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  1. #1
    Registered User Carpot Muncher's Avatar
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    Need to chat with experienced gym owners

    First off, my apologies if this is not the correct forum for this type of post, I looked at all forums and couldn't determine the best place for it. Moderator, please feel free to move this post as you see fit, thanks.

    I need to consult the advice from experienced gym owners. I'll introduce myself:

    I am an American, originally from Detroit, moved to San Jose CA for nearly ten years, now have been residing in Ho Chi Minh City (a.k.a. Saigon) for five years. Its wonderful out here, and I may not return to the US permanently, until the time comes to put my children into universities.

    Bodybuilding has been my favorite hobby since 1991. I've often considered owning a gym as my way of living as I could easily dedicate all my time/effort to it (well, whats left after caring for my family), and then easily make teh time to keep myself in better shape on a full time basis (my career, and social habits, have too often interfered with this in the past).

    I have done a lot more research (on owning a gym) in this in 07, and now again in 2010. I've come acros a potential opportunity to buy an existing gym. Though I really need advice from other gym owners so that I can come to some conclusions. I have a detailed post with questions prepared, though not sure where it would fit into these forums. Could any gym owners tell me which forums they use? Or where I might post my questions here?

    Thanks!
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  2. #2
    Strongman TomMutaffis's Avatar
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    I have not owned a gym, but if you are looking into purchasing a business I would definitely ask to see financial statements from the past couple of years to see what kind of debt they might be carrying and find out what the revenue/profit is for the facility. It would also be worthwhile to find out the number of members and see if you can dig up some history on if that figure has increased or decreased.

    If the gym if poorly run or has a lot of leased equipment you could be getting yourself into a losing situation. Even with new ownership it may be hard to bring in new members.

    You may also want to consider adding in a supplement store (pro shop) or juice bar in conjunction with the gym.
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  3. #3
    Registered User otiskii's Avatar
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    Ditto. And be sure to have someone qualified take a look at the financials. It's worth a couple of hundred to save you making a couple hundred thousand mistake.
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    Registered User irishmickk's Avatar
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    I have owned two gyms in the past and deal with gym owners every day now as I sell gym equipment. Post up the questions and i will give you my opinion.
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  5. #5
    Registered User Carpot Muncher's Avatar
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    Thanks for your replies thus far,

    Originally Posted by irishmickk View Post
    I have owned two gyms in the past and deal with gym owners every day now as I sell gym equipment. Post up the questions and i will give you my opinion.
    ok this will be a bit long as I anticipate a lot of counter questions so trying to provide much of the insight I have at this point. My main question would be how could I accurately forecast the rate at which I can gain new members, and I don't thin there is any easy answer for that.
    Other than that, just any other suggestions of things I might be overlooking (such as above, to this point I have been assuming that the equipment is not leased, but all paid for, mainly due to cultural norms over here).
    Re financials, I don't anticipate there will be much detail available (this is Vietnam), though I'll spend some days with the manager to try to learn everything I can about the past and current conditions:

