With over 60% of the American population either being overweight or obese, there is no shortage of opportunities in the fitness market. And, with the eldest of our nation’s 77 million baby boomers already at age 65-years-old, older adults will make up a growing share of the nation’s population for the next four decades.
So you love to work out and have a passion for helping others achieve their fitness goals. You’ve seriously thought about opening a gym or perhaps even buying a gym that’s for sale. You think business-minded and believe you could really make a go of it with you running the helm. Well, before you decide to take the plunge, read on.
According to Jim Thomas of Fitness Management USA, a fitness management and consulting firm, he recommends buyers perform their “due diligence.” “Many gym buyers assume the recurring revenues were higher or they didn’t realize there was a retention issue with members,” he warns. Based on what his company sees on a frequent basis, he suggests the following:
1. In addition to seeing the gym’s financials, you’ll want to see tax returns and bank statements. Be sure and talk to the billing company handling the account. Ask questions… it’s a simple as that.
2. Have enough cash on reserve. Keep at least one month’s of operational costs in reserve at all times. As in any business, there are peaks and valleys with financial flow. Having that reserve on hand will get you through the tough times when money isn’t coming in like you had hoped.
3. While a positive attitude is always preferred, don’t be blindsided by optimism. If you’re adding new debt to the business, you should expect some ramp up time before things start to turn around.
4. Don’t fly by the seat of your pants and try to “wing it.” Create a business plan and keep a realistic budget. Be patient and stick to the plan. It’ll be your roadmap for success.
5. Paying for potential. It’s best to have the business valued by someone in the industry with experience. Too many first-time buyers will pay a premium for the “potential” of the business. You don’t pay for the prior owner’s blood, sweat and tears – and you don’t pay for the great “corporate opportunity.” It’s all about cash flow.
6. Don’t go at it alone. The biggest issue that gyms have is the improper implementation of sales and marketing. The new owner is able to deliver a fine product and service, but they suffer from obscurity – no one knows they exist and those that do don’t have them at the top of their mind.
7. Train your staff to be good salespeople. It’s all about listening to the customer’s wants and desires and being able to deliver that promise. When a potential new member comes into a facility, if there is no process or trained fundamental to properly guide the prospect into an active participating member, you won’t make the sale. If you’re a new owner and you don’t have prior successful experience in sales and marketing, then get help… and preferably industry specific. Don’t wait until you run out of cash before you get help; it will be far cheaper to start out right.
Now, go start that new gym – and do it right away!
Note: Jim Thomas is the founder and president of Fitness Management USA Inc., a management consulting and turnaround firm specializing in the fitness and health club industry. With more than 25 years of experience owning, operating and managing clubs of all sizes, Thomas lectures and delivers seminars and workshops across the country on the practical skills required to successfully build teamwork and market fitness programs and products. For more info, visit his website at fmconsulting.net.
When in doubt, hire a consultant
Jim Thomas is the founder and president of Fitness Management USA Inc., a management consulting and turnaround firm specializing in the fitness and health club industry.
Thinking about buying a gym?
Before you decide to buy a gym, it’s important to review financials. Ask to see current and past financials, P/L statements, cash flow and even prior tax returns. The more you know about the business you’re about to buy, the less risky the investment will become. Know what you’re buying BEFORE you buy.
Checklist for buying a business
1. Ask to see financials, past tax returns, cash flow, profit and loss statements.
2. Develop a business plan and adhere to it.
3. Train your staff so that they make a positive first impression.