Millions of Americans are focused on their health through physical fitness. In fact, the health and fitness industry is estimated to be worth around $30 billion. There are many reasons for this, according to Forbes:
- Health insurance costs are lower for those who are healthier
- There’s a higher demand for healthier foods and cleaner diets
- Wearable fitness trackers keep people accountable for their fitness levels
- It’s easier than ever to exercise when it’s convenient for you
- Gyms are more affordable than they have been in the past
- Outdoor obstacle races are making fitness a more enjoyable group activity
For those who have a passion for health and fitness and also possess the highly-coveted entrepreneurial spirit, buying a fitness center seems like a no-brainer. However, there are a few things to consider before jumping into ownership of a fitness center.
Types of fitness centers
The term “fitness center” no longer just refers to the big box gyms. Generally corporately owned, these types of gyms may be difficult to buy anyway. However, there has been a recent uptick in the number of fitness studios offering “high value, low price” (HVLP) memberships. These HVLP gyms are quickly gaining popularity for their all-in-one pricing structure that often includes amenities such as classes and, occasionally, saunas, tanning beds, and more.
Another type of fitness center is the boutique fitness center. These can often be found in strip malls alongside nail salons or chain sandwich restaurants. While they don’t usually offer the variety that comes with a HVLP fitness center, they often make their bread-and-butter from a specialized type of class or offering, such as pilates, yoga, or kickboxing.
If you do plan to buy a fitness center, a HVLP business structure would be a good option, because customers will keep coming back for the amenities even if they lose interest in the fitness facilities themselves.
Due diligence
As with any new business purchase, it pays to do your due diligence. Don’t assume that the seller will be 100% transparent about his or her business and tell you everything you need to know. It might not even be prudent to rely on their given reason for selling.
For example, they may tell you they are selling in order to “spend more time with their family,” and that might be partially true. But what if the rest of the story includes the fact that the business has been failing for quite some time, and memberships rates have gone down drastically over the past year? This is information you need to have.
Find out what equipment is actually owned by the gym, and not just leased. Do your best to discover how many people are currently members of the gym, and how that number has changed year over year. Doing your due diligence in the short term can save you a lot of money and heartache in the long run.
Cash flow
One of the quickest ways to go bankrupt when owning a fitness center is by not having enough cash reserves to cover expenses. Gym equipment tends to be relatively expensive, and can tend to wear out and break over time when not well-cared-for.
Under your own watchful eye, you can be assured that the gym equipment is well maintained, but can you say the same for the previous owner? Make sure you have enough cash reserves to replace any gym equipment if and when it breaks. Your business depends on it.
Additionally, beware of relying too heavily on the existing cash flow of the business. While the current owner may pull in a certain amount of money each month, vendors may change and you may lose business in the transition. These are just a couple of things to be aware of.
Entity structure
When you buy a fitness center, or any type of business, it’s imperative to make sure it’s set up in the correct entity structure. So rather than signing for everything in your person name, make sure you set up a corporation or LLC in order to minimize your personal risk. An attorney and accountant can help ensure you have everything set up correctly, so don’t forget to consult with these professionals before signing on the dotted line.
To learn more about how to buy a fitness center, or any type of business, visit www.businessesforsale.com.
