You’ve been working hard to build up your dream. Maybe you’re ready to sell it and move on, or maybe you’d just like to know what you could get for it.
Maybe you’re entering Tinker Phase and doing a net-worth calculation. Or maybe you’re looking to finance a loan to buy a new building—or open a second location.
Calculating the value of your gym isn’t difficult, but the result can sometimes be hard to swallow.
Here, I’ll tell you how to calculate the value of your gym. In the next post in this series, I’ll tell you how to increase that value. And after that, I’ll help you decide if you should sell.
Different Ways to Value Your Gym
First, here’s the back-of-the-napkin calculation to figure out what your gym is worth:
- Take your best three years of profit and add them together.
- Add the market value of your equipment—what you’d get if you sold it.
- Subtract any debts you’re still paying, including loans.
- You can’t factor in “goodwill” or the power of your “brand” or any of those other magical multipliers because those usually don’t count for anything in a service business. That’s especially true if you license your brand or pay a franchise.
The number you’ll get with this simple approach is a very general starting point.
If you want a deeper dive, you can access the Gym Valuation Calculator from our friends at RigQuipment here.
Unfortunately, when gym owners break down these numbers, they’re sometimes disappointed to find that their gyms are worth far less than they believed. Sometimes it’s worth less than nothing if they have a lot of outstanding debt. But here’s the good news: In six months or less, you can dramatically increase the value of your gym.
Want a full breakdown of how to value your gym? It’s in here: “How to Sell a Gym.”
How to Increase the Value of Your Gym
There is one way to boost the value of your gym really quickly: Put every client on a contract.
I don’t like contracts (but I also don’t plan to sell my gym). That said, contractual commitments from clients to continue paying are worth a lot to a lender or buyer. I understand why that’s the case, but I still wouldn’t take this path.
The real way to increase the value of your gym is to make your business more profitable and get it running well so it requires less of your time. Nobody wants to buy your hobby—except, perhaps, another broke hobbyist.
Build a business that’s worth owning. I’ll tell you exactly how to do that in the next post.
Other Media in This Series
“How to Increase the Value of Your Gym”
“When to Sell Your Gym”
