Greg Glassman, who founded CrossFit in 2000, is selling the business to Eric Roza, according to a June 24 announcement on Twitter by Dave Castro with CrossFit. CrossFit has 15,000 locations in 158 countries. Roza is a CrossFit affiliate who owns a CrossFit box in Boulder, Colorado. He previously owned Datalogix, a tech company.
The sale is expected to be completed in July. The purchase price was not revealed.
CrossFit and Glassman have faced mounting criticism from multiple groups over the last few months for Glassman’s racist and insensitive comments he made on Twitter and in a company Zoom call related to the death of George Floyd, the unarmed black man who was killed by a police officer on May 31. Glassman has also been the subject of several stories, including one in the New York Times, that alleged he sexually harassed women on the staff.
Glassman founded CrossFit along with his wife at the time, Lauren Jenai. The two have since divorced, and as part of the divorce settlement, Glassman paid Jenai $20 million for her part of the company, becoming sole owner.
On Twitter, Glassman wrote: “The world has changed, but the magnificent human machine, the proven benefits of CrossFit, and its market opportunity remain unchanged. It is time for the founder to bid adieu and find other creative outlets. I have complete faith that Eric Roza can shepherd CrossFit Inc. effectively into this new world.”
Roza posted a statement to Instagram that said, in part:
“In the past weeks, divisive statements and allegations have left many members of our community struggling to reconcile our transformative experiences in the local box with what we’ve been reading online. My view is simple: Racism and sexism are abhorrent and will not be tolerated in CrossFit. We open our arms to everyone, and I will be working hard to rebuild bridges with those whose trust we have lost.”Read More
F45 Training, Los Angeles, is being acquired by Crescent Acquisition Corp., and taken public according to an announcement issued by Crescent Acquisition. Crescent Acquisition is a publicly-traded special purpose acquisition company. The combined company will trade on NASDAQ under the name F45 Training Holdings Inc.
F45 operates a nearly 100 percent franchise model. In its seven years of operation, F45 has more than 1,993 franchises sold in 53 countries and 1,240 studios open in 40 countries as of March 31, 2020, according to a presentation on June 24 by the executive team of F45 Training and Crescent Acquisition Corp.
The company has 847 franchises in the United States and 377 studios operating before COVID-19. Sixty-five percent of its units have reopened in the United States, as of June 19.
F45 Training also has 492 additional franchises in other countries with 270 locations open pre-COVID-19. Twenty-seven percent of units in the rest of the world were reopened as of June 19.
In 2019, pre-COVID-19, F45 Training’s revenue was $93 million, which was a 60 percent revenue growth year over year.
F45 Training started in Australia seven years ago but expanded to the United States, and in March 2019, the actor Mark Wahlberg became a minority interest owner.
The combined company is anticipated to have an enterprise value of $845 million and be capitalized by cash from Crescent Acquisition Corp’s trust totaling more than $250 million, assuming no public shareholders of Crescent Acquisition Corp. exercise their redemption rights, along with an incremental $50 million committed by Crescent Capital Group LP pursuant to a forward purchase agreement to acquire 5 million units of Crescent Acquisition Corp., according to the announcement.
Existing F45 shareholders are expected to receive approximately 53.3 million shares in the new company and as much as $204 million in cash.Read More
As part of the $2.2 trillion CARES Act, the SBA is now offering to make six months of payments on SBA loans, including both principal and interest.
This partial payment program is part of the SBA’s flagship 7a loan program and applies to both existing SBA loans as well as new SBA loans that are closed before September 27th, 2020. SBA lenders, the public stock market, and businesses of all sizes recognize that a significant disruption has occurred in their business activities. The SBA is paying six months of payments for current SBA borrowers to relieve stress on business owners and attempting to “keep our small businesses going.” It is important to note that this is not a payment deferment plan, instead, the SBA will actually make payments of principal and interest for buyers.
If you are a potential buyer of a fitness center or studio, it’s important to consider the following:
- This is a temporary economic incident. There is no fundamental economic weakness.
- There is lots of liquidity in the finance and banking sectors, this is not a repeat of the 2008 financial crisis.
