Chris Cooper: (00:00)
So what is your gym worth anyway, and should you sell it? I’m Chris Cooper, this is Run a Profitable Gym and today I’m gonna talk about the value of your gym. Whether you’re thinking about selling or you’re just curious about this baby that you’ve built and its value, we’re gonna go through this step by step and we’re gonna cover it in three broad topics. First, I’m gonna tell you how to value your gym. Then I’m gonna tell you how to increase that value, the seven steps. And then I’m gonna help you answer the question: should you sell. If you want more influence support, head to GymOwnersUnited.com to join a group with thousands of the world’s top fitness entrepreneurs.
Chris Cooper: (00:39)
I wanna start with how to value your gym. Now I’m going to give you the back of the napkin calculation. You could probably even just do this in your head, but if you want the deep dive, you can download the gym valuation calculator from our friends at Rig Equipment by clicking the link below this video. Here’s how you ballpark it. You start off with your best three years profit. The money that you took out of your gym, not your headcount, not your revenue, the profit. The best three years, and you add them together. Then you add the value of your equipment. Now, if your equipment is more than three years old, its value is probably zero. And if you really can’t figure this out, it’s worth about 30 cents on the dollar to resell your equipment as long as it’s less than three years old. So you add the value of that equipment to the best three years of profit that you have.
Chris Cooper: (01:27)
Then you subtract out any debt that you’re still carrying. So maybe that’s an equipment loan or a build out loan or something else. And then what you’ve got is the value of your gym. So let’s say that you’ve taken a profit of $50,000 a year for the last three years. You start with $150,000 valuation. Then let’s say that you bought some new rowers last year. Maybe you’ve got some equipment that’s worth about another 10 grand, so you’re at 160, but you’ve got some build out debt and some credit card debt totaling, maybe that’s another 20,000. So now you’re back down to 140,000 and that’s what your gym is worth at sale. You can’t really count on good will or social media branding, especially if you are a franchise or a CrossFit affiliate because you don’t own your name. That name could be pulled from you at any time. You’re on a term length agreement.
Chris Cooper: (02:18)
If you aren’t an affiliate or a licensee or a franchisee and you own your name outright, those assets might be worth a little bit, but we’re talking like tens of thousands, not hundreds. It really comes down to how profitable you are. So this is, again, a very general ballpark. You can get the Rig Equipment calculator by clicking the link below this video. Why I want you to do this math is because years ago I flew down to Boston, there was a really great CrossFit gym and there were three other smaller CrossFit gyms that weren’t doing well around it. And they thought that the fastest way to grow the successful gym would be to acquire one, two, or three of the other gyms that were nearby. And because I knew at least a couple of the gyms, they asked me to fly down and just be kind of like a neutral party in the negotiations.
Chris Cooper: (03:06)
And so I said, yeah, I’m happy to help. So I flew down and CrossFit gym A was doing great and they were talking to CrossFit gym, B, C, and D. Unfortunately, none of those were doing great and they had all been in business for at least five years. The owner had put their heart and soul into it, but they weren’t making any money. And so when they saw their valuation, they got upset. One guy cried because his gym was worth less than $10,000. But the reality is he had bought himself a job into a buyer who didn’t wanna buy themself a job or a hobby or that gym’s problems. The gym was just not worth paying for. And so this owner was burned out, he was stressed out, he was tired, he was gonna move across the country to get a job working with his brother, and his gym that he’d put all this work into was really worth nothing.
Chris Cooper: (03:55)
Now, gym A actually did make a pretty generous offer to each one of the other gyms, and a lot of that was just goodwill, but you can’t count on that amount of generosity. And so they wound up acquiring, I think two of the three gyms and absorbing their clients. So the clients got a better experience. One of the other gym owners got a jobs at gym A grew and kept a lot of the clients that they had purchased in the acquisitions. But the reality is, I want you to remember that nobody wants to buy your hobby except another broke hobbyist. And so if your gym isn’t worth anything, now is not the time to sell it. I often get this question: Hey Chris, I’m tired, I’m burned out, this gym is not going anywhere. How do I sell it?
