EP 65: How To Sell a Fitness Club For Maximum Value, with Jim Thomas, Fitness Management & Consulting

Ed Mysogland  0:00  
Business owners likely will have only one shot to sell a business. Most don't understand what drives value and how buyers look at a business. Until now, Welcome to the How to sell a business podcast where every week we talk to the subject matter experts, advisors, and those around the deal table about how to sell at maximum value. Every business will go to sell one day, it's only a matter of when we're glad you're here. The podcast starts now. Welcome to another episode of how to sell your business podcast. Yeah, I just finished visiting with Jim Thomas. And he, oh my gosh, it was so awesome. The number of things that he's going to share with us about the health club industry. Now Jim, you know, he, he's all over the internet, you'll, if you Google his name, you'll you'll find that he's the he's president of fitness management USA. And that's a management consulting operation. And he's been doing it for 25 years, he's owned and operated and managed clubs of all sizes. And you can find them on YouTube, where he's where he is. You know, sharing, sharing different lectures and, and seminars and workshops. You know, he, he's the guy and since he since forming fitness management, gym, he he has been turning health clubs around and you'll hear this in, in our interview, just some of the real basic things that you just wouldn't think about. He is the guy and he's, he's been turning them around for, like I said, 25 years. And so really, I'm really excited to share this for a lot of those types of business ours, I mean, you can as, as entrepreneurs, and anybody can get, get some of the get some nuggets from this, but especially gym owners, you know, this is a this is a real challenge for for them that how do you sell something like this, and Jim really brought some clarity to that. So I hope you enjoy this because whether you operate a health club, fitness center, or gym, gym and fitness management, they have all kinds of programs they from, from sales and operations to brokerage and, and financing and literally everything in between. He's one of those guys that you can tell by how much you know, the amount of information that he that just flowed from, you know, he's been battle tested and stress tested, and he is the guy to, you know, to help identify value and help create a successful exit. So I hope you enjoy this one. This is it was a lot of fun for me. And I'm certainly I'm certain it's going to be a lot of fun for you. I'm your host Ed Mysogland I teach business owners how to value and identify and remove risks in their business so one day they can sell their business at maximum value when they want how they want and to whom the who they want you know today Today's a special day Hey out to all I've had no hiccups in, in all of my episodes, with exception of one my my man Jim Thomas of fitness management and consulting we recorded and and for whatever reason it did not he didn't record and and what a gentleman What a gentleman to come back on the show and and rerecord with men. And I am 100% certain that you are going to have just an unbelievable amount of value nuggets that that he shares. So Jim, welcome to the show again.

Jim Thomas  4:08  
Well, once again, I'm thrilled to be here. Appreciate it.

Ed Mysogland  4:12  
Well, before the show started, I kind of gave an overview of of you and what you've been into. But you mind talking a little bit about fitness management and consulting.

Jim Thomas  4:21  
Yeah, sure. Absolutely. You know, and one of the things that just in the big picture of things, one of the things that things that really makes us unique and me unique in terms of the services providers, you know, I'm a former gym owner. I own eight of them, had four of them that I started from scratch for them that were acquired. And, you know, one of the unique things I tell folks all the time that you know, I'm qualified to you know, go clean your bathroom and I can go at the same time, you know, do a review of your p&l statement and kind of everything in the middle. Because that job of ownership as the folks out there listening that are in that role, boy, it changes moment by moment.

Ed Mysogland  4:59  
Well, it's funny you say that because in our practice, you know, we talk more people out of business than into business, you know, when they realize not only am I the CEO, but also head janitor, that that changes the dynamics of me. Don't we pay somebody to do as well? Yeah. But for every dollar you do, that's $1 out of your pocket. So, you know, take, you know, pick your poison, what would you prefer? So? Well, so, so my first question is how, how complicated the gym business is, I mean, it's not just an assemblage of assets and build it, and they will come. There's a lot there, there are many silos, little profit centers, all working together to make that gym profitable, or marketable, or however you choose. So can you can you just tell me a little bit about, about the gym business? And where, where is it? Where do you find the profit?

