I have been providing personal training out of a small boutique gym for about 4 years now and I have a good amount of clients. I do it part time (12 sessions per week) on top of my full time job (and I love my full time job). It really has been the perfect set up for the last 4 years. Personal training covers my basic living expenses, and I'm happy. I love this place and I love the work I do. The owner of the gym is retiring and selling the gym. Naturally, I was really interested. I have loved this gym and am there more the owner, as it is.
Upon reviewing the finances of the gym, which he is asking $120,000 for, the gym only makes $24,000 annually, after all expenses are paid. $24,000 pre-tax. I also am observing the volatility of gym ownership vicariously through him- gain 5 members one month, lose 10 the next, so on and so forth.
My financial advisor has suggested that I explore alternative options, and questioned the idea that I need to buy that gym to continue seeing my clients – One of his ideas being, to buy a home and build out a garage gym (as professional as one can), to transition my clients to, and then enjoy the part time PT work I love doing, without the giant headache of running an actual gym (especially one that is not performing great as it is). This does seem the most logical, and of course the best investment since only about 2 years ago I was thinking about home ownership.
Open to any and all feedback. I have decision paralysis as I truly have believed for the last 4 years I would own this gym, and now I'm grieving a bit after learning about the narrow profit margin, and overall thinking about the stress of it.
Thank you
I need advice- BUYING A GYM
byu/writing-human17 inEntrepreneur
Posted by writing-human17
18 Comments
Been there with the gym ownership dream. i spent a few years as a personal trainer myself and watched multiple gym owners struggle with the same math – the membership churn is absolutely brutal. Your advisor’s garage gym idea makes way more sense financially… you could probably build out something really nice with Rogue or Rep Fitness equipment for under $30k and own it outright. Plus no dealing with random members, cleaning bathrooms at midnight, or equipment breaking every other week. The home equity alone would outperform that gym’s returns.
I would check zoning regs and if the home you buy has an HOA. HOA’s often have rules against running a business out if a home, especially if you see clients there.
$24k/mo?
You’re gonna want to look into the insurance ramifications of the home gym set up too. Someone gets injured on your home property is a lot different than someone getting hurt at your business.
i try to look at all the things that will make an idea successful, because the reality of things are that the numbers are against most new businesses.
starting a restaurant or a clothing company is a bad idea too, and yet some people succeed.
this is why people are advised to go to college and get some sort of specific degree instead of doing what they actually might want to do, because X degree is more likely to be a good investment than Y degree.
because you’re interested in home ownership and potentially buying a gym, i assume you took the route of getting the good degree.
what numbers would you want to see if you started the business? is it possible to make more money than the current business owner? how much would you have to make to make it worth it? there’s also fully the possibility of doing the house thing and then transitioning that as well. i think there’s really multiple potential paths to success here
How much are you making now with your personal training? Net.
Before you do anything, contact this guy. https://www.businessbuyeradvantage.com/
So you’d be paying 120k, to essentially give yourself a 24k raise, if nothing fails.
Anything else included in the sale? I doubt property but you never know could be. Because for that price seems like you could lock up a lease somewhere and spent 20-30k on equipment and do it for a fraction of the price.
Assuming all of your clients come transfer over to you..
By the way. Assuming 24k is the real number (which you need to verify first on paper with a pro, then at due diligence stage), fair price is probably 10-15k. And as such, are you sure you even need it? Doesn’t sound like a rewarding enterprise.
120k for a business that does 24k is crazy. That gym is worth less than 50k.
Don’t
What I don’t hear you saying is what your vision for the gym is. It does not sound like a very successful business as is. There is a concept in certain kinds of trades that buying a business is bascically buying yourself a job. It’s not at all clear why you would want to take on the headaches of being the business owner for an incremental $24k a year even if the previous owner gave it to you for a dollar.
Would you do anything to change it though? Could you convert more members into private training clients? Quit your day job and spend more time doing things you love on your own terms? Kill public memberships altogether and make it a private training only facility? Charge rent or a cut to other trainers? Was the owner an absentee owner, and/or do you think you could hire someone to run it? Do you have a trustworthy niece or nephew who needs a job?
There’s enough potential here and and enough people who have been successful in this business to make this something other than an automatic pass, but you would have to have a plan that made it worthwhile.
Question no one is asking: how much work is the owner doing to get that $24k in “profit”?
Is that $24k + 15hrs/week? Because that’s a completely different valuation.
Otherwise it’s a 5x multiple on earnings – which is eh for something this size.
It’s also just his asking price.
I own a boutique personal training gym with around 200 clients and do consulting for other boutique gyms similar to mine.
As others have commented, I would stay away from this.
There are so many better options for you that don’t involve spending 120k for what might (and I want to stress the word might here) be 24k revenue.
Your clients work with you because they like YOU. Not the gym.
The home gym idea is solid (as others mentioned, check your local town/county/whatever rules for that).
Renting from another gym is also a great move. I rented from 3 different places before opening my own.
Owning a gym will not be something you can do on the side with a full time job. I opened mine when I was still young and free of any other responsibility. It was my full time gig and I’ve put in years of 60-70 hour weeks to get it to where it is now. I have a way better work balance now, but every now and then shit still hits the fan and I have to be the one to fix the issue. Most recently, I had to cancel a trip for a bachelor party where I’m a groomsman because a coach of mine got injured and everyone else was away for a holiday weekend.
Lastly, you have to know which sort of gym you would want to own. The gym you’re looking to purchase sounds like an open gym concept. That is entirely different than a personal training gym model. Legit two totally different businesses. Whatever experience you have running your personal training business will not prepare you for an open gym business.
Feel free to hit me with any other questions you have – I’m more than happy to help.
Do this on a royalty deal, where a certain level of income needs to be hit before triggering a royalty. Then some step ups that he can get a pce of as you improve.
Idea here is that you’re hedging he may pass before recouping the cost he is asking (which is outrageous btw. This is only worth the equipment).
Like price out how much if would cost you to open in this exact location the day after he closes his doors. Using all the same value equipment he has. That’s the value of this business.
Asking price is way too high. How is the seller getting to a 120k value? What condition is the equipment? Get the business appraised. Most accountants can do an informal analysis or you can pay for a formal valuation. Either way the numbers seem off
nothing stopping you haggle him down.
Some financial advice on paper showing the gym isnt worth half what the asking price is then seller me be motivated to bring it right down
you could rent a space and fill it out with 30k of top gym equipment.
Generally, businesses can be valued at 3x their annual profit. It can be a higher multiple for software businesses for example but a fitness gym generally would get valued at 3x