Fitness industry veterans share how they approached the daunting task of selling a business.
Several years ago, Nicki Anderson was at a crossroads.
“I was approaching my 50th birthday and knew there was something out there [for me to do] and I wanted to make a positive difference,” says the former owner of the successful and award-winning Reality Fitness in Naperville, Illinois. “The fitness industry is fickle. On one hand, there are great people doing fantastic things to improve the health of the world. However, the average consumer continues to listen to other fitness ‘pros’ selling snake oil and making ridiculous promises. I really wanted to get rid of that perception, but after 30 years of trying, I was tired and it was time to move on.”
Anderson, who is now the president and CEO of the Naperville Area Chamber of Commerce, made the difficult decision to let go of the career she’d held for most of her life and began the process of selling her business.
Like Anderson, some business owners elect to move out of their chosen field in search of fresh inspiration. Others decide that the rigors of running a brick-and-mortar business have become burdensome, while still others plan from the get-go on selling one day. Whatever the reason, if your goal is to sell a business, it’s best to be well-educated before you start the process. Four fitness industry veterans share the steps they took when selling and offer suggestions for those who might follow in their footsteps.
Facing Your Own Fears
Selling a business can be a stressful, arduous, time-consuming task that may require significant soul-searching.
Justin Price, MA, and his wife Mary Bratcher, MA, co-own The BioMechanics Method®, a company that develops and produces corrective exercise education. For years, they ran a successful personal training studio plus an educational division. Although they planned to sell their studio from the beginning, they were initially afraid when it came time to take the leap. They feared they wouldn’t find a suitable buyer and wondered whether life after a brick-and-mortar facility would be financially viable. While they had a thriving education business, they would no longer have the income from the studio.
Anderson had slightly different fears. “I started my business from nothing,” she says. “I spent so much time growing the business that it was like a child to me. The idea of handing it off to someone else who might not love it like I did, or treat my customers the way I did, was scary.”
Assessing Your Business
Once you’ve overcome the fears associated with selling, you must deter- mine whether your business is in good enough shape to appeal to others. All experts cited in this article had built thriving companies that were well regarded in the community, which eased the sales process.
“My studio had a great reputation in town, so I was lucky enough to go out and meet with potential buyers, and many of the people I met with knew my business and had an interest,” Anderson says.
Price and Bratcher were diligent in keeping very clear, high-quality records so that when the time came to sell, the transition would be smooth and transparent.
“Being organized in your documentation is the most important aspect in handing over a business to another owner,” advises Bratcher.
Troy Fontana, who now owns PT Solutions Inc., a management and consulting business in Sparks, Nevada, faced a different challenge. “My name was attached to the original business (I would not suggest this),” he says. “It is difficult for the new buyer to operate a business under another person’s name.”
Before listing his company, Fontana had the name changed to something less personal.
Determining Your Worth
At this point, you’ve already figured out everything that will sell as part of your business. Before you can advertise, you must know how much it is all worth. Fontana suggests considering the following:
Intrinsic value. What is the value of the brand you have created? How is your business seen in the community, and what does that brand add to a buyer’s purchase price?
Material goods. What is the value of your equipment and the tenant improvements you have made?
Continued business contracts. What are these worth? Ongoing business revenue is attractive to potential buyers because they won’t have to open the doors and exert significant effort to attract new customers right away. In other words, you are more likely to make a sale if current clients will honor their existing contracts and remain with the business once it has exchanged hands.
To understand exactly how much her business was worth, Anderson devoted time to researching the issue on the Internet. Her attorney helped her do price comparisons based on her location, the number of clients she had served and her average monthly revenue.
Bratcher also factored in “goodwill,” or signing bonuses, into the selling price. Examples include commissions for referrals, broker fees, and/or buyer incentives such as covering the first month’s lease payment. Obviously, if you don’t need to pay any incentives and are dealing directly with the buyer, you have more room to negotiate price.
To Get Guidance or Go It Alone?
It’s common to hire a broker to sell a business, but all of the sources interviewed for this article opted to go solo. However, they all agree that this may not be the appropriate path for everyone.
Fontana did hire a broker toward the beginning of the process, but the arrangement did not yield any results. Even so, Fontana believes that working with a broker can be helpful. At the very least, a broker will have access to appropriate documentation and offer helpful advice based on professional experience, he says.
"I would start out with hiring a very good business attorney." says Anderson. “Mine helped me through the process, which can be very tedious.”
Bratcher concurs with Anderson. “Seeking the help of an attorney to draft the legal documents surrounding the sale of your business is highly recommended, as is consulting with your business land-lord and your accountant,” she says.
Where Are the Buyers?
Anderson explains that selling a fitness business can be quite a challenge because it comes with such a niche clientele. And as she previously mentioned, she had worked relentlessly to develop a business with a solid reputation and feared that this reputation would be tainted if the wrong hands took over.
When Anderson first started her business, she thought she might hand it off to a family member. When she realized that her kids had no interest in taking it on, she wanted to find a buyer who could do her hard work justice. So instead of going the advertising route and waiting for the fish to bite, she chose to go out and find the fish herself. “I spoke to personal trainers in my area who I thought would be a good fit,” explains Anderson. “I knew I didn’t want to sell it to a chain.”
Bratcher and Price opted to list their business on various Internet sites, including Craigslist. “Our postings online attracted the most interest because they detailed the appeal of the studio (via text and photos) as well as listing the price,” says Price.
The duo also asked the owners of several large fitness facilities to advertise the sale in exchange for a commission on any referrals they generated.
Fontana adds that it’s vitally important to find the right buyer for your space. He admits that initially he was too eager to hand off his business, and he paid for his impatience.
“I was also the landlord, and I had purchased the three commercial units where my studio operated,” he says. “I was forced to pay the rent out of my own pocket for many months because my tenants (the people who bought my business) could not do it on their own.”
Selling a business can be a tricky endeavor. However, with the right resources, guidance and stamina, you can enjoy the many benefits that come with offloading your brick-and-mortar business.
“I was able to take a few years to volunteer in my community,” says Anderson. “And for the first time in years, I didn’t work on Saturdays! That was probably the best part.”
Fontana notes that he is able to spend a great deal of his time with his wife and two children. A third little Fontana is on the way.
As for Price and Bratcher? They’re working as hard as ever doing what they love. “[Selling the business] has freed up a lot of time and enabled us to focus on the corrective exercise education aspect of our business,” says Price.