Chris Cooper: (04:40)
And my usual response is, can you wait six months? Because if we can take six months to actually make the gym worth something, then you can sell it and get what you’ve earned with all this hard work. But if somebody, again, is just buying your hobby or buying your job, then nobody wants to buy it and it’s not worth anything to them. There are seven steps to make the gym more valuable, and I’m gonna give you a little flash of insight here. After I go through these seven steps with people and it takes me a few months, three to six months, that person usually comes back and says, actually, I don’t wanna sell anymore. Now I love it. Because the steps to fix your gym are very similar to the steps that will make your gym more valuable to a buyer.
Chris Cooper: (05:23)
Making you a CEO is what makes the gym appealing to somebody else because they don’t want to come in and have to coach at your gym or buy themselves another job. So here are the seven steps to make your gym more valuable to a buyer and also to you. First, systemize everything. Get everything out of your head. Pretend you’re gonna be going into the hospital for 90 days with no contact. You’re gonna be absolutely unconscious. Your staff won’t be able to ask you any questions. All of your clients will need to know your policies in advance and everything will have to be written down. So that if your staff has a question like, what radio station do we play? They don’t have to turn to a free public Facebook group or anything. They just open up this binder and bam, there’s the answer.
Chris Cooper: (06:05)
Okay? You answer everything in advance. That’s systemizing your business. That is actually what makes your business worth buying. And that’s step one of the seven steps to make your gym more valuable to a buyer. Step two is to teach these processes to your staff. So it’s not enough just to have them out of your head, but your staff has to know how to do it without you. So for example, you can make a rule about open gym ends at this time and class starts at that time or what time class starts, or how long you use in the warmup. But if you don’t teach and mentor your staff to deliver that rule precisely the same way every time, then the rule doesn’t even really exist. It just feels like you’re being a bad guy for a short period and then everybody forgets about the rule until you come back and then you’re a bad guy again.
Chris Cooper: (06:49)
So you have to teach your staff to deliver these rules and policies and procedures with consistency. That will build trust with your clients because they’ll see that no matter who’s there, they can have any concern, any problem solved. They won’t be late for class if they know that class always starts on time. So that’s the second thing is teach the staff your systems. The third thing that you can do to make your gym more valuable is to set up a retention plan. It is not enough just to say, we offer a great service, or we have the best programming, or we have the most educated trainers. You have to deliberately set up a plan to keep your clients. Because if you wanna show a buyer, here is the value of my gym now, and here’s what you can reasonably expect its value to be a year from now, if you do nothing, then you have to have a plan to retain your clients.
Chris Cooper: (07:38)
You can’t just hope. So the third way to make your gym more valuable is to set up a formal retention plan. And we do this straight up in our mentorship program as well as the other stuff I’ve been talking about. Fourth, you need a retention plan for your staff, and more than that, you need an ascension plan for your staff. Retention to keep them, ascension to grow them in their careers. So if you’ve got a career roadmap plan with your staff, you’re evaluating them to measure where they are every quarter, every six months, then you’ve got a career roadmap where you can show them, here is the future if we keep developing you. Now this is more than, you’re gonna get a level two or you’re gonna get a level three or you’re gonna get this credential. It’s really, here is how many personal training clients you’re going to get.
Chris Cooper: (08:21)
Or maybe, here’s the administrative role that you’re going to be taking on if you can reach this level. But if you don’t have this plan for your staff, a new buyer coming in knows they might be buying quicksand because if the staff leaves, the thing starts falling apart. They’ve gotta jump in and now they’ve got this expensive job. That’s not what they want. They need to know that you’ve got a plan to keep and grow your staff. The other thing that can happen in a gym acquisition is the original seller sells the gym. A new buyer comes in, the primary coach hates the buyer and leaves and starts a competitor. Well, if I’m a buyer, I don’t want that. So I need to know that there’s a retention and ascension model for staff. That’s number four. The fifth thing that you have to do is systemize your acquisition path.
