The rise of the fitness industry is on speed. Gyms are coming up with new ways to keep their customers hooked on their services, and the competition is becoming more fierce than ever.
In the race to become the best gym in the market, your business game should be strong. Let’s keep it real: no business is done without interest and profits. A business profits when all of its services align with market needs and trends. So, it’s important to have technical insight into your gym’s valuation to stay ahead of the competition.
Whether you grow your gym or sell it in a few years, keep two things in mind. It needs to be in the best condition so that it doesn’t lose its market value and price.
It’s important to keep your focus on your gym’s value and profits. Only then can you call yourself a true business owner. So retake a look at your gym and find the loopholes to fix. Where and how to manage it better, for more profits? Now look along here and read about gym valuation.
What is gym valuation?
A gym’s total value.
It means checking all factors and values that affect the profit and growth of your gym business. Consider your gym business a big building with pillars supporting it. The pillars of your fitness business give it support to keep your venture on the ground.
To keep your gym long-lasting, you must determine the factors that affect its worth in the fitness industry.
Importance of gym valuation
Every business needs a check and balance. It is important to be aware of your whole gym business and its market value.
This will help you develop a strategic business model to support your gym for growth. You will also know how much investment and funding is required to keep your gym successful. Even if you decide to switch this business, you can sell it to another buyer with the correct market pricing.
Gym valuation will keep you safe from potential business losses and will increase your worth in the fitness industry.
Basics of valuation
The valuation method uses a financial model to determine the value of the gym. It includes understanding your gym business’s revenue, expenses, and profit margins.
Let’s break it down.
Revenue of gym
Revenue is the value of the money your gym earns by providing its services. It includes membership fees, personal training, retail product sales, and extra services.
Cost and expenses
It includes the expenses spent on the gym and its services.
Profit margins
It is the estimated value of your business’s profit from total earnings.
Valuation methods
It is always good advice to hire a professional or finance broker to perform valuation for your business. Here are 4 common methods of gym valuation:
EBITDA method
Let’s break down this weird term first.
E= Earning
B= Before
I= Interest
T= Taxes
D= Depreciation
A= Amortization
It represents the value of your gym in the market and its cash flows. Both are related to asset value and earning potential. The model also discusses business multiples. Then, the value of other business multiples, like location, liabilities, and growth, is added to the above values.
Don’t know where to look for these values? Open your gym’s financial statements, use an EBITDA calculator, or consult a broker. And your gym’s value will be right in front of you.
Asset-based method
For this one, you only need two things: total asset value and total liabilities.
It’s one of the simplest methods of business valuation. It works like this. Subtract the value of total liabilities from your total assets, and the valuation is clear to you.
Discounted cash flow method
This is a bit tricky. Try to focus and understand this one.
This method brings out the value of your gym’s expected cash flow in the future. Like in 3 to 5 years, how much more revenue your gym would earn based on your initial investment? To calculate the expected cash flow in the future. You need:
The initial investment value
An appropriate discount rate
The market method
The most common and easiest method of evaluation after EBITDA is the market approach. If you are looking for an easy option, just pick this one.
This method resembles the real estate rule.
Do thorough research on gyms sold in your nearby areas. Their selling prices will give you an idea of how much your business is worth. How can you fix this value based on further specifications of your gym as compared to others?
This will give you an estimated value of your gym in the market.
10 factors to focus on to boost your gym valuation
To understand what affects your gym valuation and how to fix it, consider the following factors:
Retention rate
Membership numbers are very important for gym businesses. Every member brings their own share of money to your gym; the more members, the more revenue.
Keeping a good retention rate in your gym is a constant effort. It’s essential to set a goal of maintaining a good membership number for your gym’s growth.
Equipment investment
People spend their precious time visiting gyms and developing a fitness routine. They are not here to wait or feel unsatisfied by bad equipment performance. You don’t want to give them a bad experience, right?
So invest in your gym equipment with a big heart. Properly operated equipment and extra machine numbers will never disappoint the customers. Moreover, keeping your equipment in good condition will not downgrade the gym’s value.
Proper liabilities and long contracts
If we talk about selling the gym at a good price, then put your focus on the legal side of the business. It is obvious that a buyer would be more interested in purchasing the property if the process is clear. If your gym is fully protected and has a long lease period, the sale is closed easily.
Comply with your gym’s insurance requirements and put a long lease period on your gym property. This will give the buyer complete confidence in his decision.
Addition of service
To increase your gym’s value, increase its value in customers’ lives. Think of new ways to help and serve your members to keep them happy.
Take a paper and think of the things to sell at a gym. What comes to your mind? Here are some suggestions:
Unique fitness services
Just imagine how wonderful it would be if your gym were not just a big exercise pod. But had something more to offer, like a fitness class, personal training sessions, spa, or sauna. The choices can go on and on.
Of course, this setup would require a lot of revenue. But slowly, with the right strategy, you can reach that status.
Food items
If customers have low energy at the gym, give them healthy snacks and drinks to boost their energy levels. It would be wonderful to sell items like protein bars, protein shakes, energy drinks, reusable water bottles, and energy bars.
Fitness products
To be more helpful, consider going the extra mile. Sometimes, members are searching for best selling gym products. Search for it, and you can benefit from their query.
You can also put fitness products to sell online on your website or app. Allowing them to avoid the hassle of making long purchases. They would bring their dumbbells directly from your gym.
Branded merchandise
Branded merchandise is quite expensive, but it would benefit you greatly if you used it. Make your own branded T-shirts, tank tops, and gym bags to increase your gym’s value.
New locations
Location matters a lot in the business world. Think of a fancy restaurant on a busy boulevard. That’s where your location brings more customers to your business.
Now, gym location is also important. If it were located in a prime location, its selling chances at a good price would increase. A good location provides better future opportunities and increases the worth of your gym.
Even if you want to open a new franchise for your gym, always pick the best location possible.
Partnerships
When partnerships have never proved successful?
Some partnerships with health brands and organizations will increase your gym’s worth. Members will know your collaborations in the fitness industry. It will increase their trust in your gym.
Branding
Branding goes a long way in the journey of a business.
Keep your gym active on social media and websites for customers. Without a robust online presence, how will anyone know your gym is more special than others?
Develop a strong branding strategy to make your gym their first choice.
Industry trends
Nowadays, trends come and go at the speed of light.
Every day, new events occur on the internet, new memes pop up in our feeds, and a new trend emerges.
Keep an eye on trends and think about how you can shift your marketing to follow them.
Trends also change people’s views and preferences. It’s important to know what people expect from your gym and equip it with the right products and practices.
Flexible memberships
People’s choices have changed with busy lives and time. They look for easy and flexible options in everything.
Gyms need to reconsider their membership plans. People are now looking for more revolutionary options like pay-as-you-go and dynamic membership. But this doesn’t mean you should omit your typical membership plans. It is just an extra effort to be more flexible for your customers.
Market analysis
Market analysis is always important for your business. It is a fair practice to be aware of what is happening in the market. The new trends and how your competitors operate their gyms.
Checking your rivals and how they run their business will always benefit your gym.
Wrapping up
Gym valuation is essential for your business’s growth. Putting efforts to grow with more services and better solutions is the right direction. Otherwise, your gym won’t last long in this competitive fitness industry.
Gym valuation will keep you at the top for a fair market value.
Keep your gym strong and long-lasting with a solid business model and unique services. Keep learning more about these strategies and test them for real-time gym valuation.