Are you looking to expand your gym business? You’re likely weighing the options: starting a new facility from scratch or buying a gym that’s already running.
Both starting new gym and buying an existing one are lucrative investment options. However, opting for an existing gym can be a safer and less costly venture, promising quicker returns—if you play your cards right—and profitability.
Plus, you’ll save yourself a headache or two.
For those thinking about buying, here’s a quick(ish) guide on how to successfully purchase a gym business and boost its profits.
How to Buy a Gym Business
Here’s what you’ll want to do when buying a gym:
Plan Your Purchase
Before you buy, be clear on what you want. Create a list of criteria that your ideal gym business should meet and ask yourself:
- What kind of gym am I looking for?
- How big should the space be?
- Where should it be located?
- Can my target market easily get there?
- How will I pay for it?
- Do I plan to buy the building too?
Answering these questions now will help you make a plan and buy a gym that fits your goals for the future.
Find a Gym
Online Business Marketplaces are fastest (and probably the most convenient) ways for you to find anything for sale online, including gyms. You can compare prices and explore different options all under one roof.
Here is a list of places you can browse:
If you’re willing to spend some extra cash for an expert, use a Business Broker. They’ll help you find a location, negotiate deals, and navigate you through the buying process.
And if you’re willing to do some groundwork, knock on doors and ask around. The best deals can be found off-market.
Chat With Experts
So, you’ve spotted a gym business that piques your interest. What comes next? Do you feel confident on navigating the upcoming decisions? It can be tricky and feel overwhelming if you’ve never done this before.
That’s why it’s important to talk with people who have walked this path before, and the more conversations you have, the better. These individuals have all the insights you need to guide you through the process.
Consider seeking advice from:
With their expertise, you can make smarter choices and avoid making mistakes down the line.
Do Your Due Diligence
Due diligence is when you take the time to research and understand the important details of a business before buying. It helps you know what you’re getting into so that you can make a logical decision.
So the most important thing for you to do is look at the gym’s financial health. Things like:
- Revenue, expenses, profits
- Repairs or infrastructure upgrades
Should be on your radar. Being aware of all these costs upfront will help you avoid unexpected surprises later on.
Also, consult with accountants, lawyers, and other fitness industry experts. They will take care of all the legal stuff, like contracts and leases, spot any risks, and help you figure out if buying the gym is the right move.
Figure Out Your Financing
There are different ways for you to finance a gym purchase, including:
- Cash — This is the best case scenario.
- Small Business Administration (SBA) 7a Loan — This is one of the best and friendliest financing options for U.S. small business owners. You can access up to $5M in capital as long as you meet a set of criteria, and use the money to either buy a business, purchase real estate, or both.
- Seller Financing — This is when the seller acts as the bank and handles the financing for you. Rather than paying a traditional bank loan, you pay the seller instalments with interest. Since they are often eager to finalize the sale, this approach can speed up the process.
- Traditional Bank Loans — Much like with SBA loans, banks review various factors to decide how much to lend you. However, securing a bank loan often requires more time and effort.
Whatever choice you make, be sure to understand the rules and fine print for any loans or financial help you’re considering, and consult a financial expert for advice.
Now it’s time to close the deal and start making your new gym a profitable business.
How to Make Your Gym Business Profitable
Successfully turning a business around is challenging, but by immediately focusing on key areas, you can improve operations and run a more effective business.
That includes enhancing your marketing strategy, strengthening sales tactics, optimizing pricing, and hiring great staff or implementing a staff development plan. If you make these areas better than they were before, your business will grow and so will your net worth.
Because a profitable business sells at a multiple of the money the owner takes out of it each year. For gyms, that multiple is usually 2-4x.
So if you can take a gym from $0 in seller earnings to $100k/yr, the value of the business goes from the liquidation value of the equipment to around $200k-$400k.
What Other Things Should I Look For When Buying a Gym Business?
There’s a lot to think about when buying and revitalizing a gym. You want a good deal and as smooth of a transition as possible to set yourself up for success. Beyond what we’ve already covered, here are some additional factors to keep in mind:
- Consider gyms with absentee owners that are operating around breakeven. These gyms can often be bought for less than the cost of starting a new one because they’re valued at less than the assets they contain.
- Look at gyms that have been stable for at least 10 years. They’re likely to stay in business longer compared to newer ones.
- Gyms that generate $250k-$500k in cash flow/yr likely have good systems and staff in place. If not, they earn enough for you to hire a manager to make improvements.
- If your goal is to get into real estate, pick gyms in top locations. Being your own landlord gives you control and two valuable assets (the gym business and the building). If you decide not to run the gym, you can sell it but keep the property for passive monthly income.
Buying an existing gym business can be a smart investment, especially if you’re aware of what you’re getting yourself into and can make informed decisions. This involves planning your purchase, browsing for your ideal location, talking to experts, completing due diligence, as well as lining up your financing.
While running a gym demands considerable effort and work, the good news is Gym Management Software can help you streamline managerial tasks and ensure you run a more profitable business.
And that’s exactly what we do here at Kilo.
If you want to make your life easier as a gym owner, book a call to see how Kilo can help.