- Interest rates are at an all-time low and are unlikely to go up soon. As of mid-April, the interest rate for a 10-year SBA 7a business acquisition loan was 6%.
- Many small businesses, including fitness centers and studios, may benefit from pent up demand.
- Fitness centers and studios that were overpriced at the end of 2019 will be repriced to reflect current market conditions.
- Many fitness studios may see a decrease in wage costs as the unemployment rate increase and workers look for new employment.
- Now is not the time for inexperienced entrepreneurs to be getting into the fitness industry.
- Lenders are willing to back buyers with strong operating track records, a solid personal balance sheet, and a clear vision about how they will be able to rebuild sales and pay down debt in a post-Coronavirus economy.
- Even though the SBA will be making the payments for the first six months on newly originated loans, lenders can not take that into the credit decision. To qualify for the program, the cash flow of the fitness center or studio must be able to support the loan payment without taking into account the SBA payments.
- Lenders are willing to take into account the impact the Coronavirus has had on the business when valuing a business, but buyers must demonstrate a clear and realistic plan to get cash flow back to pre-pandemic levels.
- Certain fitness centers and studios, especially those who were able to quickly transition to a virtual model, may be especially attractive candidates for this program right now because they were not as severely impacted by the pandemic as other businesses.
If you are interested in taking advantage of this program, keep in mind that deals must be closed by September 27, 2020, to qualify. So, working backward, you may want to keep the following timeline in mind:
- Sign letter of intent – May 15th
- Complete Buyer’s Due Diligence – June 1st
- Secure Lender’s Financing Proposal – June 15th
- Lender Submits Loan to Underwriting – June 30th
- Lender Underwriting Completed – July 31th
- Purchase Agreement Completed – August 28th
- Target Closing Date – September 1st
- Fall-back Closing Date – September 15th
- Drop Dead Closing Date – September 27th
For additional information about this unique SBA loan payment program, visit the BizBuySell Financing Resource Center or contact Richard Jackim at 224-513-5142 or at firstname.lastname@example.org.Read More
The evolving impact of the coronavirus is being felt everywhere—but especially in the health and fitness industry as social distancing and shelter-in-place become the new norms. This is a time of uncertainty in our personal lives and in our businesses. The closest thing I can compare it to is the uncertainty everyone felt in October 2008 as the financial crisis was unfolding.
Then, like now, business owners are seeing the values of their business plummet as clubs close indefinitely and members cancel their memberships in droves. Smaller health clubs and fitness centers are naturally more vulnerable in an economic downturn, but everyone in the health and fitness industry is affected in one way or another. Strategic buyers, investors, sellers, business owners, and business brokers are all trying to understand how this will impact them, and what they can do to mitigate the consequences.
Reflecting on the financial crisis of 2008-2009, however, helped me identify a few things that are likely as we deal with the impact of coronavirus on the M&A market and business sales.
Like in 2008 and 2009, M&A activity will most likely contract significantly over the next 3-4 months as the volatility in the stock market will likely put the M&A market on hold. For deals in the early stages, there will be a lot of anxiety on the part of sellers and a lot of caution on the part of buyers. As a result, we expect that many buyers and sellers will press the pause button to wait and see how the situation unfolds over the next few months.
But there are a lot of indicators that when the coronavirus scare is behind us, the M&A market will rebound with gusto.
“I’m bullish on the outlook for M&A activity in the long term once the financial markets adjust to the ‘new normal’. There is an unprecedented amount of capital that needs to be deployed, interest rates are at record lows, and the federal government’s stimulus package should make borrowing even easier. At the same time, the record high valuations that we’ve seen over the last year or two are likely to decrease, which will make financing acquisitions less risky and fuel a strong increase in M&A activity.”
Richard Jackim, Managing Partner, Sports Club Advisors, Inc., and Jackim Woods & Co.
