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Value Drivers for Gyms & Fitness Centres
Whether you are in the early stages of considering selling your business, or you have already made the decision to sell, there are a number of significant factors that can impact the end result. The following list outlines the key value drivers that consistently have the most impact on the value of a fitness related business:
1. Historical Financial Performance
The most important factor in a business valuation is a club’s historical financial performance. Has the gym been profitable for the last three years? Are margins above or below industry averages? Are revenues and profits stable, trending upward, or trending downward? A buyer’s decision will often be driven by the return on investment.
2. Future Cash Flow Projections
Buyers are essentially investing into a business for the streamline of future cash flow that it will generate. As a result, the most important question is what will future revenues and profitability look like? Buyers often look to the past to provide some indication of what the future will look like, but if you are in a rapidly changing neighborhood, a fast-growing sector of the fitness industry or amongst a saturated market your future earnings might be significantly impacted, in either a positive or negative direction.
3. Strong Membership Retention
Successful fitness centers have consistent and steady membership retention. Great staff and good quality equipment & programs are usually the key drivers of membership retention.
4. Strong Niche Focus
Given how competitive the fitness industry is, a gym or fitness center that has developed a loyal following by focusing on a specific niche, such as CrossFit, Pilates, Female only, or active senior citizens, is more valuable than a club that tries to appeal to everyone.
Being in a market with a large and affluent population is one aspect for a club’s success, but being the largest player in a small market can also be a very competitive advantage. Also, being easily accessible with plenty of FREE car parking or a short walk from public transport is extremely important to your clients.
Fitness club members have become increasingly discerning and expect their clubs to be well designed, modern, clean and well maintained. Clubs that have not been updated or that have deferred maintenance issues will be less valuable than other clubs.
7. Quality Programs & Services
The most valuable gyms, fitness centres and sports clubs differentiate themselves by offering members a wide range of high quality programming, including niche group exercises, professional personal trainers and extra services such as physio, dieticians ext.
Fitness centres that are keeping up with changes in technology, including things like club management software & social apps will be more valuable than clubs that are still operating the way they were in the 1980’s!
9. The Lease
This is very important for a buyer for various reasons. Lenders will only lend against the length of the lease so if you only have 1-2 years remaining before your lease expires it will impact the ability to sell your business. Having a secure long lease or further options of tenure negotiated into the lease is extremely beneficial when selling your business. Other factors that may affect the ability to secure a suitable buyer is factors such as demolition clauses, excessive rental increases, marketing levies ext.
In summary, in order to maximize the end sale result it’s important to be on top of the value drivers outlined above. For more information about selling your fitness related business please contact me today.
Article written by Dustin Slypen, Specialist Health & Fitness Industry Business Broker - LINK Brisbane
M: 0425 121 788