Selling Your Gym? Why it Might Only be Worth the Value of Your Equipment
In 2017, Nick Sarruda purchased CrossFit South Shore in Hanover, MA for $65,000.
Factoring in depreciation, the equipment alone was worth in the neighborhood of $50,000, he explained, so he essentially bought the gym with approximately 70 members, for just $15,000 more than the value of the equipment.
Sarruda wasn’t willing to pay more than that, because he knew he was essentially just paying for a full-time job—or “buying a project” as he put it.
“It wasn’t an investment. Running this gym would require (full-time) work on my part,” he said. “If the gym was making 20 to 30 percent profit, then maybe it could have been an investment. But if you don’t have that, then as a seller you’re basically just negotiating the assets.”
Thus, he and the owner valued the business based on tangible business assets and $15,000 of “good will,” which included the gym’s existing book of clients, the business reputation and the building lease.
“And then we ended up having to negotiate a new lease anyway, so that didn’t end up helping us,” said Sarruda, who is currently in the process of acquiring a second gym and is hoping to merge it with CrossFit South Shore in the near future.
A Familiar Story
Sarruda’s story is a common one that affiliate owners, and other small gym owners, experience when selling their business: They find themselves negotiating for far less than they had hoped for, often for not much more than the value of their depreciated equipment.
One gym owner we spoke with even purchased an affiliate for $5,000, and others, such as Garth Cooke, were able to do slightly better on their gym sale, but still nothing to write home about.
Cooke sold Forge Valley Fitness in Vernon, B.C in 2019 for three times his annual take home pay. After having owned the gym for seven years and taking home modest pay at best, “when it was all finished, my original investment had been paid back and I got that amount for the sale,” he said.
Against the Odds
Though selling a gym for a true profit is a rare occurrence in our industry, it is possible, said Joe Vaughn and Jason Ackerman, two affiliate owners who sold their gyms for well over half a million dollars.
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