So, you saw a gym put up for sale in the adverts section of the newspaper? Or someone told you about a gym downtown that needs a buyer and you seem interested? Well, the idea of owning a gym or fitness center is great especially if you also have a goal of establishing your own fitness business someday.
However, when considering buying a gym or fitness center that has been running, you need to do your due diligence to avoid buying a gym that would not be profitable in the long run. Buying a gym rather than starting afresh is a great idea as it is less risky than starting a new gym. A running gym would have existing equipment, members, trained personnel and some metrics to show its performance. Before deciding to buy a gym, you need to consider some factors before investing into the venture.
Do your due diligence
This is the most important factor to consider when buying an existing fitness center. You need to ask why the seller is selling the business. Is the gym owner moving or relocating? Is the owner retiring? Are they selling to raise funds for establishment of another gym? Are they selling because the gym is dwindling or no longer profitable?
Getting the right answers to these questions will help you determine the real motive on why the gym is being offered for sale. This should form the basis of your decision. If the owner is selling because they are moving, retiring or diversifying into another business, then you know the gym is in a good condition.
Also, knowing their motive for selling the gym will determine how soon they would want to go through the negotiation process and how flexible they would be. Additionally, ask questions about the amount of time you would need to invest into the business to keep things together and also ask about the gym's weak points and success strategies. Having real information about these things will determine whether the buying the gym would make sense or not.
Be honest with yourself
If you saw a gym for sale that interests you and you are considering investing into the business, you need to ask yourself if you really are interested in the fitness business. Basically, establishing a gym should be about passion first and then monetizing the passion. So, if you are considering buying a fitness center, you should ask yourself whether you are ready to run and operate a fitness business.
Ask yourself how you would balance your present lifestyle and plans with running a fitness center. You also need to ask yourself if you are willing to take risks and make sacrifices for the gym. Running a gym is no child's task as it requires investing long hours to ensure the venture hits success. As a gym owner, you would be responsible for a lot of roles. Everything from being the human resources manager to the accountant to chief security officer to janitor. Being able to put on different hats to perform these tasks is important if you want to take the gym to greater heights.
Evaluate the Numbers
When looking at buying a fitness center, you should ask for the financial reports and statements showing the gym's performance. Ensure the seller gives real and accurate numbers and examine them critically. You can have an accountant or someone who is an expert in reviewing numbers take a look at the charts and financials to understand how healthy the business is.
Look at the monthly and yearly reports as well as taxes at least for the past five years. With these analytical reports, you will know if the fitness center has been growing or in decline. Also, get information about the debt situation of the gym so you can know if the gym has any hanging debt.
Additionally, get a real valuation of the business to know if you are paying right for it. Lastly, compare the gym’s financials with that of other gyms within the vicinity as well as the industry standard for profitability so you know if you stand a chance with the gym.
Before investing in a fitness center and buying it, one of the most important information that you need to know is the amount of gym memberships it has. How many members pay their dues regularly? How many current members have paid in full for membership access?
These numbers are different from the number of registered members. There are often registered members are no longer paying for the gym but their memberships are not yet cancelled. So looking at the number of registrations is not enough.
You should also ask for the type of members, their profile, attrition rate, average lifespan of each member and the number of members that are on break so you can have a sense of how dedicated the members are to the gym. Also, get real life customer reviews of the gym to understand how the gym's members really feel about it and also know why past members left the gym.
Visibility and Marketing
You need to get real-time information about the gym's popularity among other gyms, fitness enthusiasts and other stakeholders in the industry. Ask for its social media pages to know the extent of their online presence and reach. Also check out their website and evaluate its design, speed and device optimization.
Assessing this information also helps you understand the gym's marketing strategies so you know its weak points and how to improve these strategies for new members and increase revenue. Additionally, check the gym's search engine optimization to know the keywords that bring it up online and see what can be improved.
Also, see if the gym is ranked anywhere online or featured on fitness club blogs. The gym's sales funnel is also important as it gives information about its conversion ratio. Ask for the promotions and referral programs they have in place for attracting new members and evaluate their success so far. Having knowledge of these metrics allows you to know how much the gym is investing into advertising and marketing and if you can also go that far and even more.
Buying a new gym could be overwhelming and daunting as you would have doubts about the gym. However, thinking through these basic questions would help you determine if buying the fitness center is worth it or not.