Jim Thomas. “If you spend all your money in the acquisition of the gym then you will not be able to cover shortages when they occur.”

Your projections should be conservative enough to account for teething problems during the  . “If you purchase a gym assuming the current cash flow will cover the payment on your debt, then you might be in for a rude awakening,” continues Thomas.

Paying a fair price and deal structure

He also warns against paying for ‘potential’. “Do not make the mistake of overpaying for a gym and rewarding the seller for your hard work. The value of the gym should be based on the condition at the time that you purchase it” – not on what it could become under your hardworking, savvy stewardship.

He also says that choosing the wrong entity structure is the worst mistake you can make.

“First-time gym owners will buy a gym and sign every contract in their name. This is a major mistake because it makes you personally liable for any loss that the gym incurs.

“If there is loss your creditors will go after your home, your car and your savings.”

Instead, he recommends that you opt for a corporation or LLC in order to reduce your personal exposure to risk.

If you’re ready to break into the fitness industry, check out our fitness centres for sale today!



Faye Ferris

About the author

APAC Sales & Marketing Director for BusinessesForSale.com, the world’s most popular website for buying and selling businesses globally and attracting over 1.5 Million visitors each month. To contact Faye please email faye@BusinessesForSale.com

@YouAreYourBoss

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