Obtain a Gym or Fitness Facility Business Valuation
Determining the true value of a gym or fitness facility requires conducting thorough pre-offer due diligence, typically using multiple valuation methods. The most common approach involves calculating a multiple of EBITDA (earnings before interest, taxes, depreciation & amortization) or SDE (seller discretionary earnings), which usually falls between 3-4 times EBITDA for medium-sized fitness businesses or 2-3 times SDE for smaller operations under $650,000.
To validate these initial calculations, you'll need to determine asset valuation by evaluating both tangible assets (equipment, facilities) and intangible assets (brand recognition, customer base). Additionally, you should identify comparable transactions of similar fitness facilities in your target market.
Submit a Conditional Offer to Purchase or a Letter of Intent (LOI) Agreement
When you're ready to move forward with purchasing a gym for sale or fitness facility, you'll need to carefully consider whether to structure the deal as an asset sale or share sale, while potentially requesting partial seller financing to make the transaction more manageable.
During this phase, it's essential to review all operating licenses and permits to ensure compliance and transferability, as these documents will significantly impact your ability to continue operations seamlessly after the purchase.
You should also begin drafting a thorough seller training and changeover plan that outlines how the current owner will help you learn the business operations, transfer key relationships, and maintain continuity during the ownership change.
Asset Sale vs. Share Sale Considerations
Fitness business acquisitions typically involve two main transaction structures: an asset sale or a share sale. Understanding which deal structure best suits your situation is indispensable, as each option carries distinct implications for liability, taxation, and operational continuity.
- Asset sales allow you to select specific equipment, contracts, and other assets, leaving behind potential liabilities or problematic elements of the business.
- Share sales transfer ownership of the entire corporate entity, including all assets, liabilities, and existing contracts.
Tax implications differ dramatically between “asset sales” and “share sales,” with sellers typically preferring share sales for better tax treatment. Asset type considerations become particularly important when dealing with equipment-heavy fitness businesses, as depreciation and maintenance histories transfer differently under each structure.
When evaluating these options, you'll want to work closely with your legal and tax advisors to determine which structure aligns with your investment goals and risk tolerance.
Request Some Partial Seller Financing
Through seller financing, you can structure a more affordable acquisition by having the gym's current owner act as a lender for part of the purchase price. When you request partial seller financing, you'll typically need to make a substantial down payment with bank financing, often 70-80% of the purchase price, while the seller carries the remainder as a loan with agreed-upon interest rates and repayment terms.
The terms of partial seller financing should be carefully negotiated and documented in your purchase agreement, including the loan duration, interest rate, payment schedule, and any security arrangements. This financing approach reduces your initial capital requirements and demonstrates the seller's confidence in the gym's future performance and their willingness to maintain a vested interest in its success during the changeover period.
Review the Gym or Fitness Facility Operating Licenses & Permits
A thorough review of these documents will protect your investment and guarantee smooth business operations after acquisition.
- Municipal business licenses and occupancy permits that confirm the facility meets local zoning requirements and building codes.
- Health department certifications for proper sanitation standards, especially for facilities with pools, showers, or spa services.
- Environmental regulations compliance documentation, including proper disposal of cleaning chemicals and maintenance of HVAC systems.
- Professional certification records for personal trainers and fitness instructors, along with liability insurance coverage.
Maintaining proper licensing not only keeps you compliant with regulations but also demonstrates your commitment to running a professional, safety-focused facility that members can trust.
