Finding A Buyer
I recently wrote an article about how and when to sell your gym. It covered the basics about the topic but there is so much more information out there that it’s likely something that I’ll revisit a few times. There are many motives behind selling, from fast exit to slowly easing into retirement.
Most likely, you love your independent gym business and it’s prospering. But it’s hard work and there are other worthy things that you intend to achieve before you settle into retirement. Or perhaps the time to retire is approaching.
Even if that day is way off in the future it’s a good idea to have contingencies and to be aware of the process of exiting your business, before fate forces your hand. Being aware of your options and having an exit strategy on standby is essential in any business.
Family Friends And Acquaintances
The first question is most likely going to be: Who is it that you can sell to? Do you have a partner or smart manager worth grooming to take over? You may have someone in mind that would be ideal to take over or purchase your business. This might be a key employee, the whole management team or even an outside buyer.
Is there a family member who would be a good fit to take the business forward? Can you arrange a buyer from the local business community or the industry? Each one of these cases has a different set of specific requirements and hazards to navigate to get from owner to satisfied seller. You need to get professional advice from your attorney or tax advisor before you start down this path.
There is the also the somewhat important issue of how your buyer will find the funding. The person that you most trust to be a responsible caretaker for your life’s work may not be able to come up with the sort of funding that will give you the sale price that your hard work and diligence deserve. If you have been operating for years and have a following that brings you good revenue each month you may need to see a large payout to justify selling.
You may choose to sell your interest in stages as the buyer earns the income and becomes more at home in the role. You become the financier and in return you receive an income until the balance is paid. You might sell large chunks of interest year by year or carry a note for the balance beyond the initial deposit. This will give you income but you risk having to recover your interest by foreclosure and then rebuilding it to sell, all over again.
You might have an asset that is worth six or seven figures or more by the time you sell so your buyer might want to take on partners either as investors or as an investment syndicate in which the buyer controls the business but shares the profits.
Syndicates And Private Equity
Many of the larger transfers of gym ownership in the past year have been to private equity investors or syndicates. A syndicate is simply a partnership of investors that have pooled their equity to be able to invest in larger assets. The structure is usually centered on an active general partner, who has the control and leadership responsibility, and passive limited partners who share the risk and reward.
Private equity Investment funds are just big syndicates that put their cash into private companies in return for controlling shares. It’s a little like flipping a house. You buy a rundown house in a nice neighborhood, fix it up and sell it on to someone who wants to live there or to hold as rental investment. Similarly, private equity funds buy up floundering companies that have assets and market potential, clean house and sell to investors who want the income.
Telling Your Business You Are Selling
When you make choices that impact the livelihoods of your employees they tend to get nervous fast. If your key staff members jump ship because they feel unsafe or threatened you could lose sale value quickly. So you’ll need to break it to them gently and with reassurances that they are secure in their jobs. The sort of hard-nosed investors you’re likely to encounter in the private equity market can smell panic a mile off, they will either drop their price or pull out of the deal altogether.
There is a time to work hard and a time to sit back and enjoy the rewards of your labor. When you have spent years working hard on a business you deserve to get the highest value in return for selling. It’s part of the normal course of business ownership. By thinking ahead and being aware of your future options you prepare to ultimately negotiate a final sale from a position of strength.
Bibliography
Administration, U.S. Small Business. Transfer Ownership. https://www.sba.gov/content/transfer-ownership (accessed January 26, 2015).
Dai, Shasha. Gym Clubs: The Latest Gold Rush For Private Equity? 16 January 2013. https://blogs.wsj.com/privateequity/2013/01/16/gym-clubs-the-latest-gold-rush-for-private-equity/ (accessed January 26, 2015).
Fagan, Lawrence. The Best Time To Sell Your Gym. 10 November 2014. https://blog.gyminsight.com/2972-sell-your-gym/ (accessed January 26, 2015).
U.S. Internal Revenue Service. Closing a Business Checklist. 12 January 2015. https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Closing-a-Business-Checklist (accessed January 26, 2015).