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Old 11-14-2011, 05:03 PM   #1
Joe Klein
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Purchasing an existing box

Hi Guys

I'm considering purchasing an exisiting box. Any pro's/con's I should be aware of before I take the next step.
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Old 11-14-2011, 05:15 PM   #2
Brian Strump
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Re: Purchasing an existing box

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Originally Posted by Joe Klein View Post
Hi Guys

I'm considering purchasing an exisiting box. Any pro's/con's I should be aware of before I take the next step.
Hell, hundreds of questions would need to be asked.

One major thing I'd consider it the type of business you're purchasing. Is the box owner a big part of the training, and personality of the business? If so, you would need to consider some, possibly a large attrition rate if you do not have a good repore with the current members. It's similar to purchasing a business from a chiropractor, obstetrician, and other "people" businesses.

Just alittle food for thought.
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Old 11-14-2011, 07:51 PM   #3
David Wisniewski
 
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Re: Purchasing an existing box

You would do the same due-diligence as would be done before purchasing any business. For example, you need access to the business' financial statements, bank accounts, and tax returns for at least the past 5 years (if open that long), all contracts (lease, employment contracts, membership contracts, etc.), business plan, marketing plans, corporate documents (articles of incorporation, partnership/membership agreements, etc.), etc.

Most businesses are purchased based on some multiple of cash flow - earnings before interest, taxes and amortization (EBITA).

Once you have that all figured out, and have an idea of the price you'd like to pay, you should consult with an attorney, who would draw up a purchase agreement (or negotiate with the seller's attorney and make sure that the purchase agreement is fair to you the buyer).
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Old 11-14-2011, 08:32 PM   #4
Ian Nigh
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Re: Purchasing an existing box

I would also consider the length, conditions and type of lease on the location, check whether they got the right certificate of occupancy, business licenses, permits etc required by the state and county they are in. Also, some gyms dont own their equipment, but lease it from another company, or have more than one corporate structure set up for tax or liability purposes. There should be a detailed inventory of exactly what you are purchasing in terms of assets and liabilities.
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Old 11-15-2011, 05:05 PM   #5
Joe Klein
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Re: Purchasing an existing box

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Originally Posted by Brian Strump View Post
Hell, hundreds of questions would need to be asked.

One major thing I'd consider it the type of business you're purchasing. Is the box owner a big part of the training, and personality of the business? If so, you would need to consider some, possibly a large attrition rate if you do not have a good repore with the current members. It's similar to purchasing a business from a chiropractor, obstetrician, and other "people" businesses.

Just alittle food for thought.


Hi Brian

Thanks for your msg. The current owners are not involved. The have a staff of around 10 people (hard to imagine that many) & they pay the bills & collect the little profity they are making right now. I plan on being much more involved & would definetely make some cuts to the number of staff members
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Old 11-15-2011, 05:07 PM   #6
Joe Klein
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Re: Purchasing an existing box

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Originally Posted by David Wisniewski View Post
You would do the same due-diligence as would be done before purchasing any business. For example, you need access to the business' financial statements, bank accounts, and tax returns for at least the past 5 years (if open that long), all contracts (lease, employment contracts, membership contracts, etc.), business plan, marketing plans, corporate documents (articles of incorporation, partnership/membership agreements, etc.), etc.

Most businesses are purchased based on some multiple of cash flow - earnings before interest, taxes and amortization (EBITA).

Once you have that all figured out, and have an idea of the price you'd like to pay, you should consult with an attorney, who would draw up a purchase agreement (or negotiate with the seller's attorney and make sure that the purchase agreement is fair to you the buyer).
This is great information David. I really aprpeciate it.
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Old 11-15-2011, 05:53 PM   #7
David Wisniewski
 
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Re: Purchasing an existing box

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This is great information David. I really aprpeciate it.
You're welcome. Last year, I represented a person who invested a substantial amount of money into a business where she did absolutely zero due-diligence before hand and didn't have a good purchase agreement, and lost all of her money when it turned out the business was not viable from the get-go.
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Old 11-15-2011, 06:45 PM   #8
Brian Strump
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Re: Purchasing an existing box

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Originally Posted by Joe Klein View Post
Hi Brian

Thanks for your msg. The current owners are not involved. The have a staff of around 10 people (hard to imagine that many) & they pay the bills & collect the little profity they are making right now. I plan on being much more involved & would definetely make some cuts to the number of staff members
Would you be doing some of the training? You may want to join for a month to see how it runs, or pay someone you trust to go for a month and provide feedback.

Cutting heads from day 1, while smart for the long term, may hurt your initial start, as members may not be happy with that. Lose members=loss of profit from day 1.

Just things to consider.
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Old 11-18-2011, 12:11 PM   #9
Joe Klein
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Re: Purchasing an existing box

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Originally Posted by Brian Strump View Post
Would you be doing some of the training? You may want to join for a month to see how it runs, or pay someone you trust to go for a month and provide feedback.

Cutting heads from day 1, while smart for the long term, may hurt your initial start, as members may not be happy with that. Lose members=loss of profit from day 1.

Just things to consider.
Hey Brian

The box is about a 45 min drive from where we live now, so joining for a month would be pretty tough with working a regualr job for now. (traffic, etc) It happens to be that this box is where we want to move to in the spring, so teh location for us is great, it just isn't so great to try to get there after work. M-F

I definetely will keep things how they are now, just to feel out the box & see where I think some improvements could be made. No heads will roll for a while.
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Old 11-18-2011, 12:13 PM   #10
Joe Klein
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Re: Purchasing an existing box

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Originally Posted by David Wisniewski View Post
You're welcome. Last year, I represented a person who invested a substantial amount of money into a business where she did absolutely zero due-diligence before hand and didn't have a good purchase agreement, and lost all of her money when it turned out the business was not viable from the get-go.
Hey David

Have you reviewed sales agreements for such sales as the one I am looking into?
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