If you own a fitness boutique or a health club and are thinking about selling, what does all this mean to you? First and foremost, it’s important to remember that while the next few months may be painful, and it may take you six months to a year to build your business back up to its 2019 levels, but the fundamental value of your business is likely still intact. If you were waiting for the market to peak before you sold you missed the window. But that doesn’t mean your business is unsaleable or that it has no value. The value is still there because buyers buy companies for the future cash flow that business will generate. That means buyers take a long-term perspective. If your business is fundamentally sound, it is very likely that its value will rebound once the economy and our lives return to the new normal.
Many of the business owners I’ve spoken to in the last few weeks believe that the current market conditions will scare away buyers. That is true in the short run, but savvy financial and strategic buyers recognize the short-term nature of this crisis and see this as a good opportunity to buy a good business at a lower multiple of EBITDA than last year.
If you’re thinking of selling your health club or fitness center it’s important to work with someone who understands the dynamics and changing motivations of sellers and buyers to advise you during these uncertain times. Below are our recommendations for business owners to take over the next 2-3 months if you are thinking about selling in the next few years.
- Focus on Exit Planning (talk with us about our formal process that can use this time to help you and your business get prepared for sale)
- Get a valuation of your business (so you understand how much your business is worth)
- Understand what you can do to improve the value of your business and make it more attractive to potential buyers
- Talk to your financial advisor to understand how much you need to retire
- Work with an M&A advisor or business broker to begin putting together a data room and formal marketing materials so you can hit the ground running when the market recovers.
Our team is comprised of experienced investment bankers and M&A professionals who literally wrote the book on exit planning. We helped over three dozen companies between 2008 and 2010 help get ready for sale and then sold them for top dollar when the market recovered. We will provide you with a value-focused, hands-on approach to help you develop a strategic exit plan that allows you to exit your business on your terms and for its highest possible value.
If you are interested in selling in the next three years and would like to talk to a licensed business broker and M&A professional about how this crisis affects your options, please feel free to contact Rich Jackim for a FREE, confidential conversation at email@example.com or at (224) 513-5142.Read More
Rich Jackim, a Managing Partner at Sports Club Advisors will be speaking to owners of sports and social clubs at the 2020 Sport and Social Industry Association Conference to be held in Cancun, Mexico in February.
Rich will share information about the mergers and acquisitions market for sports and social clubs. He will also discuss how to value a sports and social club and over a dozen things that can be done to enhance the value of a sports and social club. As part of his presentation, he will be sharing details of two transactions in the sports and social industry that he was involved in and the lessons that can be learned, as buyers or sellers, from those transactions.
Rich Jackim has been involved in four transactions in the sports and social industry, including two on the sell-side and two on the buy-side. He has also prepared valuations for four other sports and social clubs.
Rich is the author of the critically acclaimed book, The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners, which was an Amazon Best Seller the year it was published.Read More
The value of your family-owned sports and fitness center may be one of the largest assets in your marital estate. As a result, it is essential for both spouses to know and understand the exact value of their business when contemplating divorce. Simply guessing at the value or using rules of thumb, or having someone who is not an expert in the sports and fitness industry could result in a valuation that is either way too high or way too low.
That’s where Sports Club Advisors can help. As experts in the sports, fitness and leisure industry, we offer a wide range of business valuation services to spouses contemplating divorce, including a Calculation of Value, a Broker’s Opinion of Value, a Section 59-60 Valuation, and Expert Witness Testimony.
Calculation of Valuation
A Calculation of Value is a detailed financial model that estimates the fair market value of a sports or fitness center based on its historical performance, future prospects, and market conditions. The purpose of this valuation is to provide an estimate of value that the parties can use in divorce settlement negotiations. This is the most cost-effective option, but the results from this approach are the same as in the other valuation approaches we use. We use the same financial model and the same valuation practices and principals as in the Broker’s Opinion of Value and the Section 59-60 Valuation, the only difference is we don’t write up a formal report with the results.
Broker’s Opinion of Value
A Broker’s Opinion of Value starts with a Calculation of Value and then adds a cover letter that explains the information we reviewed to prepare the valuation, the methodology we used, and our conclusions. This is often helpful if you need to present the valuation to a third party and you don’t want them to have to interpret a financial model.