Chris Cooper: (09:08)
You have to have a marketing plan that you can point to and say, this is working. We are reliably getting five new clients a month or seven. You should be able to say, oh yeah, here’s our marketing funnel and quickly draw it on a napkin because you know it so well. You should be able to point to metrics and say, Hey, we know exactly where the opportunities to grow this gym are because we know that we get a hundred leads a month, we get 10 No-Sweat Intros booked. Of those ten, eight show up and of those eight, five actually sign up. If you don’t have those metrics, then a buyer coming in will say, I don’t really know if there’s an opportunity here because there’s nothing to hang my hat on. I’ve got nothing to compare against. Maybe I should just start my own gym or wait until this person folds and just get all their clients anyway.
Chris Cooper: (09:53)
Okay, so the fifth thing that you have to do to make your gym more valuable is to systemize your marketing. The sixth thing is to track your metrics. I can’t tell you how many times I’ve been called to help in a gym acquisition and I’ve said, okay, let’s see the P&l and there’s no P&l. And so the seller is saying, well, I didn’t really make any money last year, but there’s all this potential. Guess what? Potential is worth $0, especially if you’ve got no numbers to point to, to back it up. So it’s really, really, really important that whether you’re valuing your gym to sell or even valuing your gym so that you can get a bank loan, that you have metrics that you can point to. Years ago when I wanted to buy my first building, I was trying to convince the bank to loan me $300,000 or something, and I had come up with the first part of it, but I still needed another 300 grand to buy the building.
Chris Cooper: (10:43)
And so the bank wanted to know, well, what are your retention numbers? How do we know you’re gonna have this money coming in over the next 10 years when we’re lending you this money to buy the building? And so I was able to point to our average revenue per member, our average length of engagement, how many members we had, all the metrics that they wanted. And they just boom, rubber stamped my building approval in 48 hours because I had those metrics. It’s not even really what the metrics were because let’s face it, average length of engagement in the fitness industry is like four months. Mine at the time was over a year. So they liked that, but they didn’t know any better. It was just the fact that I had metrics to point to that convinced them. The seventh way that you make your gym more valuable is: you get through the tough stuff now before the buyer comes in.
Chris Cooper: (11:31)
So if a buyer is considering your gym and they know, wow, that you got 12 staff, I need to cut that down to six, your rates are too low, I’m gonna have to raise rates. And they see that there are all these challenges that might actually hurt the business and might hurt the reputation and it’s gonna be stressful for them, that drops the value of your gym. If you do all those hard things before the sale, that dramatically increases the value. Hey, look, we did the rate increase last month. So you’re gonna see future revenues coming in because everybody’s paying $10 more a month than they were, and you don’t have to go through the hassle of doing that. Okay? Or, you know what? I had this other partner, I don’t want you to have to negotiate that. I’m gonna handle the buyout. You know, I had a gym a couple months ago where the owner had three potential buyers, good position to be in, and they went to each of the potential buyers and each potential buyer said, I will not even consider this deal until you fire your head coach.
Chris Cooper: (12:33)
Each one said that, I’m not interested unless you fire your head coach, then we’ll talk. They did not want to buy the problem of the head coach and then have to fire them themselves. They wanted that problem solved before they bought or that they would’ve significantly discounted their offer. So the seven ways to make your gym more valuable: systemize everything, teach your staff how to run it absolutely without you, set up a retention plan for your clients so that you can predictably say, here’s how long somebody will be around. Set up a career roadmap and ascension model for your staff. Systemize your marketing so that you’ve got predictable lead generation of new clients. Track all of your metrics so that you can point to growth and then get through the tough stuff in advance because selling a car without washing it first is a fool’s game.
Chris Cooper: (13:20)
Okay? Now here’s the thing. Doing all this stuff is doable in four months. It takes most people six because they’re busy and they’ve got other stuff going on. That’s really what our mentorship program is all about. But after they go through that first six months, a lot of them will say, I love my gym again. I’m proud of my gym again. I’m proud to be a gym owner because all the stuff that was stressing me out has been resolved, right? I was wanting to sell my problems, not sell my gym. And those problems are mostly gone now, or at least I can see them going away. I can see the light at the end of the tunnel I’m in, my passion is back, my energy’s back. I’ve been through this myself. I know exactly what it feels like. And so I’m not surprised when people say they don’t want to sell after they fix these things, okay?