    Positives
    The asking price ($80 k)is less than the cost of all of the equipment. The equipment is not the best, though decent name brand equipment (mainly Cybex and LifeFitness). This equipment has already been imported and cleared customs and duties (which could be troublesome obstacles for me to do on my own here in Vietnam).
    The location is good or very good. Great visibility of the business from the road. It is on a main road which connects downtown to the most prestigious area in Vietnam (Phu My Hung). There are multiple new residential high-rise development projects taking place on this road in the immediate vicinity.
    The facilities seem good: Very good size for a gym, roughly 24 m x 24 m footprint, times 5 levels, plus underground parking (motorbike is the main mode of transportation, so this size can accommodate a good number, parking in front of the building is also allowed). Neighboring business is a wholesale karaoke equipment shop, so their customers won’t take up much of the parking and not for very long. On the other side is an empty lot, then a restaurant immediately adjacent to that.
    I’ve been told that the existing lease contract will remain in place for the potential new business owner (of course I’ll need to verify that). This is good in one way, as it is a ten year lease (and the rates will not increase for ten years).
    One floor is dedicated to cardio equipment (7 treadmills, some rowing and elliptical machines, and maybe a dozen bikes in a separate classroom). One for free weights and machines, including most of the equipment essential to execute fundamental bodybuilding exercises, one floor for yoga and aerobics classes, with a third of it reserved for offices. One floor is mainly unused (they use it for laundry of towels for customers), and one floor they have subleased to another company. Each floor has men’s ad women’s restrooms. There are also showers and a sauna though most guests prefer to shower at home and these mostly go unused).
    The facilities are already finished (painted, mirrors, flooring, lighting, office networked, some speakers/sound system, etc).
    The business is apparently self-sufficient, in that the owner is not even in the country. I do not yet know to what extent they have fool proofed potential losses (due to employee scams), for example cameras on the cash register, logging guests, etc.
    Local staff is already hired and in place. Of course I’d need to develop them and train them further. Language barrier will be a bit of an obstacle (I speak Vietnamese fluently in social conversation, but am lacking in industry specific terms). At least one of the Sales Directors is fluent in English (and a native Vietnamese speaker), though even the best interpreters here lack many important words and will simply substitute with a guess without asking to clarify any unknown words).

    Concerns
    This business has only been open for about four and a half months (at least in this new location). They have two full time sales directors. They claim that the reason the owner wants to sell is because he has to spend more time overseas than he’d anticipated, so he can not focus enough attention on this project.
    The sales director I spoke with today claims that she sells mainly one year contracts (for $450), and they just had a special, buy two years get one free. I am thinking that perhaps the strategy here was to sell as many long term contracts as quickly as possible, and that perhaps now the local area is drying up, sales may be slowing so the current owner wants to bail after making all the long term sales. So this is where I’d really like to hear from gym owners who are experienced in this market. They claim to have 300 customers. 100 carry over from their previous location, and an average of 50 per month over the last four months. Of course I’d have to review their records to verify this.
    Some of the equipment appears refurbished (the treadmills in particular), but still I’d think that he must’ve spent a bit more than $80,000 on the equipment.
    My biggest concern is that I am inexperienced in assessing the market, and being able to accurately forecast at what rate I can pull in new customers.
    The lease rate is $7,500 per month. The current business owner has subleased one (of the five) floors to another company, for only $1,000/month for five years. That doesn’t make good business sense to me, and perhaps he was in an emergency situation and made a bad decision here. On the other hand, in building, ground floor real estate is normally about twice the rate of upper floors here in Vietnam, so this might be fair market value, I’ll need to verify that. Supposedly this lease would carry over to the new owner when the business is sold, though I’ll need to verify that.

    Other considerations:
    Monthly fees are $70, which is in line with the 2 bigger local competitors (who offer much less floor space and equipment (particularly lack in free weight equipment), but have access to a swimming pools, and tennis courts). Though most customers opt to pay $450 annual fee upfront (and some large unknown percentage of that went with the buy two year- get one year free program).
    The new residential high rise complexes will likely have some sort of fitness facilities, though if they are like the existing ones, they will lack in floor space and equipment, but compensate with swimming pool and tennis courts.
    They haven’t yet fully capitalized on sales of accessories (gloves, belts, t-shirts, etc), and supplements (though they claimed that they tried to move supplements in the past and that they moved too slowly, with the exception of protein powder). Perhaps I could sell other supplements (amino acids, multi-vitamins, creatine, etc), though I would have to organize a strong marketing scheme to educate the clients and sell. I am also unfamiliar with local supply of such supplements (I think that there is not a lot currently available / imported.
    The local population is much less informed about nutrition, supplements, workout routines, etc, - I could capitalize on some of this by hiring and training trainers, or even coming to some agreement with expatriate professional freelance agent trainers.
    There are over 83,000,000 citizens in Vietnam, but the average per capita income is very low (somewhere around $200 per month), though in Ho Chi Minh City (and Ha Noi), most of the upper middle class people reside. The best fitness clubs most often in 5 star hotels) offer memberships most commonly from $100 - $150 per month (which would include pool, and plush club surroundings. I met with a manager of one of these facilities, and he claims that there is no shortage of potential clients willing to spend that amount.
    Thus far unsure as to whether they maintain a preventative maintenance program, or an inventory of spare parts for their equipment. The equipment is all imported, and I am guessing that most don’t have local parts and service representation. Hence if any equipment breakdowns, there could be a long lead-time in securing required parts. I’d probably do the maintenance personally until I could hire and train someone to do that.
    They claim that their electric costs are about $500/month, and their water cost is less than $200 per month. I’m a bit skeptical about this as they must have about twenty 2 hp air conditioners which run about 12 hours per day. They are new Panasonic split wall mounted AC units; I’ll be checking the input power on these.
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  6. #6
    Grumpy Achy Mod ctgblue's Avatar
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    as stated, get a full look at their financials and I'd want to see proof of these energy costs. Hell my 2400sqft home here in USA cost me over $400 in July in electric alone.
    That's the stuff that will bust you.
    Make sure all electrical and structural items of the building are in good shape and verify who fixes problems if they occur.

