Is buying a gym better than starting from scratch?
What’s up Gym World?
One of the most successful gyms from an investment standpoint was an acquisition.
I found three different gyms in my target market that met my criteria:
- A bad website
- Weak Google My Business (GMB) profile
- Ugly paint colors
- An owner who is either absent or juggling a full-time job
- Gyms operating on a similar model to ours
- Bad coaching
- Slow response time
- Poor social media presence
- No ads
- Running close to breakeven
I cold outreached the owners with a simple message:
A lot of gym owners struggle with issues like lease liabilities, consistent monthly losses, and burnout. The owners I dealt with were no different. After a brief negotiation, we bought the gym for roughly the price of its equipment.
We took that opportunity to fix the gym’s existing problems and turn the business around. After a few years, my partner sold it to another CrossFit operator for a massive profit.
Jeff Schumacher from Engage Personal Training and Devin Gage from Gage Strength Training are making a similar play. Six weeks ago, they bought a struggling off-market gym with the hopes of turning it around. This is the sixth location they’ve opened in the last 18 months.
Here’s how it happened:
Finding the gym
Devin met a guy named Joe in a mastermind group 12 years ago when he first opened Gage Strength Training. Joe owned a series of HIIT gyms and opened one in Florida in 2018. Two years later, he sold it to two of his clients when he moved out-of-state.
💡 At the time, the gym had 200 members paying $150/mo and was generating $30k/mo—a promising sign.
In hindsight, these clients weren’t equipped to run a gym. Devin says they both had full-time jobs, and the gym’s performance slowly deteriorated over the next couple of years.
Just six weeks ago, Devin got a call out of the blue from Joe. Knowing that Devin and Jeff were scaling their personal training business, Joe told them about the struggling gym he once owned. The current owners were at a crossroads of either selling it or closing down.
That conversation opened a door for Devin and Jeff to step in and transform the business. So within a week, they flew down to meet the owners and checkout the space.
💬 Side note: Mastermind groups work in weird ways, and the ROI isn’t always immediate.
When I met Kaleda Connell in one of these groups, I quickly realized she was among the best operators I’ve ever met. Three years later, she was running Kilo. Today, it’s one of the fastest-growing gym management software companies.
The ROI from that meeting is immeasurable.
Setting the deal
Funnily enough, the gym matched the criteria that Devin and Jeff look for when considering a location for their small group training concept:
- The footprint matched their requirements (around 1,800 sq ft).
- They had similar equipment.
- Even the color scheme aligned with their brand identity.
Interestingly, they also shared an accountant with Joe, which gave them access to the gym’s financial info (with permission). It was clear the gym wasn’t making money now, but there was a time where it was before.
For Devin and Jeff, this indicated that with the right management, there was a really good chance the gym could be profitable again. That meant finding someone who can:
- Do the marketing
- Do the sales
- Keep the gym running
💡 Greg Morrone from The FIT Lab says the key to running a successful business is finding the right operator. I agree.
So, they decided to take a chance. Given the cash flow from their other locations and desire to expand, the boys were in a good position to buy and got the gym for asset value. The price tag, which was about the cost of a used Honda Civic, included the buildout, equipment, and a 4,000-person email list.
💡 It costs about $125k to $175k to build out an Engage Personal Training location. But with this acquisition, Devin and Jeff instantly get a gym, save a ton of money, and avoid dealing with the risks of starting from scratch like permits, delays, and unexpected expenditures.
The plan
Devin and Jeff are now working on turning the gym into their sixth Engage Personal Training location. Here’s the plan:
- They’ll hire a good operator
- Improve the service
- Increase the prices by 100%
- Hold on for dear life
💡 Want to know their exact system for scaling fast? Read this article for the full breakdown.
Assuming the plan works, they’ll have a small group training gym that
- has 120-150 members,
- charges $300-$400/mo,
- breaks even after one month,
- brings in $40,000/mo with 30% profit,
which would value that asset at more than 10x what they bought it for. Not bad.
But if things don’t work out, they could lose between $50k and $100k, not to mention a lot of time and effort getting this gym up and running.
💡 Engage Personal Training has gyms in Pennsylvania, Delaware, California, and Florida. While I like their concept, I’m not a fan of their expansion strategy. I’d prefer to keep my gyms closer together. But they’re savvy operators, so let’s see how it plays out.
Final word for gym owners
Turning a business around comes with its own set of challenges:
- It’s tough to change an established culture, both for staff and members.
- Modifying the business model isn’t easy.
- Adjusting pricing requires careful consideration.
- Sometimes, you have to let go of staff or fire your members.
On the flip side, starting a gym from scratch has its perks:
- You get to negotiate the lease terms from the beginning.
- You can choose the ideal location and equipment yourself.
- You have the advantage of controlling the gym’s reputation and setting the culture from day one.
But as Devin and Jeff’s experience shows, buying an existing gym can significantly cut down on time and upfront costs. I highly recommend this strategy for anyone looking to break into the gym industry.
For a deeper dive into this approach, be sure to watch or listen to Devin and Jeff’s complete interview on Gym World.
have a good one,
j
