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Buying a Fitness Club

Buying a Fitness Club

A fitness club (or fitness centre) can be a great investment.  It can also be a great way to make a nice living in a dynamic industry with very compelling economic metrics.  Buying a fitness club is not for everyone though. 

It takes a lot of work and know-how to make it a success in this competitive industry.  This article will touch on some of the aspects of buying a gym business for sale.

Fitness industry is competitive
If you are serious about buying a fitness centre, you should realize that it is a very competitive business.  The market is full of major power-house corporate gyms, franchise and niche players that cater to every demographic and fitness regiment.  A fitness business can be a lucrative investment but please go into it with your eyes wide open.  The Toronto, Ontario (and surrounding GTA) fitness market is especially competitive.

The lease
When you do find a fitness business for sale that appeals to you, the premises lease should be a critical part of your examination of the business.  You will want to review the lease with your lawyer and determine such things as:  term and time remaining, any options to renew, rate escalations, TMI you might be subject to (taxes, maintenance and insurance).  If you buy a franchise gym, you may be in a situation where there is a sub-lease.

The revenue model

How gyms make money:
– Do they offer people monthly packages?
– Do they charge upfront to join?
– Are clients locked in to contracts
– Are there pay as you go options?

You will also want to determine how else the fitness club generates revenue.  A club that only relies on membership dues may not have their revenue stream diversified enough.  The flip side to this, of course, is that this is an opportunity for a savvy buyer.

Some other services that a fitness centre may offer their clients, and charge for:

– Tanning
– Specialty classes (Yoga, Pilates, Spinning, etc)
– Massage therapy
– Nutritional and diet plans
– Personal training
– Weight loss coaching
– On-site child care
– Juice bars and cafe
– Physiotherapy

Gym users care about the facilities of the gym, and so should you as the business buyer.  Some things that users are looking for in a gym include:  pools, sauna, steam room, running track, new equipment, televisions, free wi fi and so on. 

Not all gym users will expect their club to have everything (witness the success of Curves) but it is important to understand to pick where in the spectrum you wish to compete in.  There are mega-gyms that do offer all things to everyone and others that are niche and focused on the services they deliver.  Where do you think you can compete?

It’s also important to determine the age of the fitness equipment and how much time is left before you need to upgrade it.  Also, whether the existing equipment is leased or owned by the existing owner can have bearing on the purchase price and how much overall financing would be available.

The customer base
When evaluating the decision to buy or not to buy a gym business, examining the customer base is key.  You will want to know how many clients pay monthly (and how many are in a contract).  This is your installed base of clients.  This recurring stream of revenue can be very compelling to a buyer so take a close look at it during due diligence.   Try to understand not only the raw installed base of clients but also try to determine the club’s churn rate (the rate at which users quite) and also the rate at which new users sign up. 

The fitness business is also quite seasonal (new users sign up in droves typically after New Years) so calculate your working capital needs throughout the year.

A fitness club can be an excellent business with recurring revenues and significant upside.  Talk to a professional in the business to learn what you are getting into, or a business broker that has experience selling fitness clubs to help you.

About the Author

Buying a Fitness Club? Businesses for sale in Toronto, Hamilton and surrounding areas in southern Ontario, Canada. We are a full service business brokerage here to help you buy or sell a business.