#442: 10 Ways to Make Your Gym More Valuable

Most gym owners have no idea what their gym is actually worth, and the scary part is the number they think they'd get if they sold tomorrow is probably way off. So today, I'm gonna walk you through the 10 factors that determine what a buyer would actually pay for your gym, and why two gyms doing the same revenue can sell for completely different prices, and what you could do right now to make yours worth a lot more. So here's a real scenario that plays out more often than you think. You got two gyms, same city, both doing a million dollars a year in revenue. One sells for 1.2 million, and the other can't find a buyer. Same revenue, completely different outcomes. And most gym owners have really no idea why, but Shark Tank actually has a little bit to blame here. Uh, people watched that show for years and walked away thinking valuation is just really some multiple of revenue. So they chase more members and more locations and bigger top-line numbers, and then they go to sell and wonder why the offer they get is nothing close to what they thought it would be. My name is Mike Arce. I own several gyms myself, and through GSD gyms, we've worked with over 4,400 gyms and fitness studios across 13 countries, 60 franchise brands, and hundreds of independent brands. And I've seen gyms sell for way more than their revenue would suggest they're worth, and I've also seen gyms that look great on the surface struggle to get even an offer at all. The difference almost always comes down to the same 10 factors. And even if you have no plans to sell, everything I'm about to cover will also make your gym more profitable and easier and more fun to run, so pay attention either way. Factor one: profitability and EBITDA. So let's start with the one that matters most because everything else gets built on top of that. Buyers don't buy revenue, they buy profit. Specifically, they look at something called EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization. Strip away the accounting language, and it basically means what does this business actually make? A gym doing a million dollars in revenue with 10% margins is a very different business than a gym doing 800,000 with 25% margins. The second one is worth more, significantly more. Because a buyer isn't buying your top line, they're buying what ends up in their pocket after everything gets paid. 15% margin is considered decently healthy in this industry. 20% is pretty good. 25% is above excellent, especially if that already accounts for a real manager on payroll. And that's where a lot of owners mess up. Many gyms look more profitable than they are because the owner isn't paying themselves a real salary. They're doing the work of the general manager, the sales rep, a coach sometimes. Uh, none of that really shows up as a business expense. So when a buyer looks at those numbers, the first thing they do is figure out what it would cost to replace you. And if adding that back tanks the margins, the offer drops accordingly every time. Factor number two: predictable recurring revenue. Predictability is what makes a buyer willing to pay a premium. Monthly memberships on autopay are the gold