Section 59-60 Valuation
A Section 59-60 Valuation is the highest standard of valuation. It gets its name from the section of the Internal Revenue Code that spells out what the IRS requires in a valuation. This standard has been adopted by most courts and is used whenever litigation is required. A Section 59-60 Valuations requires a trained, experienced appraiser to gather, analyze, and report on the financial performance and future potential of the business. This unbiased process removes subjectivity and supports a company’s true value. This is the most expensive option, so we recommend starting with a Calculation of Value or a Broker’s Opinion of Value. We can always update a Calculation of Value to a Section 59-60 Valuation if a settlement can not be reached and litigation is ultimately required.
Expert Witness Testimony
Rich Jackim and Jim Bates, the founders of Sports Club Advisors have a lot of experience serving as expert witnesses in divorce matters involving sports, fitness, and leisure-related companies. We are prepared to present our findings to a court and to explain our process and methodology in an objective, neutral manner.
Why Work With Sports Club Advisors to Value a Sports & Fitness Center?
The valuation professionals at Sports Club Advisors are committed to ensuring you receive the most accurate, efficient, and easy to understand business valuation of your sports or fitness center.
Our valuations are prepared by Rich Jackim (author of the $10 Trillion Opportunity, Designing Successful Exit Strategies for Middle Market Business Owners) and by Jim Bates (Business Valuation for Dummies) who are experts in all areas of business valuations. We are committed to provide you with an intelligent, informed analysis of your business and assure you of 100% confidentiality from start to finish.
Hidden Factors that Affect the Value of a Sports or Fitness Center
Personal Goodwill – Personal goodwill is the value of your business that is the direct result of your personal involvement in the business. The best example of this in a sport and fitness center is when the owner teaches classes or provides private personal training services and had built up a client list of personal clients. If that spouse were to leave and go to work at another fitness studio or training center, it is very likely that many or all of these clients might go with that spouse. The value of the personal “book of business” is that spouse’s personal goodwill. Since personal goodwill is not a part of the marital estate so it is important that both spouses understand whether personal goodwill is present in their business and how much of the company’s value is attributable to personal goodwill.
Term Remaining on Lease – The term remaining on a fitness center lease has a big impact on the business value. It there is not at least 3 years left on the lease a potential buyer will not have enough time to realize a return on their investment, so the value of the business goes down. The same is true if the lease can be renewed but at a much higher rent. The higher rent means lower EBITDA, which translates to a lower value.
Adjusted EBITDA vs Seller’s Discretionary Earnings – Most business brokers value sports clubs and fitness studios based on seller’s discretionary earnings or SDE. SDE is equal to all of the cash flow a company generates. EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization. It reflects all of the cash flow a company generates, less a market-based salary for the owner who works at the club. This is very important if one or both of the spouses work in the fitness center. If you value your fitness center based on SDE you will overvalue it because you are not taking into account the salary a new owner would need to pay to replace you.
Value of Intellectual Property – Some health clubs and sports-related businesses have built up a valuable portfolio of intellectual property that is not reflected on the balance sheet or income statement. For example, we sold an organizer of professional kickball tournaments about a year ago. They hosted 10 professional kickball tournaments around the country each year and they videotaped each game as well as the national championship. Kickball enthusiasts from around the world would then sign up and pay a monthly fee to have access to watch these games. About 50% of the value of this business came from the EBITDA it generated, but the other 50% came from the revenue potential represented by this video library and licensing platform. If your fitness center has developed a proprietary app or training program, it may represent significant value that is often overlooked.
Membership Trends – To accurately value a sports or fitness center it is essential that the valuation expert look at membership trends to understand membership attrition rates, membership dues trends, changes in membership types, and other key membership data. Clubs with high member retention rates and increasing dues trends are much more valuable than a fitness center that has 50% membership attrition and is having to lower dues to try to attract new members.
Competitive Analysis – The value of any business, including a sports and fitness center, is based on the expected future performance of that business. As a result, a valuation expert should look at who the center’s competitors currently are, and what competitors are opening up, to understand what impact, if any, the changes in the competitive environment may have on the future performance of the business.