Jim Thomas  6:03  
Okay. And so, you know, it's interesting, because folks that want to get into the business, there is a tendency a little bit to oversimplify this, that you build it, they will come mindset, kind of kind of hops in there. But you know, in terms of profitability, I'll give you some things that we look at here, okay. And particularly with something, it's new, and then if it's already existing, you know, we have to work to kind of reach these numbers. But we want to be able to negotiate a lease, that at maturity, I'll call that a year, at maturity, that lease represents on a monthly basis 15% of our revenue, we want to be controlling our payroll, to the extent that that's going to be at 40%. And so this being a very fixed costs business, we keep our rent in line, negotiate it, right. And that's a challenge for some folks that have not done it, they need to get help, and, and then keep our payroll in line. Now we've got a run in shot, you know, I get in some of these that are turnaround situations, and that, that rent that, you know, 40% or 50%, we can many times fix it, but there's some challenges in there. So you want to make sure you start off, right.

Ed Mysogland  7:17  
So with the rent, I've always, I've always thought that gyms are a destination location, so it's not necessarily you need a lot of frontage. Is that Is that true or not?

Jim Thomas  7:29  
You know, I would agree with that. You know, when we look at locations, the way I like to look at this, you've got an A location, which is, you know, that's prime spot, you know, prime street corner, all these great things, but you paid big money for it. What I've always liked, and what I suggest to many folks is let's look at a B location, maybe it's pulling from that same demographic area. But because there's a B location, half mile down the road, maybe even a mile, the rent is substantially lower. Now, here's the key, though, is you have to be good at at marketing, you have to be good at getting the word out. And if you're good at that, that B location is perfect.

Ed Mysogland  8:09  
So, so the radius that you're talking about I if I remember, right, it's like three or four miles is is where you're pulling or pulling your constituents or your members. Is that right? Right or no? Yeah, yeah. Okay. So, I'm sorry, go ahead.

Jim Thomas  8:29  
No, I was gonna, what I was gonna say there is generally it's going to be about a 15 minute drive time, right? And which is about a three mile radius. But here's the thing for folks to think about when they're doing this, the greater job that a gym owner does and creating different tation you know, providing a different product than what everybody else in the market is providing. This will expand. Yeah, that pull radius, you'll pull further further distance. So there's a lot of things you want to be thinking about here.

Ed Mysogland  9:02  
So when you say that though, when you when you're the differentiators, the different types of are you talking different types of exercise, like you know, you have your your normal, the bodybuilder types that are, you know, just using free weights and machines kettlebells. And then you have like, CrossFit, you have Pilates you have I mean, what what other what other I suppose fitness silos are? Or are we talking about?

Jim Thomas  9:35  
Yeah, when you start looking at different tastes, and I'm asking you some some things you see out there right now, without kind of naming names necessarily. There's products out there that will charge $10 a month, and you mentioned their name, and everybody knows, gets $10 a month I get it and that's a massive difference station. Again, you know, compared to most folks, you got others, maybe they're running a women's Only operation, that is a significant difference station. Because there's a lot of women that don't want to be in that CO Ed environment, or won't even go in Sure. You know, given that you've got some that are open 24/7, you can work out at two in the morning, if you want to know. And if you're Where do you have hospitals, or maybe auto manufacturers, those are some good places for those, those are some more of the obvious points of differentiation.

Ed Mysogland  10:29  
So, so I know one of the challenges that that gym owners face is trying to create a community within their, within the, within their, within the pool of members, that, you know, that everybody kind of gets along, and everybody is, you know, taking the same classes, and they go out for beers afterwards. And that kind of thing. How does an independent create that I know, CrossFit, CrossFit kind of has that vibe, where you know, where you see the same people over and over again, and we're all we're all in this together? But how does how do you make that, you know, inviting atmosphere? Because that makes a sticky client? You know?

Jim Thomas  11:18  
Absolutely. It's a fabulous question, maybe the question of the day, because it gets back to, you know, attrition, and, you know, how do you retain your customers? And what you're looking for you use this word, you know, that sense of community? And in very simplistic terms, here's what I would suggest that any club owner want to look at. Are you treating your members? You know, are you treating them? Like they are consumers? Or is it a sense of community? Are we providing something, we're doing it for free, we're doing to help we're doing it to benefit them? We're a resource center to them, or are they simply consumers, because the big mistake that I see is we say we want a sense of community where we're going to provide all this, but the reality is, we're really looking at them, like their consumers. Now, that's not to say we're not going to sell them something, we're going to have all that available. But there's a big difference. There's a big mindset shift right there, in terms of how you view your customer.

Ed Mysogland  12:22  
Well, right. And, and one of the things, one of the the nuggets that you shared, you shared last time was the proactive manner in which you red flag your, your clients or your members that that are perhaps flight risks, and you do some outreach to to retain them. So can you circle back and talk a little bit about about that?