    It's a tough call, most gyms here don't make it, so if you go for it, good luck...
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  7. #7
    Registered User otiskii's Avatar
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    Wow, the price sounds ok but the lease sounds outrageous for having 300 clients that has already paid the current owner. In other words, you have 300 freeloaders as far as you are concerned for 1-3 years. My big question would be does this culture even care about weightlifting/fitness? I have no idea. Have you spoken to gym owners in other towns?
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  8. #8
    always in training STR8OUT's Avatar
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    You say that the sales director sells mostly $450 yearly contracts... now does that mean that most of your members will be non paying for at least a year? The people you are buying the gym from will keep this money they've already received from the members I'm guessing...

    So your rent is $7500 per month. Plus utilites will cost around a grand I'm guessing, maybe a bit more. So count on your payments being $8500 per month. Divide this by 300 members is $28 per month from your members just to break even on rent/utilities. Plus you'll have a loan to pay for the purchase price of the place ($80K).

    You really need to not do the yearly membership thing and switch to $40 per month or something like that... and get as many members as possible in the door.
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    Your Demographic seems to be male oriented
    I have not owned a gym but have worked in them and most gyms I have worked in have had the atmosphere changed
    to where the trainer is apart of the clients life. You cant have a Bulking Trainer teaching a femAle who is small and The trainer yelling commnds at the female
    The doors to said Gym must be open and interesting

    1.An extra 160K on top of purchasing expense
    2.Doors open and no intimidation to anyone
    3.Get some proved female trainers
    4.Interior must be done over to make clientelle feel great Plasma Tvs and such.
    5. If your clientes can leave the Gym feeling like the lady in this picture you will have no problem keeping clients
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  10. #10
    Registered User irishmickk's Avatar
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    It sounds interesting, the size is great but personally one thing I would do is turn the weights and machines floor into a machines and ladies weights floor and then either have all or most of the laundry floor as a proper free weights room. Most female members can be a bit intimidated if the free weights are in the same area as the machine weights. The rent is average for a country like yours and a building that size, one thing I think is over the top is the cost. 70 a month is way beond the reach of most people over there, this is probably why there is so little members. Don't get drawn into the competition of well the 5 star hotel down the road is charging 130 a month so 70 is not a lot". You are going for a completely different class of member, the members who pay 130 for the membership at the 5 star hotel are the same people who pay 5000 for a silly chanel handbag. These are generally the local business owners and their wives, they pay the membership as a badge of how wealthy they are. If I was you I would concentrate on opening up the availability of gym membership to office workers and the middle classes. Your gym is big enough to accomodate about 2-3k members, 39 a month or 350 for the year along with a big marketing push should get about 200 members a month. Don't worry about the "freeloaders" which you will inherit, they wont cost you a thing and will customers who you will get fro free to upsell personal training and supplements ect.

    One question I would ask is why they moved and how they only brought 100 members from the last gym, were they moving up in size or down, from a better location or a worse one. Check out the old location and ask locals about it, it could tell you which way the business is going.

    Can you count how many treadmills or the total number of pieces of cardio equipment are in the gym?
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