What’s My Fitness Club or Gym Worth? – Simple Rules of Thumb
Thinking of selling your fitness club or gym? The first question most business owners ask is, ‘How much is my business worth?’
Most businesses, including health clubs, fitness clubs, and gyms, are valued based on a multiple of the cash flow they generate. This cash flow is often referred to as earnings before interest, taxes, depreciation, and amortization (EBITDA).
These rules of thumb are used by business brokers, buyers, and lenders to get a ballpark idea of the value of a fitness club or gym.
| EBITDA | SELLING PRICE |
| 0 – $50,000 | 1.0-1.5 times EBITDA |
| $50,000 – $150,000 | 1.5-2.0 times EBITDA |
| $150,000 – $250,000 | 2.0-2.5 times EBITDA |
| $250,000 – $500,000 | 2.5-3.0 times EBITDA |
| $500,000 – $1,000,000 | 3.0-3.5 times EBITDA |
| $1,000,000 and up | 3.5-5.0 times EBITDA |
Updated 7/1/2019
The selling price includes all the equipment, fixtures, and other assets necessary to run your club or gym. If you own the real estate and want to include it in the transaction, you would add the fair market value of your real estate to the asking price for your club or gym.
How to Calculate the EBITDA of your Fitness Club or Gym
To calculate your club’s earnings before interest, taxes, depreciation, and amortization (EBITDA), start with the profit shown on your P&L statement or tax return. Then, add back interest, depreciation, and amortization. EBITDA is the starting point for any business valuation, so it’s a good number to track annually.
Don’t Leave Money on the Table When Selling Your Fitness Club
Using valuation rules of thumb will give you a rough idea of what your club or gym is worth. However, a word of caution: these rules don’t account for the unique characteristics of your club and are often inaccurate, resulting in either too high or too low a value. To get an accurate idea of your club’s worth, the valuation needs to consider factors like past performance, future prospects, projected growth, and more. Additionally, business ownership comes with perks such as paying yourself an above-market salary and offering perks and expenses that a new owner may not incur. The value of your fitness club also depends on factors like historical growth trends, margins compared to other clubs, and lease terms, including the remaining term, rent escalation clauses, and renewal terms. Therefore, it is important to work with an objective third party to evaluate what adjustments can be made to your EBITDA to truly reflect the operating cash flow of your business.
To get an accurate valuation, talk with a business broker or M&A advisor who specializes in representing health clubs and gyms. They will work with you to make the appropriate adjustments to your EBITDA, evaluate your lease, and value your gym properly so you don’t leave any money on the table when you sell.
Contact Jim Bates or schedule a call if you want to discuss the future of your fitness facility; or, if you would like a free valuation for your sports or fitness facility, get our Free Opinion of Value.