Jim Thomas  12:51  
Yeah. So in terms of retention, and in keeping our members, you know, when, when a customer comes in, I get asked this question a lot. Hey, Jim, what should you say, when somebody wants to cancel? Well, let's try to not be in that situation, first of all. And so what we suggest that any club does, is every day when you come in, you want to pull a member usage report. And depending on where you're at every club is a little bit different. But let's just say we're going to identify being an inactive member as coming in four times or less the previous 30 days. And so every day, I'm pulling a member usage report of folks that have been in four times or less, and I'm going to start making phone calls. And this is a brand new kind of CRM category, I'm going to call and I'm calling the idea to nurture to help maintain interest, maintain desire, be a resource center, be a servant, because the data tells us every interaction we have with that inactive member, they're now 20% More likely to come back in, and it's highly effective if

Ed Mysogland  14:06  
I was gonna say I'll bet it is because if I got a call from my gym saying, Hey, we haven't seen you, we haven't seen you in a while, you know, you may want to think about getting your butt back to the gym. You know, that that would be an interesting, that's certainly a differentiator in all my years, I have not known anyone, to any gym owner to to have that type of outreach. I mean, that's an irregular thing, right?

Jim Thomas  14:35  
So many folks don't do it. And, and I would say, you know, the lion's share of the folks that I talked to me coming in are not doing it. And it's one of the things that we encourage because you know, all the time and effort and money that goes to acquire a new customer to not have a similar system on the back end to save that customer. You know, it's kind of crazy because all Normally what you're trying to create is this member experience that keeps them wanting to stick around

Ed Mysogland  15:06  
what you made mention of, of something I wanted to ask us is the customer acquisition costs. I mean, what? And I know, it probably varies between markets. But I mean, what what should it cost for you to acquire a customer?

Jim Thomas  15:23  
You know, it can be expensive if you're not careful. And here's what here's what happens is most gyms, what they will do, they will, they will, they'll, they'll set up like Google AdWords, and maybe it's a $300 budget. And now one of the problems you have sometimes is we're not tracking that. So we don't know, right. And then and then we'll do some kind of a digital marketing program. And these digital campaigns, not including the actual advertising mean, they could cost you 1000, you know, $1,500 a month, and maybe you get 50, good leads, and maybe 25 Of those, you get to talk to maybe a sign up 12. So it can get expensive, if that's all you're doing. But see, that's where really, you have to understand all the moving parts here, because there's a lot of things that are going to cost you nothing, member referral programs, former member programs, you know, that I call alumni, and I give you an interesting stat add, you know, there's currently more former members in the US than there are current members. And that's not really pandemic related. It was that way before the pandemic, there's just that much of a churn. But But the beauty of it is, most folks will look at him and kind of ignore it. But that former members like your number two source of new members behind referrals, I had no idea. And so you want to have both of this, you want to have this, when I call that boots on the ground that guerilla marketing, and then you want to have your paid marketing, you want to get that acquisition costs down?

Ed Mysogland  17:03  
Well, I'll tell you, if a gym owner can calculate and identify where their customers are coming from and how much it costs to acquire them. There, I can tell you, they're miles ahead of the next the next guy because they'll survive.

Jim Thomas  17:18  
You know, what happens on that a little bit is on some of this. Because we don't understand the sales process, there's a tendency to charge very little to get started. And maybe it's just month to month, whereas it's easy to kind of leave. And you can literally have situations, if you're not careful. If you're not monitoring this on all ends and how you're doing it is you actually don't make money until MONTH number four in some cases.

Ed Mysogland  17:51  
And better. I,

Jim Thomas  17:53  
I got involved with the club one time, they were losing maybe 20,000 a month, and they were doing big enrollments, and they could not understand it. I went and did the math on it turns out they were losing money upfront. Every time they signed somebody up freely. And we and we had to cut out certain things they were doing. Their dollar volume dropped, but the profit margin went out.

Ed Mysogland  18:19  
And that's that's funny. I was getting ready to ask you, because we fight that a lot that, you know, I really don't care about the top line, I really care about your bottom line. So how however you make your machine profitable, I mean, and if it's repeatable, pal, you've got a sellable business all day long.

Jim Thomas  18:41  
Yes, absolutely.

