The road to selling your studio

The decision to sell your boutique fitness business can be both daunting and exciting. You’ve spent years pouring your heart and soul into building your fitness studio and nurturing your brand, and now it's time to take the next step and find the right buyer to carry on your legacy, so that you can enjoy whatever the future holds for you. While the road to a sale can be anything but straight, there are a few essential steps that are a part of every deal and are key to a successful sale. From determining its market value to closing the deal, each stage is crucial for a smooth and profitable transaction.

Step 1: Valuation - Determine the Market Value

The first step, before listing your boutique fitness business for sale, is to determine its market value, meaning, what will someone else pay for it in a fair market transaction? While your business is as unique as you are, the valuation involves factors such as your modality, past and future cash flow, profitability, and comparing your business to others in the industry that have recently sold. There are different methods for valuing a business, but we find that in the boutique fitness industry, the best valuation approach is the SDE (Seller’s Discretionary Earnings) approach, which considers the discretionary earnings of the business for one owner, and then applies a multiple to that number based on industry comps.

It can be helpful to seek guidance from a professional business broker who specializes in the fitness industry to get an accurate valuation of your business. (Like us. We do this all the time, and we know what is selling at what price and what isn’t). This step provides you with a solid foundation to set an appropriate asking price so that you can attract the right buyers and sell your business in a reasonable period of time. 

Step 2: Listing - Publicly Advertise Your Business

Once you have a clear understanding of your boutique fitness business's market value, it's time to create a compelling listing to attract potential buyers. It is important to utilize both online and offline channels to advertise your business, such as business for sale websites, social media platforms, industry-specific forums, and local business publications. Share the news with your community as well; let them know that you are ready for the next step in your career, and that your business is for sale. Don’t be afraid to do this…easily 70% of the transactions we see are sold to someone with a connection to the community.

In your listing, be sure to highlight the unique features of your boutique fitness studio, its positive reputation, and the potential for growth. Use high-quality images and detailed information about your equipment, customer base, and location to further pique the interest of potential buyers.

Step 3: Negotiating - Finding the Right Deal

Once your listing is live, the search begins for the ideal buyer for your beloved studio! As inquiries come in, you will negotiate with interested buyers to find the best deal for both parties. There are several crucial aspects to this negotiation:

-Letter of Intent (LOI): The LOI outlines the buyer's intent to purchase your business and includes key terms such as the purchase price, payment structure, and due diligence period. Remember, everything is negotiable; this is the perfect time to ask for what YOU want out of the transaction, as well.

-Financing: How you will get paid for your studio is one of the most important considerations of the deal. When you use a professional broker, they can help discuss financing options with the buyer, such as Small Business Administration (SBA) loans, seller carry financing, or a Home Equity Line of Credit (HELOC).

-Asset Purchase Agreement (APA): This formal agreement outlines the terms and conditions of the sale, including specific assets being sold, representations and warranties, as well any contingencies. Whether you draft this yourself or use a broker, we recommend that you have your attorney review the agreement, as well.

Step 4: Escrow - It's Finally Time to Make the Moves

Once the parties have agreed on terms, the next step is the escrow phase. During this stage, several important tasks will be completed:

-Earnest Money Deposit: The buyer will provide an earnest money deposit, demonstrating their commitment to the purchase. This is held by a third party until the sale is closed, and there usually is a small fee paid to the escrow agent for this service.

-Due Diligence: The due diligence period is when the buyer conducts a thorough investigation of your business, including its financial records, legal history, and operations. It can be tedious and stressful, but once you get through this part, the rest is (mostly) smooth sailing. 

-Asset Purchase Agreement: Once due diligence is completed, both parties can finalize and sign the APA, which will legally bind both parties to the agreed-upon terms.

-Lease Assignment: If your fitness studio operates on leased premises, you'll need to work with the landlord to transfer the lease to the new owner.

-Funding Details: And finally, arrange for the necessary funds to be available for the transaction to proceed smoothly. This is how you will get paid!

Step 5: Closing - Shake Hands and Finalize the Deal

Congratulations, you're almost there! The closing stage involves finalizing the deal and officially transferring ownership to the buyer. Here are the essential steps to knock out before you head for the beach to relax:

-Sign Closing Documents: Both parties will sign the necessary documents to complete the sale.

-Transfer Services: Transfer all relevant accounts, permits, licenses, and contracts to the new owner.

-Training: Provide training to the buyer and their team, ensuring a smooth transition.

Successfully selling your boutique fitness business requires careful planning, effective marketing, skilled negotiation, and diligent execution. When you follow these steps, you can successfully navigate the process with confidence and find the ideal buyer to continue the success of your studio. Remember to seek professional advice and surround yourself with experienced advisors to maximize the value of your business and achieve a successful sale, paving the way for your next exciting adventure!

Whether you’re looking to sell your business in the next few months, or want an idea of what your business might be worth, Boutique Fitness Broker can help! 

Want to learn more? Let’s talk! Contact us right here.