Marketing

Five Mistakes Investors Make When Buying A New Gym

If you are thinking about buying a new gym, check out these five common mistakes investors make when purchasing gyms.

Eric LeClair
October 25, 2021
TLDR;
If you are thinking about buying a new gym, check out these five common mistakes investors make when purchasing gyms. Make note and don't make these errors
buying a new gym
Photographer: Rodrigo Sarsfield | Source: Unsplash

A gym is a place where people come to get fit for various reasons. People are willing to pay a lot of money to achieve this. So buying a new gym has become a very lucrative venture in this present day. People often leave the workforce to run their own gym for a variety of reasons including excitement of being the boss.

If you make the wrong decisions, running your own fitness center or gym can quickly become a nightmare. If you know what to look for in the gym, you can avoid these pitfalls and mistakes. If these five key mistakes are avoided, you have a better chance of earning a professional wage. This can help lead to financial freedom.

#1 Mistake When Buying A New Gym, Improper Financial Analysis

When it comes to buying a new gym, not everything is as it appears. The gym's owner can offer financial statements demonstrating how the business is fairing. You must conduct thorough financial analysis of the gym. This ensures that the information provided to you is very accurate and valid. Not doing so could be detrimental, as you might plunge yourself into unnecessary debt and at the end of the day, the revenue from the gym might not be able to cover these excess costs.

You should be aware of what the gym owns, what it leases, what it owes the gym, and what it owes others. You don't want to spend money buying a new gym just to discover that you have a mountain of debts to pay and that the revenue you expected never arrives. You may avoid buying the wrong workout or gym equipment set by doing your financial analysis homework thoroughly. This will aid in your decision when paying for the gym so as not to overpay for something with little or no value.

Inadequate Cash Reserves

Cash reserves are extremely important when starting a gym because this might come in handy when revenue falls short of operating costs. It takes money to run a gym. Successful gyms are able to pay their operating costs with revenue. When revenue falls short of expenses, cash reserves are necessary to make up the difference, these reserves will be used to cover these costs instead of opting for a loan. You won't be able to cover shortages if you spend all of your money on getting to the gym. This could be the quickest way to put your new gyms out of business. Do not purchase a gym unless you have the means to purchase it as well as the funds to maintain it open afterward. Because maintenance of a gym is one of the sole factors that determine the success or failure of a gym. When a gym is poorly maintained due to inadequate cash reserves, the gym tends to lose customers and also will not attract new ones.

Cash Flow Does Not Cover Debt

When you are buying a new gym, there will always be a learning curve and this could be pivotal in the success of the gym. When management changes, some vendors will pull their business since they are loyal to the seller. Similarly, after the transition, you may lose some of your members. It is impossible to avoid these developments in a gym business, because the people patronizing the gym before you purchased it might feel they don’t know you. They have the potential to significantly affect your gym's cash flow, and reduce the revenue of the gym at first. If you buy a gym with the expectation that the present cash flow will meet your debt payments, you may be surprised, because the low cash flow will be something you are not expecting to happen. So this factor is something that must be properly considered when buying your gym.

Paying For What “Might Be”

Sellers will attempt to price a gym based on its expected worth. The future potential in the gym will be determined by your time, effort, and energy. Your efforts should be recognized. Do not overpay for a gym in order to reward the merchant for your efforts. The gym's worth should be determined by its condition when you buy it.You tend to make this mistake, because you feel the gym has a bright potential to succeed based on some factors and also what you have in plan after purchasing the gym, this might cloud your judgement when paying for the gym. Not making you properly considering what the gym actually has to offers at the moment, and wht it actually worth at that particular moment

Entity Structure Errors

Buying a gym with the incorrect entity structure is the worst error you can make. The first-time gym owner will purchase the facility and sign all contracts in their name. This is a huge oversight because it puts you personally liable for any gym losses. Your creditors will go after your house, car, and money if there is a loss. Purchasing a gym through a corporation or a limited liability company can reduce your personal risk. Employ the services of an attorney and an accountant to assist you in determining the optimum entity structure to use. When buying a gym or fitness center, don't make the mistake of putting your entire life on the line, as this could be detrimental in the future.

Conclusion

Owning a gym can be the quickest way to become a millionaire and becoming a successful entrepreneur, when you don’t painstakingly plan and consider everything that is involved in buying a gym center, and these five mistakes are not avoided as best as possible when buying a gym, it could affect the success of the gym center.

Eric LeClair

Eric LeClair works on the Marketing Team at PushPress. Eric has been a CrossFit Affiliate owner for 16 years. He's built three separate gyms and developed over 20 staff members to run operations at those facilities. He's a Veteran of the US Army, married with two little kids, and spends lots of time with his two boxers backpacking and exploring new adventures!

The gymOS Podcast

Helping gym owners build better businesses, one episode at a time.
Listen Now

Ready to scale your fitness business?

Try our hassle-free Gym Management Software loved by thousand of successful Gym Owners.
Get started for $0/month
“PushPress is the reason my gym became profitable.”
—Joe M. Gym Owner

Follow along and build a better gym with us

Get actionable strategies and ideas to help you grow your gym and manage it successfully, in your inbox every week!

No Spam. Ever. Unsubscribe anytime.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.