Market Area Analysis – The value of a fitness center or sports club is directly related to the demographics of its local market area. As a result, to get an accurate valuation of your fitness club, the valuation analysis must determine what changes if any are likely to occur in your market area. Is a large new employer moving into the area? Is a developer building a large new apartment complex in the area? Any material changes to the demographics in your market area can have a big impact on the value of your fitness center.
If you own a fitness center or sports club and are contemplating a divorce, you owe it to yourself to seek competent, qualified advice from professionals who understand the sport, fitness and leisure industry.
Contact us today to learn more about the valuation process.
Selecting the right damages expert witness can make or break your case. Knowing how to pick the right expert is key to obtaining a successful outcome.
Choosing the right expert for a litigation matter goes beyond just checking that the person has the right credentials to act as an expert on financial damages. It is equally important that the expert can connect with the judge or jury, and educate them about how the available data and other information supports your client’s position.
Know What Skills Your Expert Witness Must Have
Expert witnesses are often referred from one attorney to another, however, when you need an expert with a very specific skill set, like expertise in business valuation and mergers and acquisitions issues related to the sports, fitness and leisure industry, clients and law firms do research to identify potential experts.
When picking an expert witness it is critical that you and your attorney know exactly what skills you want your expert witness to have. Richard Jackim, the Managing Partner at Sports Club Advisors, is a former mergers & acquisitions attorney and an experienced investment banker who has been involved in over 25 mergers and acquisitions in the sports, fitness and leisure industry, has performed over 90 valuations of sports & health clubs, fitness centers, and boutique fitness studios, and is familiar with franchise agreements and the world of franchising. Jackim earned his law degree with honors from Cornell University Law School and his Master of Business Administration with honors from the Kellogg Graduate School of Management at Northwestern University. Rich also developed and taught the Certified Exit Planning Advisor program offered through the Booth School of Business at the University of Chicago. A copy of his expert witness curriculum vitae is available here.
In addition to the right credentials, an effective expert witness must be able to communicate in a clear, concise, and articulate manner. He must come across as knowledgeable, accessible and self-assured, but not condescending. The ability to build rapport with the judge and jury is essential; and when both sides present a strong, technically sound case, a jury often favors the side whose expert was able to communicate the issues more clearly or convincingly. To that end, we offer clients and their attorney’s a free, one-hour initial assessment of their claims so they can determine if our approach and communication style meets their needs.
Richard Jackim is a personable and knowledgeable expert and has a unique ability to present complicated issues in a clear and concise manner that connects with judges and juries.
Credibility is Key
An expert must also be polished and unflappable in the face of tough, sometimes seemingly stupid questions from opposing counsel. An expert witness must be able to answer questions about his background and experience to withstand a Daubert challenge. It’s critical for the attorney to have an upfront conversation with the expert to ensure they are of good character; have worked for both plaintiff and defendant; learned of any positions they may have taken that are adverse to the position taken in this case, whether through testimony or through publications of an article; and whether they have been Dauberted.
Richard Jackim’s top-tier academic credentials, plus his 30 years of business experience including practicing mergers & acquisitions law, and leadership positions at several leading investment banking firms, provides him with unique qualifications as an expert witness. His opinions are based on market realities and actual transactions, not just financial theories. As a result, he can speak to industry best practices and what is “market”.
An Expert’s Experience = Your Advantage
It’s also important that you select an expert witness who has experience testifying in a courtroom or providing deposition testimony. This experience enables them to have a clear understanding of the moving parts of a case, gives them an advantage by being able to understand how litigation and depositions work, allows them to anticipate the kinds of questions opposing counsel might ask, and helps you and your attorney understand the key weaknesses in the opposing expert’s presentation.
Richard Jackim has consulted on over thirty-two different litigation matters, testified in six depositions, and provided expert witness testimony in two trials. His experience as an industry expert and as an expert witness helped the parties settle thirty matters without the need to go to trial. On the two matters that did go to trial, Jackim’s clients won both matters on the merits, with the judge stating in one case that Jackim’s testimony was clear and convincing and could not be refuted by the opposing expert witness.