Chris Cooper: (14:04)
But there are some times when people should sell. And so about one time out of every five or so, somebody will be so burned out and broke that they’ll say, that’s it, I’m done. Now for you, I’ve got a guide called How to Sell Your Gym, and you can click the link below this video, this podcast, wherever you’re listening or watching, and you can get this free guide. I’ll tell you right now, the more pressure you’re under to sell, the faster you wanna get this deal done, the less you’re gonna get for it. So if you can afford to wait a month, you can start today. You read the guide, you start taking the actions in the guide, and at least the ball will be rolling. You’ll see a light at the end of the tunnel that’ll probably get you through, okay?
Chris Cooper: (14:51)
So there’s two reasons that people sell gyms. The first is, it’s too late. I’m burned out, I’m done. Look, in a lot of businesses, people will think about selling their business when they have a bad day. Gym owners will go right to the mat and give everything they’ve got until there’s absolutely nothing left before they even think about selling their gym. And so if that’s you and it is too late, you can’t last another six months, you can download this guide. But the other reason that they sell is they’re scared. And what they think is, I’ve had a couple of bad months. Oh no. Or like, Hey, my peak, I was hitting 40,000 a month, now I’m down to 29. I don’t think I can get back there. The best time to get out is right now while the gym is worth something.
Chris Cooper: (15:35)
Okay? Or even, I’ll sell and start over. But here’s the thing, you are at your best when your back is to the wall. Having this willingness to sell is actually a forcing function. So it’ll make you more willing to do the hard things. When I reached this point and I was thinking about, I gotta get outta here, I knew that I had to raise my rates and knowing that I was willing to sell actually helped me do it because I said, well, hey, look, I’m gonna sell anyway. So if raising rates works and I’m making more money, good, the business is gonna be worth more. If it doesn’t work and everybody quits, well whatever, I’m ready to let go anyway. And so there is absolutely a little bit of leverage in having your back against the wall or reaching the bottom, however you want to say it.
Chris Cooper: (16:23)
So what I want you to ask yourself is, are you completely burned out and done, or are you just scared? If you’re completely burned out and done, by all means make your gym as valuable as you can and then sell it. Try not to rush. Follow the guide. If you’re just scared and you don’t know how to recover, book a call, talk with a mentor, and let’s build this thing into something valuable. And then in six months you can reassess and say, do I actually wanna sell it? In our industry, it’s really common for gurus to say, oh, I retired from running my gym. I had this successful gym and I retired. Listen, if your gym is successful, you do not ever have to sell it. I spend one hour running my gym every single month. I still make a great wage. It still pays me rent.
Chris Cooper: (17:06)
I’m its landlord. I go there twice a week and do the CrossFit group at noon with my friends. And that is it. There’s a general manager that runs everything. She has a mentor through Two-Brain. I talk to her one hour a month and that’s it. There’s no need to ever sell a successful gym or retire. Okay? So to recap, there’s an old joke in the fitness industry that says the two happiest days in a gym owner’s life are when she opens her gym and when she sells her gym. But I want you to build a business that you’re proud to own. I want you to build a business that feeds you and your family so that you’ve got the energy to come in every day, deliver an amazing service and change people’s lives. I want you to have a gym that allows other people to build careers on your platform and changes enough lives that your gym is the lead domino in your town and you’re creating an impact and a legacy of health and fitness long term.
Chris Cooper: (18:01)
This is exactly what I want for you. That’s what you wanted for yourself when you signed up. And I hate to see people give up on themselves and give up on their dreams and sell, because most of the time you don’t have to. But if you’re at a point where your family is struggling, you’re close to bankruptcy and you’re doing yourself mental harm, then by all means: sell your gym. Take a year off and come back. We’ll always welcome you back. This is Run a Profitable Gym. Thanks for listening. I hope you join our Gym Owners United group today. That’s where I answer questions for free. We run free webinars and give free tools every couple of weeks. It’s GymOwnersUnited.com. See you there.
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