Market trends change fast with the emerging trends from the public. In the fitness industry, gyms have topped their game with exceptional services. They are no longer just a big room with machines. Gyms these days have become modern, personalized, and very attractive for their members.
Gyms are highly investing in every strategy to keep their name and services different from their competitors. They know it’s important to balance the value and profit of their business. From a market point of view, every business gets its shining value from its overall asset value and profits.
As a gym owner, you must know how to value a gym business. This strategy will keep your gym with the best market value for both business owners and customers.
Gym Valuation Method
Gym valuation is the process of determining the overall value of your gym. The valuation methods are based on financial models that do the big math and reveal the real value of the gym.
A gym’s value is dependent on the services it provides. There are some factors like gym revenue, cost and expenses of its services and finally, the profit margins. All these factors affect the value and profits of your gym.
So, to find out what is the real worth of your gym, you need to use the basic valuation methods to get the value of your gym.
Easy Methods Of Finding Out A Gym’s Value
The valuation can be carried out by any method. So, the question of how to value a gym is not vague anymore. Here are the top methods that are easy to understand and applicable to find out the value of your gym:
EBITDA Method
This is the most common method for businesses to use for valuation. The EBITDA method is simpler and gives your gym a better market value.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. This method works on these four principles. The total calculation of these principles determines the value of the gym’s cash flow.
The variables of EBITDA are total earnings, tax deductions, loss values, and amortization(the leftover debt values). Your gym’s financial statements contain all of these variables. By adding all the variables, you can easily find the value of EBITDA.
After finding out the value of cash flow, compare it with the market’s value, and your gym valuation is complete.
Asset Based Method
This is the second most common method after EBITDA, and in terms of calculations, it is also simple to figure out how to value a gym.
As the name represents, the valuation method is based on the total assets of your gym. Your gym’s assets are divided into tangible and non-tangible assets. The tangible assets include all the physical things in your gym like location, machines and non-tangible assets include things like patents, logos, and franchises.
To find out the value of your gym, subtract your gym’s liabilities from the assets of your gym. The valuation figure will be the total price of your gym in the market.
Discounted Cash Flow Method
This is a little tricky method, and it takes a long to find out the valuation for gyms.
The method works on the basis of a future cash flow projections, meaning the profit your gym would earn in the future. By using an estimated discount rate you can determine the future cash flow value of your business.
When the future cash flow value is out, you have to analyze and compare it with the initial investment. The discounted cash flow method is a more finance focused approach to get your gym valuation.
The Market Method
The market method is also the most common method for valuing a gym. This method is mostly used by real estate agents to project the value of property to their buyers.
To use this method, you simply have to do detailed research on the gyms that were sold in your region or nearby area. By getting the selling prices of the other gyms, you can clearly evaluate, the total value of your gym in the market.
The market method is the better choice for keeping up the valuation of your gym in the fitness industry.
Conclusion
Bring a business owner, it is really important to keep yourself updated with the value of your gym. In a competitive industry of fitness and health, your gym needs to hold the spot for the best services in your area.
All of your business services and profit figures are co-dependent on gym valuation. Build a strong business model and strategies to run your gym and make efforts to increase its valuation in the future.