Areas of Expertise for Sports Businesses & Health and Fitness Centers
- Business Valuations
- Financial Damages (lost revenues & profits)
- Valuation of Membership Lists
- Valuation of Personal Goodwill
- Earnout Disputes
- Lender or Creditor Disputes
- Shareholder Disputes
- Buyer & Seller Disputes
Engage An Expert Witness as Early as Possible
For these reasons, we encourage clients and their attorneys to contact us as early as possible. Early collaboration provides us with an opportunity to help you and your attorney to discuss strategy. Ideally, we would be engaged early enough to assist in formulating requests for discovery. As a well-versed damages expert, Jackim knows what information is needed to ensure a thorough and supportable analysis. In addition, engaging us early in the process allows time to think through the issues and help you and your attorney develop the most cost-effective strategy to present your case.
In the event we find we cannot support your position based on the information provided, knowing this early on can give you time to either revise your strategy or find a different expert. Remember, unlike attorneys who are advocates for their clients, your expert witness should be a neutral, third party whose opinion is objective and unbiased. Jackim has built an impeccable reputation by providing clients with honest, objective, advice based on the available facts and his years of industry experience.
As an experienced damages expert, Jackim is familiar with recent case law in the subject area, as well as the best health club and fitness center business practices and mergers and acquisitions norms. He understands his role and can be the deciding factor in your case if you choose to use his knowledge, experience, and credentials. For a free initial consultation, please contact Richard Jackim at firstname.lastname@example.org or at 224-513-5142.Read More
Key Performance Indicators Essential for Fitness Club Success
At IHRSA 2016, Daniel Gonzalez, chief financial officer for Universal Athletic Club, shared his thoughts on how to use key performance indicators (KPI’s) to drive success for fitness clubs.
Gonzalez gave several reasons to define and monitor KPI’s as a club owner or operator:
- Define a clear path for your organization
- Clarify performance expectations
- Manage more objectively
- Focus your staff’s attention on what is really important
- Run more effective meetings
- Hold staff accountable
As a club owner, it’s important to keep two specific key traits in mind when understanding KPI’s. KPIs need to be actionable and results-focused
In order to develop the most effective KPI, Gonzalez stressed the need to identify the primary business goal or result you want your club to achieve. Every staff member should have an ongoing quantitative KPI or two and be able to answer the question, “Did I have a productive day or week that helped the club achieve this goal?”
Gonzalez offered five characteristics of key performance indicators.
Simple: Need to be both comprehended and measurable. KPI needs to prompt decision.
Aligned: KPIs need to be developed from overall strategic goals of the organization and translated into actionable daily operational tasks.
Relevant: Applicable to respective decision makers within various levels of the organization or department.
Measurable: To analyze positive and negative variations from a goal.
Achievable: The goal of each KPI should be reasonable and attainable or else it may negatively impact team morale.
Timely: Should be monitored and reported on a regular basis via a dashboard or other method.
Visible: Goals are achieved more readily if staff members are aware of KPI’s and progress towards goals.
Gonzalez suggests that a fitness club’s KPIs, should revolve around three goals:
Attract: Gain new prospects
Sign: Acquire a new member
Retain: Create loyal members
Sports Club Advisors knows that key performance inducators are an essential component of building the value of every fitness club. Contact us if you are interested in developing a value enhancement strategy for your sports and fitness facility.Read More
How do you maximize the value of your fitness club or business? What’s the difference between a club worth $150,000 and $1,500,000? Health, fitness and sports clubs and related fitness businesses typically sell for between 3 times and 6 times their cash flow. That’s a big range, but where you fall in that range is up to you.
In order to maximize the value of your club or business, remember that there are three basic categories of factors affect the value of a fitness club or business: return on investment, risk profile, and growth prospects.
Return on Investment
Buyers look to the cash flow of your business or your Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) to see what kind of pay back they will get on their investment. As a result, if a buyer offers you 4 times EBITDA for your club, they are basically saying that it will take them 4 years before they will recouped the purchase price and begin seeing a return on that investment. As a result, doing whatever you can to improve your cash flow or profitability will have a multiplier effect when you sell your club or business.
