In early 2013, I was standing in the parking garage of the Four Seasons Hotel in Seattle. It was raining, and I was late for my flight. But I was talking to Greg Glassman, and he was offering me a contract to write for CrossFit HQ, and we were almost there.
But I had two conditions:
1. I wanted to be “firstname.lastname@example.org” (I still am), and
2. I didn’t want to sell my gym.
Greg said, “Chris, you don’t have to sell your gym. Lots of people at HQ still own their gyms.” He pointed to Jimi Letchford, with whom I’d just had coffee at the original Starbucks.
“How do I run my gym and work full-time for HQ?” I asked.
“You’re supposed to be the expert,” he said. “Figure it out.”
I did. The rest of that story is written down somewhere, including my vision of “retirement” and “wealth”. But I’m writing this piece to answer the question, “Should I sell?”
It’s not your standard pros-and-cons article. First I give a reason NOT to sell that many miss. Second, I give one solid reason TO sell your gym to someone else.
1. No. Don’t sell.
Your gym is too valuable to sell. “Building a salable asset” is becoming popular rhetoric. But a service business usually isn’t a retirement-grade asset because of the volatile nature of the clients. As Jason Ackerman explained in this podcast, even a prominent gym won’t sell for retirement-level money. MOST gyms are worth far less than their owners believe. To find out for sure, download our free Gym Valuation tool.
Ackerman sold his gym for “between half and a million”. I know the real number, but won’t share it.
Your gym can be a cash flow asset. It can run without you. In fact, some would argue THIS is the true measure of business success: building an asset that’s worth more when running than when sold.
Let’s say your gym is worth $500,000 (again, it’s probably not.) If you sold for the full amount today, how long could you survive on 500k? Five years? Maybe seven? For the sake of argument, let’s say you could live on $50,000 per year for ten years.
Alternately, let’s say your business paid you $50,000 per year and didn’t require your full time attention. Let’s say you could keep it running for 30 years–that’s a $1.5 million asset. IF you can make it run itself, the business is worth more alive than dead.
As an example, several TwoBrain clients have reached this point with their gym, and then relaxed into a coaching role or started another business. Before Jason Brown could launch BoxProgramming.com, he and Danielle did a TON of work to turn their gym into a cash flow asset. I could easily list a dozen other projects currently underway by TwoBrain entrepreneurs.
2. Yes. Sell!
In Charlotte two weekends ago, I asked the Big Scary Question: “What do YOU want NOW?”
Granted, the room was full of entrepreneurs. But many gym owners would prefer to return to coaching and leave the “business world”…if it paid as well. They’re not necessarily happy owning a business; they’ve just bought themselves a coaching job.
It doesn’t have to be this way. Not anymore.
There’s an interesting experiment afoot with some friends in Massachusetts (Michael Scott and Mike Collette, owners of CrossFit Prototype.) They suggest owners to consider a “buy in” instead of a “buy out.”
In the words of Michael Scott: “People who have the passion but lack the business skills are great fits for buy-ins.” He explained it this way:
“Buy in = keep the title owner as a partner or co owner. Keep the passion, and add a good business partner. It’s an opportunity to make more money and get a lump sum of capital from the new partner that many need.”
I’m really on the fringe of that conversation–though I consider myself a dashing Bo Duke at business, I’m really more of an Uncle Jesse, brokering an amenable solution that makes everyone happy.
I wrote about “levels of engagement” in my book, Two-Brain Business 2.0. I’ll write more about it. But here’s the point: if coaching makes you happy, coach. If owning a business makes you happy, open a gym. But don’t think one is a natural extension of the other.
I’ve seen gym owners “retire” unnecessarily. They closed their gym, gave people some terrible news, and got “jobs” where they felt more secure…but less in control. It’s a shame: to win the war of infirmity, we NEED thousands of generals leading hundreds of guerrillas each. Every time a gym goes under, our flank gets weaker.
I write more about creating “cash flow assets” in Two-Brain Business 2.0.