BACK TO ISSUE 18

MAGAZINE HOME PAGE

FITREC HOME PAGE

Operations

5 Ways to a More Profitable Business

Business broker Cameron Prosser recommends every business owner has an exit strategy in mind (i.e., to one day have your business ready to sell), even in the early days of your business. Read on to learn more.

To put it simply: getting your fitness business sale-ready (even if you don’t want to sell it) will make it more profitable. This is because ensuring optimal system and processes are in place makes a business more valuable when selling and more profitable to operate

Following the five key areas to focus on when getting your business ready for sale:

  • STAFFING
  • LEASE
  • SERVICE OFFERING
  • EXPENSES
  • MARKETING

MANAGING YOUR TEAM

  • Have a standard agreement form for all staff. Contracts must be clear about holiday pay, annual leave and long service leave.
  • Document all key roles with responsibilities clearly outlined.
  • Ensure everything is process-driven so that anyone can step into a role. Avoid 'personal' systems (yours or staff) for handling anything.

FITREC Tip: For operations management, we use a website called Process.st. It's like an interactive operations manual.

Remember that on the sale of the business, staff contracts are likely to be null and void, and the new owner will have to rehire all staff. Ensuring contracts are in place and ready to renew is a good way to add extra value. Be ready to pay for any outstanding leave entitlements or expect to reduce the sale price of the business to suit a rollover of the contract.

Lease DETAILS

  • Personal Training Studio: An optimal lease is a 3x3x3 (3 years with an option to renew for another 3 years, and then an option for a further 3 years). At the end of the first 3 years, negotiate for the next 3x3x3 to give the greatest possible security for a buyer.
  • Larger Facilities: A 5x5 arrangement is best (5 years with an option to renew for another 5 years).

Ultimately, the longer the lease, the greater the value of your business. Evaluate CPI or annual rent increases when taking up every new option to ensure they’re fair. Ensure any money held as a bond is fair and reasonable to reduce the likelihood of a bond increase on lease transfer becoming too onerous for the buyer.

Service Offering and Client Value

Knowing your market and what you provide is critical: It influences your marketing, prices, service, and more. When selling your business, it’s also valuable to the potential purchaser. Consider the following:

  • What's your target market and why would someone come to you?
  • Who you are to your market and who are your key clients?
  • What's the average net worth of each client?
  • What is your USP in relation to competitors?
  • Retention rates
  • The ratio of Direct Debit to Upfront memberships.
The clearer you are on each of these points, the easier it is for any potential buyer to see where the income for the business is coming from.

If you’re ready to sell, consider upgrades to facilities and services: Or at least, understand the cost associated with fulfilment. The purchaser will use these requirements to reduce the sale price. Determine if the business requires an owner-operator or if it can be run under management.

When determining client value, working in cash is NOT optimal: It provides no idea of the business turnover so is not beneficial if you want to sell. If you must use cash, it should be in a systematic manner so your business can be better valued. Clients on direct debit are your most valuable clients, indicating a steady income and easier future earnings projection.

Expenses

Less is more. Period.

Your three greatest expenses, as a percentage of your gross revenue, are likely to be your building lease, staffing costs, and equipment leasing. A saving as little as $100 a week will add $5,200 to the bottom line and increase the value of your business by ~$15,000 (using a 3x multiple of EBITDA).

Marketing

What is your marketing plan, what do you spend, and is it working?

More than just the marketing plan, have data around the return on that plan. This information highlights expenses that may be removed as ineffective in attracting members or others that have worked and should be increased. Collect as much data as possible. If you’re unsure, find out what metrics you should be capturing and how best to capture them.

BONUS TIP FOR RENTAL TRAINERS – Try to Sell/Transfer Your Clients

Getting some return from your efforts to build a steady and reliable client base is a reasonable aim. We suggest you find a Trainer/buyer best suited to your clientele and begin introducing them to your clients under an agreement that you receive a percentage of revenue from each client introduction over a set period, perhaps three months. This way, the incentive for the seller to have the client maintain their training with their new Trainer is higher, resulting in a more successful turnover for the buyer.
Facebook
Twitter
LinkedIn
WhatsApp
Email
Print
Cameron-Prosser-600x700-1

Cameron Prosser

Cameron is the Director of Business and Franchise Brokers (BF Brokers), which is an Aussie-owned and family-run business offering franchise and business brokerage services. The are the largest health and fitness brokerage in Australia and now also operate internationally. What makes BF Brokers different to other brokers is their unwavering commitment to service, integrity and confidentiality, enabling them to provide the most accurate and informative advice in relation to the sale or purchase of your business or franchise.