The risk profile of your club club or business is largely subjective and based on the buyer’s impressions. Their impression of risk directly affects how long they are willing to wait before they see a return on their investment. So, if your club has a higher than average risk profile, buyers may only be willing to pay you 3 times EBITDA, because they are concerned about the long-term prospects of your business.
Here is a list of some of the factors that buyers look at to determine the risk of a particular business:
- Are the long-term and short-term trends in revenues and earnings positive or negative?
- Is total membership stable?
- Are financial statements complete and accurate ?
- Is operating data presented in a clear and concise way?
- Does the business have an experienced management team willing to stay on after the sale?
- Are margins at least equal to industry averages?
Buyers are basically buying the future performance of your fitness club or business. As a result, to maximize their return on investment they want it to be bigger and more valuable when they decide to sell it years in the future. As a result, buyers will try to project how they could grow your business once they own it. Help them see the growth possibilities by understanding the following:
- What are the prospects for increasing overall membership?
- How successful would we be in introducing new programs?
- What other sources of revenue could this club or business generate?
- Could we grow by acquiring other clubs in the area?
- How much would it cost to expand or enhance the club’s current facilities?
Small changes you make today can have a huge impact when you decide to sell. Contact Us if you would like to learn more about how you can maximize the value of your sports club or business.Read More
Finding a great sports and fitness club or business to buy is a lot hard work. Most buyers review dozens of deals each month, and many buyers will evaluate hundreds of deals before they find a club worth acquiring.
Part of the challenge is that there are far more buyers than sellers of quality clubs. Consider this: Sports Club Advisors has over 2,000 registered buyers who want to receive notices when we have a new opportunities for sale, but in most years we only bring 6-10 new clients to market each year.
The problem is not just limited to a lack of sports and fitness club businesses for sale. Buyers routinely complain about how hard it is to find a transaction that is worth pursuing. Common complaints we hear from buyers include:
- Unrealistic expectations of value on the part of sellers
- Inaccurate or incomplete financials or operating data
- Hidden liabilities like unresolved member complaints or improper payment of independent contractors
Given these challenges, how can you increase your chances of finding a great sports or fitness club to buy? Here are six tips to help you with your search.
Tip 1: Develop Clear Criteria
The best buyers act quickly. With so many buyers looking, and so few quality deals coming to market, you need to make decisions quickly. To speed up your ability to evaluate the deals, put together a clear list of your acquisition criteria. This list will act as your guide to help you determine which deals are worth pursuing and which deserve a quick pass.
Putting together a clear, well-thought out list of acquisition criteria will take some time and effort.
Your acquisition criteria should be your objective guide to evaluate opportunities, but you should always apply a subjective element to your evaluation as well. This should be your basic “gut check” about a business. If the business meets your objective criteria, do you like and trust the owners? Do you like and trust the staff? Do the members and clientele seem reasonable? If you decide you do not like a business for some reason, offer the seller or broker quick feedback and move on.
Tip 2: Register with Online Marketplaces and Brokers
There are many ways to find fitness clubs or businesses for sale, and club brokers represent only a portion of the fitness club or businesses that are for sale. Finding a good fitness club or business for sale is a numbers game. You need to look at as many deals as possible in order to find the perfect acquisition target. Registering with online marketplaces and brokers will provide alerts on any new listings. This will make your daily inspections relatively easy. To register with Sports Club Advisors, simply fill out our Buyer Registration form, and don’t forget to bookmark our Active Engagements page on our website.
Tip 3: Approach Fitness Club or Business Owners Directly
Many buyers limit their search for a sports club or gym to two places: marketplaces and brokerage firms.
However, why not write directly to fitness club or business owners to see if they would be willing to sell their fitness club or business? There are pros and cons to this approach. The pros are:
- You Get Better Deals. Writing directly to club or business owners allows you to reach club or business owners who never considered selling. It’s a numbers game so if you write enough people, you may find a club or business owner who is an absentee owner and no longer actively involved in their club or business. For these owners, selling their club has probably been on the back of their mind and your letter might just incent them to start a discussion with you.
- It Simplifies Things. When you approach an owner directly to buy their fitness club or business, it makes it simpler for the owner. He doesn’t have to hire a broker or try to sell it himself. He doesn’t have to worry about the club being “on the market” and having his employee find out. In addition, a direct transaction is often more relaxed and focused on creating a win/win transaction.
