4 Things You Need to Know When Buying a Fitness Business

Buying a fitness business is a major financial outlay, so you want to ensure you (the potential purchaser) make a smart purchase that delivers what was promised, and without any unpleasant surprises down the line. These four tips can aid a regret-free purchase:

  1. Check for ‘skeletons in the closet’:
    1. The last thing you need when you buy a business is to encounter an unexpected drama, such as claims that the branding infringes someone else’s trademark.
    2. You should (definitely) ask the seller if any potential issues have been disclosed before purchasing the business.
    3. However, the seller may not necessarily be very forthcoming with information that might dissuade a potential buyer.
    4. What you should do is have a verbal conversation (and not just via email) and make sure it is backed up by appropriate ‘warranties’ in the contract, which should provide some protection you in case the business ends up being different from expected.
  2. Ensure that appropriate restraint of trade obligations are in place:
    1. Restraint of trade obligations are clauses in a sale contract which ensure the seller promises to step away and not interfere with the business once the ownership changes hands.
    2. Interference can materialise in a number of forms. For example:
      1. The seller could set up a competing business down the road;
      2. They could try to poach staff; and/or
      3. Contact members and try to get them to transition to another business.
  3. Establish exactly what you are buying:
    1. When purchasing a fitness business, you need clarity on precisely what you are buying rather than assuming what is or is not included.
    2. Gym equipment, for example, may be included in the sale but it turns out the equipment is not owned outright by the seller. This would change how much you are willing to pay for the business.
    3. Knowing exactly what you are acquiring includes things like the social media account(s) and website(s), which you should ensure are transitioned across.
  4. Know the terms of the premises lease:
    1. Rent is one of the most significant costs in operating a fitness business, so it pays to be up to speed on the terms of the lease that is being transferred to you.
    2. This might include a contractual annual increase every year or there might be obligations to pay broad outgoings.
    3. For example, if the gym is based in a shopping centre or leisure park, you will want to understand the terms and conditions of the lease.
    4. The good news is that buying a business presents the opportunity to negotiate variations to the existing lease. You may decide that you are not happy about the annual increase to rent and request a variation is made.

Buying a business is about negotiation and reasonable access to relevant issues/information that may affect your decision to purchase. Potential buyers may also need to consider any local authority or regulatory issues that may impact on a business. Due diligence is important, do your homework and ask questions.

Advertisements
Advertisements

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.