Blog

Buying an Existing Martial Arts School or Fitness Business? 8 Tips to Hit the Ground Running

Are you considering buying an existing martial arts School or fitness facility? It’s essential that you cross all your T’s and dot your I’s prior to pulling the trigger.

Here are eight tips for you to consider so you can hit the ground running.

1) Get comfortable regarding the reason that the seller is selling.

Retirement would be a great reason as they would want the school (and their reputation) to have continued future success. Other reasons that the seller may disclose are: family issues, change in profession, focusing their time on another school location or the like.

Rarely, if ever, would a seller tell you that they are selling because they are losing money. Take every reason they give you with a grain of salt and remember that if everything were peaches and cream then they would most likely not be selling. Be very wary of a seller that has only owned the business for a short while.

2) Insist that the seller signs a non-compete agreement, no matter what reason they give for selling the business.

The non-compete prohibits them from owning, working for, or forming any alliance with another gym or Martial Arts school for an agreed-upon time and geographic region.

3) Be sure to perform due diligence on the business location.

It’s been said many times, but cannot be stressed enough, that location is one of the most critical components of success for a business. Get comfortable that there is adequate traffic flow, adequate parking, and access to potential members. Also consider the physical safety of members at your new location, as safety is a top priority.

4) Meet with a reliable commercial real estate agent.

Discuss the future happenings of the business community that may positively or negatively affect your location.

5) Get professional help.

Hire a CPA to review the tax returns of the business for the previous several years. You want to see years of steady, reliable cash flow. If you see losses for reasons other than a high salary for the owner, then you need to honestly ask yourself how you will turn the business around.

Have the CPA work with a commercial real estate broker in putting together the offer price on the business. The first offer should be a lowball offer. It’s easy to increase future offers but very difficult to lower future offers unless you find deficiencies during due diligence. The CPA should also assist you in getting proper licensing and tax identification numbers for both federal and state.

6) Hire an attorney

Have an attorney review any past, present, or pending lawsuits regarding the business and associated property, as well as to prepare all related paperwork regarding the purchase. If you know the seller on a personal basis, then one of these professionals should do the negotiating for you.

7) Be clear on your expectations.

There are several questions that you need to address prior to owning your own facility. How many hours per week will it take to successfully run this business? Is that more or less than the hours you’re currently working and are you (and your family) comfortable with those hours? Do you expect to make a profit in the first year? What will it take in terms of hours worked or losses incurred that would cause you to pull the plug and either close or sell the business? Doing a little self-reflection and honestly answering such questions will assist you in future decisions and help keep your family relations intact.

8) Analyze your personnel skills.

Are you a Martial Artist with a burning desire to own your own school or are you a business manager? They are not one and the same. The quality of the staff at your facility will be critical and dependent upon proper personnel management, delegation, training, and correction. If you do not have these skills then you will need to hire a business manager that does.