Caught up in the day-to-day operations of your business, you may not be thinking about how much your box could be worth when the time comes for a transition. But the choices you make now, both large and small, can add to or detract from the future value of the business.

There are many ways for a gym to grow, including opening new locations, developing new products, acquiring complementary businesses (pt practice, recovery, etc.), hiring more employees, and increasing sales and marketing expenditures. You can grow the business faster by tapping into outside financing or more slowly by using the company’s own revenue. With so many strategies to consider, you may want to develop a long-term plan to guide the growth of your business.

Your decision regarding the ultimate disposition of the company may influence many aspects of your current business strategies, including your form of business ownership. You may want to consider a C corporation structure for a business that may go public or an S corporation structure if a private sale is planned. We help guide clients in regard to the implications of various forms of business ownership and how it can impact their overall goals.

Transferable Assets

To begin, work on building and maintaining your company’s transferable assets. These may include tangibles like property and equipment, as well as intangibles, including a customer database, website, brand recognition, and business processes. You may also develop intangible assets, such as copyrights or trademarks, proprietary lists of customers or prospects, and long-term contracts. An attractive location can also add value beyond an owner’s equity.

A CrossFit Box can also derive intangible benefits from a strong management team with the knowledge and connections required to maintain the business without the owner’s oversight. In many cases, having a skilled and loyal workforce may also be considered a transferable asset in a sale.

Financial Performance

When growing your business, strive to establish a self-sustaining enterprise with steady revenue growth. The financial performance of a box is often measured by its free cash flow or the cash that it generates before interest, taxes, depreciation, and amortization, less capital expenditures. In assessing the value of a business, a buyer may, for example, project a company’s earnings over the next five years based on the current cash flow. This projection will take into account any outstanding debt, as well as whether revenue growth and margins demonstrate a history of consistent growth.

Businesses are often more efficient when they focus on their core competencies, rather than diversifying too broadly. So, if your CrossFit box has product lines or offers services not closely aligned with the box’s core business, consider whether these areas are profitable or represent a drag on the business income.

You may also want to restructure agreements or contracts that may be objectionable to a potential buyer, such as a long-term lease, licensing contracts, employment contracts, and loan agreements. Long-term leases may be an asset provided the terms are favorable, the location is suitable, and the size is right. If, however, the current box is likely to outgrow it’s current space before the lease is up, a short-term lease may be more appropriate.

For a detailed analysis of your company’s value, we offer business valuation services specifically serving the CrossFit microgym community. Even if you have no immediate plans sell the box, an estimate can help you identify ways to maximize the value of your business in preparation for a future exit strategy.

Neither the firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom-suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference

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