Valuing Weights in a Gym

Off Topic
21

[quote]fraggle wrote:
As you have said that you’re looking at buying a business, I would not put as much effort into evaluating the assets worth as I would trying to establish the income that business can provide. What is the net income, cashflow, roi, repayment, etc.

They may be outdated, but if you can get people lined up to use them, does it really matter what they are worth?

Also, for what purpose is this valuation needed? If you are doing this as part of a business plan for a bank, they would be more concerned with liquidation value than whether you’re getting a good deal.

That said, if you need to establish a value, it’s all about making REASONABLE estimates based on comparable sales. If at all possible, try to find similar, if not identical pieces of equipment. You would then make adjustments based on information available, such as age, condition, features missing/included. If I have more than a handful, I would throw out the outliers. You could also try looking for a dealer in the region and asking them. As you are in Alaska, this process may be very difficult, so again, ask what is reasonable in each case.

As a last resort, I would look at what it would cost to purchase new or comparables in other places and work in the shipping costs.

In the abscence of a thriving market, you’re really just making an educated guess, so don’t sweat it too much.

[/quote]

This is a good answer.

Valuing existing equipment is really something you do AFTER you buy the business to be honest. Replacement cost of equipment would figure into any discount you would pay on the acquisition, but I’m not really sure given the information, and the fact you’re asking on a forum and not a CPA in person, that you are thinking about the right things here…

[quote]Adam Bomb wrote:
I’m with Fraggle, valuation should be based on established cash flow of the gym and Net Operating Income.

Are they trying to give you a FF&E value and that being part of the assets/value of the gym to establish a purchase price?

With how many gyms are shutting their doors I would value good equipment at pennies on the dollar let alone old sub par equipment like you stated.

A little more info would go a long way.[/quote]

Only thing I disagree with on the is the use of NOI. Outside of tax planning, it isn’t the best way to establish a value. You need to look much deeper into financials than NOI. You would certainly back off Depreciation and Amortization first thing, maybe interest expense too, depending on the type of financing you would use for the acquisition, blah blah blah…

I have a feeling this is over OP’s head anyway.

22

Beans I come from real estate so NOI, cap rate, and cash on cash are the figures I think in.

23

[quote]Adam Bomb wrote:
Beans I come from real estate [/quote]

The “FF&E” rather than “PP&E” gave you away, lol.

24

[quote]KBCThird wrote:

[quote]sam_sneed wrote:

[quote]Nards wrote:
Well, you could get away without any of the red-headed stepchild of the gym…the 35lb plate.[/quote]

My olympic set at home came with the 35. I hate that fucker. I’d sell it on craigslist but I probably wouldn’t get shit for it.[/quote]

Blasphemy. You people probably like your weights rubber-coated, octagonal and with a handle cut thru, dont you? 35s are old school, I’ve never seen a chrome-palace, “fitness center” that has them. Almost all - if not all - of the serious gyms I’ve been in do have them[/quote]

Are you in NYC? If so, I’ll sell you my pair of 35 lb’ers for $30 since you like them so much. Beware, there are “carrying holes” cut into the plate.

25

Where the fuck did the OP go? Is this one of those ask a question never return threads we see so commonly in SAMA?

I hate these effers.

26

[quote]sen say wrote:
Where the fuck did the OP go? Is this one of those ask a question never return threads we see so commonly in SAMA?

I hate these effers.[/quote]

maybe a polar bear ate him… you shouldnt talk rudely about the dead…

27

[quote]theilercabin wrote:
I am possibly thinking about buying a fitness club. Most of the machines and equipment is outdated. How would one value these sub-par machines and equipment? One good thing is that the gym has a hell of a lot of weights in the form of dumbbells, and plates. I live in Alaska, so the shipping of these weights alone is costly. How would one critically value the weights themselves. For instance, what would be the critically assessed value of a 45lb plate, a 55lb dumbbell, etc? Is there a FMV formula? I know I would have to account for shipping into the valuation, yet I don’t know the base as of yet. Any advice or feedback?

Thanks,

T[/quote]

Don’t value the assets. Value the flow of income from the assets.

