Buying a Gym

[BarCoach]

I am considering buying a small gym. I have worked there before, and was a gymnast there when I was younger. Their equipment is old and not in great shape, but usable. There is room only for the basics: full floor, one set of uneven bars plus a single rail, one vault table, 4 beams (2 high), and a trampoline. But they are an established gym with a good reputation.

A couple questions:
How much might be a reasonable price to pay for a gym like this?
What do I need to consider before buying?

Thanks.

 

[gymdog]

What are your options for expansion (either of that facility, or in the area)? Realistically at this point, if you wish to build a program with higher levels, you will need a pit, etc. So I would consider that.

As far as a reasonable price, that seems like it would depend on the area and the business to a great extent. I would try to crunch the numbers (total revenue minus total cost) and then consider the asking price. I'm not a business person (as you may tell by the above ratio, I think they would call that a "profit loss statement" on the business/accounting end - we deal with marginal costs in economics), but to my mind liquidity should always be a concern. Presumably you'd be taking out a loan, so I'd look at how much you could put down versus that and make sure you're not going to be overwhelmed every month. Also obviously there's been something of a credit crunch so you'd have to look at whether you can get the loan you need.

Also, you didn't mention the details of this, but I've been at gyms where the building was leased. I don't know how common this is geographically or whatever. But obviously in that case I would take care...I have seen a gym after 20 years of business in the community lose their lease...never late on payments or anything, another bigger business in the area wanted the space and was willing to do what it took at the time. Of course this business has since gone out of business if there is any potential for this, I'm inclined to say in these times especially, are there other facilities you could potentially move to in the area, etc.

 

[nevertooold]

We own our gym, you are welcome to pm me with more specific questions, but in general you need to look at the annual revenue of the gym coupled with the current state of the equipment. Depending upon how badly the current owner wishes to sell you are looking generally at between 50%-200% of annual revenue of the gym. That's a pretty wide range, but if you want to pm me more details i would be happy to narrow that range for you.

 

[BarCoach]

Sounds like I have a lot to learn. I believe there is a great deal of room for expansion. At one time, not that long ago, this gym, under different owners, had a very successful business with many more students, and many more successful team gymnasts. The current owners weren't able to renew the lease and moved the gym to a smaller building, lost the whole team, and had to essentially start over. I do know the current owners fairly well, and I expect they might be willing to help me get going, and show me what I need to do.

 

[BarCoach]

I finally went to talk to the current owner yesterday. He said he wants to do the transition slowly, which I understand, but he said it would probably take 3-5 years for him to leave and me to take over. That seems like a long time. Too long! I really like him and I think he's a great person, and I would be more than happy to have him stay on and coach, but I don't see why it can't take 6 months to a year before I can be running the business.

 

[BarCoach]

After telling a couple people about taking over the gym, I've begun to believe that this is absolutely the right thing to do. The first person I told was the other coach of the high school team. She has a business degree and said she would love to run the business side of the gym. Plus, she loves coaching PT-Level 5 and I love level 5 and up. Then I told one of the parents at the gym I coach at currently. She said she would buy the gym, and that she really believes the town needs a good gymnastics program. It seems so perfect. Its exactly what I want. I'll get to coach and organize the programs, but not have to worry about money or the business. I was so excited. But...

When I told the current owner yesterday, he said that if Katie and Shelley (the other coach and mom) were going to be involved, then he would leave. And really, thats what I want, but I can't let him know that. He also warned me that it is risky to have someone else as the owner because she could start to take control. I don't really see that happening because I know she trusts me, we like each other, and she has a real love for gymnastics.

I don't know what to do. It's all I can think about. I want to do run the gym with the other two women, but it would totally ruin my relationship with the current owner. I don't know if there is a way to keep it cordial and still be able to run the gym the way I want. Any advice/comments greatly appreciated.

 

[sally]

Just thought I would give my little thing. I don't own a gymnastics business, but I do own 3 businesses. If that lady is going to buy the gym. Then in fact, she owns the business. Ok fair enough you think she trusts you. What happens if you have a fight?. She can sack you, as you don't own the gym, she does. What if she doesn't agree with the way the program is heading, who has the last say?, she does, as she is the owner. You have to remember she put the money in. so she will want to see the return. I feel it would be very risky, I have seen it way to often, people saying we will be right. When it comes to business their are no friends. I would be very cautious on how you go about it, and make sure you have a strong contract in place, otherwise all your hardwork will go down the drain. On the other hand, it could work out really well, no fights or anything, what I am saying is that you should protect yourself if anything should happen.