Business Valuation Blog | Understanding Buying / Selling a Company

What exactly is involved in valuing a gym?

Posted by Business Valuation Specialists LLC on Jun 13, 2018 9:57:00 AM

When you own a gym or fitness center, your business can be very different than other companies in your area. One area where there can be some marked differences is in how to handle valuing a gym and what's involved in the process. Fortunately, it's not as different as you may think, with a range of factors coming into play to determine your fitness center's actual value. This value can then be leveraged for financing, tax reasons, legal issues and insurance claims to ensure that you're getting what your gym is worth, no matter your situation. Here's a quick look at what's involved in the process.

What exactly is involved in valuing a gym?

Gyms tend to fall into an interesting area in terms of valuation. They tend to carry some amount of goodwill, where the reputation your business has built up over the years must be taken into account. There is a certain amount of assets involved in terms of the property and equipment that is used by patrons. Income is another part of the equation that needs to be accounted for, especially if services are a large amount of that income in terms of personal trainer fees and similar expenses. 

Often times, a multiple of income is used to help gain a ballpark figure, with goodwill and assets figured in to help determine the overall value. Generally speaking, the higher the amount of income per year, the higher the multiple will be to determine that ballpark figure. As with similar industries, the appraiser will need to compare your fitness center to a number of similar enterprises that have sold recently, helping them to determine market demand and current prices. But that's not necessarily the only thing they'll look at.

In many industries, the reason why the appraisal is needed is vital to finding the right value. Why? Imagine that you've run a gym for four decades. If it needs to be sold, there are many factors that will impact the final price. Is it being sold quickly to distribute among the heirs to an estate because the owner has passed away? If so, the business value may be much lower than if the owner is slowly looking at retirement and is willing to wait for the perfect buyer to make the sale.

Is the business going to be sold in its current condition to a buyer who will continue to operate it? If so, it will probably command a higher price than selling off the equipment assets, which will often sell for less due to the cost of removing that equipment from the gym and installing it in a new location. Speaking of equipment, what shape is the gym in? You can often use an initial valuation to improve the condition of your business prior to offering it for sale. Old or worn equipment will have a lower value than well-maintained machinery that is ready to use.

Though fitness centers may have a great deal that is different than other companies, the process of valuing a gym isn't that different, provided that you're working with the right people. Make sure before you hire a business valuation specialist that they are certified with experience in the fitness industry. This helps to ensure that they have the expertise to determine exactly how your company is similar to or different than other fitness centers in your area. 

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