If you value the assets for a pure purchase, I would pay 10% of the value new.

28

[quote]sen say wrote:
Where the fuck did the OP go? Is this one of those ask a question never return threads we see so commonly in SAMA?

I hate these effers.[/quote]

I am right here since you asked, sorry that you are so riled up, some of us have lives where we work to make the big bucks and don’t spend every waking hour fretting about the forums. I seriously at times loathe the very existence of most forum folks; they spew the same rhetoric, they blah, ta blah ta blah, and react the same way. Borish at best.

Anyway, thanks for all those that posted quality information, that’s what I most appreciate, even though 95% of the people have zero affinity for critical assessment and expression, those remaining 5% are what makes it worth everyone’s precious time. So anyone that wants to flame or be the trite, cliche typical forum guy, please save it for someone else because I could give a fuck about your petty whining.

That said; I now have a fairly good working idea of how to value weights and such. Now does anyone know how to properly value used equipment? Is there a website or a formula for assessing the critical value of let’s say used treadmills, ellipticals, etc?

Again, thanks so much for all you guys help that took the time to offer critical information. I sincerely and authentically appreciate the time you invested in doing so, as I realize how valuable everyone’s time is.

Thanks!

29

[quote]Jewbacca wrote:

[quote]theilercabin wrote:
I am possibly thinking about buying a fitness club. Most of the machines and equipment is outdated. How would one value these sub-par machines and equipment? One good thing is that the gym has a hell of a lot of weights in the form of dumbbells, and plates. I live in Alaska, so the shipping of these weights alone is costly. How would one critically value the weights themselves. For instance, what would be the critically assessed value of a 45lb plate, a 55lb dumbbell, etc? Is there a FMV formula? I know I would have to account for shipping into the valuation, yet I don’t know the base as of yet. Any advice or feedback?

Thanks,

T[/quote]

Don’t value the assets. Value the flow of income from the assets.

If you value the assets for a pure purchase, I would pay 10% of the value new.[/quote]

Thanks for your input, perhaps I should clarify a few things. I live in Alaska and the gym I am thinking about purchasing is about to go under, it has 250 members or so and has limited equipment. I realize the various valuation methods and thoroughly understand how to adjust back to PV, yet this isn’t exactly what I am interested in. I am looking for an exit strategy before I even begin. I am a business major and already operate three businesses. When I look at purchasing or starting any enterprise, I draw up a critical exit strategy along with the business plan. This is imperative for any business regardless of the optimism involved. So, again this is Alaska, it’s very, very hard to operate/sell a fitness business, this business has been for sale for at least a year or more. What I would like to be able to do is establish a reasonable and critical salvage value for all equipment, weights, and minor assets that I could reasonable liquidate by disbursing through the fitness gyms throughout the state. It’s simply a matter of also assessing risk. If I can buy the business for $60,000 and the reasonable salvage value is $50,000, then the risk is substantially offset, the remaining cash flow is a gift then. Also, cash flow isn’t always the best assessment of value. For instance, incoming cash flow is $10,000 a month, outgoing is $9,500, leaving $500/mo positive cash flow. Yet, what’s the growth rate here? Is there capacity to grow? Capacity in the market? In the demographic? In the gym itself? This doesn’t take into consideration risks in the micro and macro environments. What if cash flow at purchase is exalted and at a peak, and the market does not lend itself to a positive growth factor over the foreseeable 1-5 year period? Lots of things to consider; that is why I asked the initial question that I did.

Again, guys thanks so much for your help.

30

[quote]theilercabin wrote:

[quote]Jewbacca wrote:

[quote]theilercabin wrote:
I am possibly thinking about buying a fitness club. Most of the machines and equipment is outdated. How would one value these sub-par machines and equipment? One good thing is that the gym has a hell of a lot of weights in the form of dumbbells, and plates. I live in Alaska, so the shipping of these weights alone is costly. How would one critically value the weights themselves. For instance, what would be the critically assessed value of a 45lb plate, a 55lb dumbbell, etc? Is there a FMV formula? I know I would have to account for shipping into the valuation, yet I don’t know the base as of yet. Any advice or feedback?