- Less competition. Sports Club Advisors has over 2,000 buyers actively looking for a fitness club or businesses to buy, but we only bring 6-10 clients to market each year. So when you do look at a good listing, from a broker you are likely competing with dozens of buyers. When you approach someone directly, you usually have the luxury of less competition.
However, contacting club or business owners to see if they would be interested in selling has it downsides too. Here are some of the cons:
- It is a numbers game. Many of the buyers we’ve worked with report several challenges, beginning with getting a good list. Buyer often say that it takes them weeks to put together a list of targets that they think will fit their acquisition criteria. Since a good response rate is between 1-3% depending on whether you call or write, that means you will need to call or write email 100 people just to get 1-3 responses. Then they need to find the time to call or send letters to 200-300 potential targets and then find the time to follow-up with each of them a month later.
- Rejection is Part of the Game. Because the response rate is between 1-3% that means that 97-99% of the owners you contact will simply ignore you. The polite ones might respond by telling you they are not interested. The less polite ones will yell at you and tell you not to bother them.
- Opportunistic Sellers are Poorly Prepared. When you find an opportunistic seller he or she will typically not be prepared. They may not have financial statements and operating data prepared, reviewed and ready to be shared. This can drag out the process and you may find yourself investing a lot of time and energy to collect the information to review only to discover months later that the opportunity does not meet your acquisition criteria.
- Sellers may be unrealistic. When you approach a seller unsolicited, it naturally puts them in the “driver’s seat”. As a result, a seller may have no idea what their club or gym is worth and as a result may pull a number out of the sky, or figure the club must be worth enough to allow them to retire. Either way, even if the club meets all of your other criteria the seller may have unrealistic expectations of value that you cannot change.
Tip 4: Network, Network, Network
Wouldn’t it be nice if deals just came to you? Well, they can if people know are seriously interested in buying a fitness club or businesses and you have the money to do so. The best way to get known as a serious buyer is to network within the industry.
Conferences and networking events are a good way to meet many people and get the word out, but it can be expensive, especially if you are traveling around the country. Instead, we recommend that you network by telephone and email with a targeted list of industry leaders. Send them your acquisition criteria. Tell them how much money you have to invest and the source of your capital. Then stay in touch with them on a monthly or quarterly basis to update them on your search.
Tip 5: Hire a Merger & Acquisitions Advisor to Help You Source and Evaluate Deals
As previously mentioned, finding the right deal is a volume game. You could easily spend most of your time reading through email notices, browsing online marketplaces, and networking. Rather than spend your time doing this, you might find it simpler to hire a club broker or mergers and acquisitions advisor to conduct a buy-side search for you. Follow the tip above and develop a criteria checklist. Then hand this list over to the club broker and have them find deals for you. They can either run a “passive” search or a “pro-active” search for you. In a passive search, they will screen their prospects and active clients, sort through notices and online marketplaces and contact you when they have something that they think might interest you. In a pro-active search, they will do the above, but also pro-actively reach out to club owners on your behalf using a combination of letters, emails and cold calls to find opportunities for you that meet your acquisition criteria.
Tip 6: Always Explain Why You Are “Passing”
Because buying a club or business requires evaluating lots and lots of deals, you’ll likely make a few mistakes along the way. One mistake many buyers make is to dismiss a deal based on a misunderstanding of the business. If you mistakenly pass on a good opportunity it could take months to find another good club or business. The best way to avoid this mistake is to always tell the broker or seller why you are passing or not pursuing a particular business. Not only will the seller or broker appreciate the feedback (brokers will often give preference to buyers who give regular feedback), but if you are mistaken, you’ve given them the ability to help correct any misconception and could save you a lot of time and aggravation.
Finding a great club or business to buy is a numbers game, but it is also about being smart and designing an intelligent search and using the right resources to help you identify and evaluate deals properly. Most importantly, be patient. It can take 6-24 months to find a quality club or fitness facility for sale, but when you do, you’ll be glad you did.Read More