Gym Valuation Multiples
With growing trends in health and fitness, the gym and fitness center industry is thriving. If you want to buy, grow, or sell a gym, now may be a good time to do so. But before you make any big moves, it is important to determine the gym’s fair market value. This information enables an informed strategy as you navigate important business decisions. For a broad fair market value estimate, business owners and financial experts often refer to gym valuation multiples.
This article breaks down the most common valuation multiples for gyms and fitness centers. These tools offer a helpful starting point for estimating a gym’s worth. However, valuation multiples alone may not reflect the specific characteristics of your gym. For the most accurate gym valuation, it is best to work with a professional, experienced business appraiser.
At Peak Business Valuation, we regularly help individuals who are buying, growing, or selling gyms or fitness centers. We are here to provide an accurate and timely gym valuation! In addition, we can address any questions you have about the valuation process or valuation multiples. Get started today by scheduling a free consultation with Peak Business Valuation below.
What Are Gym Valuation Multiples?
Gym valuation multiples are financial ratios used to estimate the fair market value of a gym or fitness center. These multiples are often based on financial metrics such as earnings or revenue. To determine which multiples apply, business appraisers evaluate recent sales of comparable fitness businesses. For privately owned gyms, this data typically comes from private transaction databases. Applying suitable multiples indicates what a buyer might pay for the gym on the current market. For more information, read Valuation Multiples for a Gym or Fitness Center.
Common Gym Valuation Multiples
When valuing a gym, Peak Business Valuation commonly uses multiples based on SDE, EBITDA, and revenue. Each method provides an estimate based on a different aspect of the business’s financial health. To provide a comprehensive valuation, business appraisers often apply a combination of multiples. Below, we discuss each of these valuation multiples and the typical ranges seen in the gym and fitness center industry.
SDE Multiples for a Gym
Seller’s Discretionary Earnings (SDE) represents the total financial benefit available to the owner of a gym. This figure is commonly used for valuing small to mid-sized gyms. SDE is calculated by adding back personal, discretionary, and non-recurring expenses to the business’s net income.
Formula: Business Value = SDE × Multiple
Range: On average, gyms can sell for 2.48x to 2.93x SDE.
EBITDA Multiples for a Gym
EBITDA, or Earnings Before Interest, Taxes, Depreciation, and Amortization, provides a normalized measure of profitability. This metric is especially useful when valuing larger gyms or fitness centers. EBITDA enables straightforward comparisons between similar companies in the industry.
Formula: Business Value = EBITDA × Multiple
Range: Gyms generally transact within a range of 3.33x to 4.34x EBITDA.
Revenue Multiples for a Gym
Revenue multiples are based on the gross income a gym generates over a 12-month period. While this method gives a quick view of the business’s size and reach, it overlooks profitability. For this reason, valuation experts often weigh revenue multiples alongside income-based multiples like SDE and EBITDA.
Formula: Business Value = Revenue × Multiple
Range: Gyms typically sell between 0.65x and 0.97x revenue.
As a business appraiser, Peak Business Valuation applies valuation multiples as part of a full-service gym valuation. We also conduct additional analyses of the business’s financials, strengths, market trends, and risk factors to deliver a defensible valuation. If you need a gym valuation, Peak Business Valuation is happy to help! Schedule your free consultation below to get started!
How to Value a Gym Using Multiples
Gym valuation multiples use current market data to estimate a gym’s worth. However, using these tools effectively requires industry knowledge and financial expertise. When valuing a gym, a business appraiser determines the most appropriate multiples and considers additional external and internal factors that impact value. Then, weighted averages may be applied to refine the valuation. For more insight into the valuation process, see How to Value a Fitness Center or Gym.
Rules of Thumb for Gyms
SDE, EBITDA, and revenue multiples are popular rule-of-thumb methods for performing gym valuations. These benchmarks offer a rough estimate of a gym’s worth. However, rules of thumb overlook the unique nuances of a specific gym. As such, results are often unreliable for making major business decisions. For an accurate gym valuation, it is important to consult a certified business appraiser. Reach out to Peak Business Valuation if you have any questions.
Factors Affecting Gym Valuation Multiples
There are several factors that can influence which valuation multiples apply to your gym. Understanding these elements can help gym owners identify opportunities for increasing the business’s value. Here are some important factors to keep in mind:
- Membership Retention Rates: A loyal member base ensures recurring revenue, creating financial stability for a gym. As such, high member retention is a valuable metric for potential buyers and supports stronger valuation multiples.
- Revenue Streams: Offering a broad mix of services, such as personal training, group classes, and recovery services, helps meet a diverse range of member needs. This creates multiple revenue streams, promoting higher valuation multiples.
- Differentiation: Providing exclusive amenities or specialized programs helps the gym stand out from other fitness alternatives. A competitive gym is more resilient to market shifts and more valuable to potential buyers and investors.
- Location & Accessibility: Gyms located in high-traffic areas with convenient access and parking often generate higher revenue, which can positively impact valuation multiples.
Check out Value Drivers for a Fitness Center for more information.
Conclusion
If you need a quick estimate of a gym or fitness center’s value, valuation multiples are a useful starting point. However, these figures are based on general trends and may not reflect the unique circumstances of your gym. The best way to ensure an accurate fair market value estimate is to receive a professional gym valuation. Valuation experts take thorough measures to identify the unique variables that influence the gym or fitness center’s value. This allows business owners to effectively identify the next steps for their company.
If you are looking to buy, grow, or sell a gym or fitness center, Peak Business Valuation can support you with a precise business valuation. In addition, we can answer any questions you may have about gym or fitness center valuation multiples. Start today by scheduling a free consultation with Peak Business Valuation below.
For additional information, see Gym Valuations and Valuing a Gym.