Thanks,

T[/quote]

Don’t value the assets. Value the flow of income from the assets.

If you value the assets for a pure purchase, I would pay 10% of the value new.[/quote]

. . . . For instance, incoming cash flow is $10,000 a month, outgoing is $9,500, leaving $500/mo positive cash flow . . .

[/quote]

Fair enough. To be more precise “net cash flow.” Or (some multiple) EBITDA - debt = price.

The assets of a gym are not the weights, it’s the memberships, preferably contracted memberships.

Regarding exit strategy — it’s generally to be bought out by a chain that wants your membership base to kick itself off.

Buy out sounds unlikely, so IMHO, you are chasing a bad deal.

Learning when you need to give up a deal is the PhD of business.

General-public gyms, with rare exceptions, are loser investments these days.

Me, I love to work out outside. Lots of people are like me. Indeed, the number one reason lots of fitness buffs don’t go to gyms is the gym is “inside.”

What you have going for you there is the weather.

It’s fucking cold in Alaska, so people almost have to work out inside 9 months out of the year.

Me, I would think the growth market I would see for a gym would be a space where you can basically seem like you’re outside without freezing your balls off — like a mall, or airplane hanger, or something.

Huge, open, yet warm. Put fake palm trees everywhere. Make people forget the outside is dark and frozen.

Weights, cross-fit, and non-standard cardio inside (sleds, stairs), along with the stairmasters (which are the bread and butter of your money — fat chicks wasting their time on steady state cardio).

31

[quote]Jewbacca wrote:

[quote]theilercabin wrote:

[quote]Jewbacca wrote:

[quote]theilercabin wrote:
I am possibly thinking about buying a fitness club. Most of the machines and equipment is outdated. How would one value these sub-par machines and equipment? One good thing is that the gym has a hell of a lot of weights in the form of dumbbells, and plates. I live in Alaska, so the shipping of these weights alone is costly. How would one critically value the weights themselves. For instance, what would be the critically assessed value of a 45lb plate, a 55lb dumbbell, etc? Is there a FMV formula? I know I would have to account for shipping into the valuation, yet I don’t know the base as of yet. Any advice or feedback?

Thanks,

T[/quote]

Don’t value the assets. Value the flow of income from the assets.

If you value the assets for a pure purchase, I would pay 10% of the value new.[/quote]

. . . . For instance, incoming cash flow is $10,000 a month, outgoing is $9,500, leaving $500/mo positive cash flow . . .

[/quote]

Fair enough. To be more precise “net cash flow.” Or (some multiple) EBITDA - debt = price.

The assets of a gym are not the weights, it’s the memberships, preferably contracted memberships.

Regarding exit strategy — it’s generally to be bought out by a chain that wants your membership base to kick itself off.

Buy out sounds unlikely, so IMHO, you are chasing a bad deal.

Learning when you need to give up a deal is the PhD of business.

General-public gyms, with rare exceptions, are loser investments these days.

Me, I love to work out outside. Lots of people are like me. Indeed, the number one reason lots of fitness buffs don’t go to gyms is the gym is “inside.”

What you have going for you there is the weather.

It’s fucking cold in Alaska, so people almost have to work out inside 9 months out of the year.

Me, I would think the growth market I would see for a gym would be a space where you can basically seem like you’re outside without freezing your balls off — like a mall, or airplane hanger, or something.

Huge, open, yet warm. Put fake palm trees everywhere. Make people forget the outside is dark and frozen.

Weights, cross-fit, and non-standard cardio inside (sleds, stairs), along with the stairmasters (which are the bread and butter of your money — fat chicks wasting their time on steady state cardio).[/quote]

Thanks bro! Good info. Weights and all equipment are considered assets, yet I understand exactly what you are saying. I need to grab all essential numbers and inventory all possible avenues of cash flow. I realize it’s not a huge money maker. I have other operations that create all the real money I need. This is more of a passion and something new to work on, the community needs a better place to work out and I believe I can deliver that; that is if it’s economically feasible. Again, thanks!