Ed Mysogland  18:42  
So who are the typical buyers buying gyms these days?

Jim Thomas  18:49  
You know, we did one recently, it was a gentleman who was living in the Midwest. I think he was an insurance agent and he was freezing cold up there. And he bought a gym down in Florida.

Ed Mysogland  19:03  
So it's so it's a it's a lifestyle business. I mean, it's so we we view it as you know, you have financial buyers that are basically replacing the ownership and they're going to sleep, eat and breathe it as a lifestyle. And then you start moving into people that are looking at this as more of an investment. So in your practice, I mean, what what are you seeing more of the guys that are looking to buy it as an investment and have somebody run out or somebody that's kind of changing gears and moving more into a lifestyle? Yeah,

Jim Thomas  19:37  
nine times out of 10 it's someone who's going to buy it and run it themselves. And of course, you know, we'll help direct them a bit where you don't, you don't want to get anchored to what you're doing there. But more often than not, that's really the buyer that we're talking to.

Ed Mysogland  19:53  
So with that type of buyer and we spoke about before For Where do you work? You know, this a lamp for it, but where? Where are you finding those buyers?

Jim Thomas  20:08  
You know, many times, you know, they'll find us in a sense in terms of, you know, going to our websites and you know, hearing me speak and hear me talk and existing operations gotta tell you what's interesting, our broker division how that originally got started. We've been doing it for quite some time. But how it originally got started was clients would say to me, Hey, Jim, I think it's time to sell. And I wasn't really involved in doing that at the time. And I said, Well, yeah, we need to find a broker, if that's what you want to do. And they said, Oh, no, no, no, Jim, we know you. We trust you, we want you to do for them. And that's really how it led to that. So existing clients, you know, people that are searching this out? Maybe they'll find this. I mean, do we do our own email marketing, social media marketing, you know, things of that, we'll get folks that know, Hey, Jim, if you remember me, but we talked about two years ago,

Ed Mysogland  21:06  
100% I get I get the same, but so what's the success ratio? I mean, like, for example, the, you know, the industry average, on on all businesses is about a 20 to 25% success ratio, to sell their business, which, to me is, is absolutely dismal. And, and, you know, there's, uh, there, there can be a number of reasons why deals don't go together. But I know size matters, you know, the, the more sophistication, the more likelihood that the that the seller will withstand any kind of financial scrutiny from in due diligence. But, I mean, what are you seeing, as far as you know, the likelihood of transitioning a gym?

Jim Thomas  21:56  
I think the numbers are pretty dead on, I find that at least half the gyms never sell. They don't even get off the launching pad. And in large part is because they're overpriced. The owner has not valued it properly. You know, they they put value into blood, sweat and tears, and they don't they can't come to grasp the reality. It's about cash flow.

Ed Mysogland  22:25  
Yeah. So but that, and again, it's it's across all industries, valuation is always the always the challenge I have. I've been called the grim reaper of business valuation. And, and I get it. I mean, you don't want to hear you don't want to hear that perhaps your what you've worked and sacrificed for is not as appealing as you might think, to a third party. Right? So so how are you coaching them to make more of a saleable business?

Jim Thomas  23:03  
Well knows if there's a few things, and actually, we actually just took on a recent client like this, they were looking to sell, they wanted to kind of get out. But it just didn't, we didn't really do a valuation, we could look at the numbers pretty quick. And we can pretty well tell them, this was not going to be a successful attempt at doing this. It was pretty significant. And, you know, we had a few conversations. And so what are we in the process of doing, we're in the process of growing the sales, we're in the process of growing the revenue, we're in the process of training the staff, we're in the process of it depends on where you're at financially, but we want to keep the gym looking as new today is the day that it opened. So if you're short on, if you're short on funds, maybe we'll put out some new carpet, we'll paint some walls, you know, we'll do some different things. But we're trying to bring this thing back up. Because if your sales are trending up, right, and you've got, you know, good staff in place, you know, I kind of jokingly tell folks, this is how you sell your business for more than it's worth. Because, you know, you're trending up and there's opportunity here, you couldn't even give the darn thing away if it's losing money.

Ed Mysogland  24:15  
So a lot of challenges that the business owner faces, when when you bring in like, Hey, if you if you have the runway, and you're willing to you know, give me a year, two years or whatever, you know, I'm telling you, you can make another turn on your multiple. So I guess my question, is it. I mean, how, when someone hires you how and I know it depends on the scope of what you're doing, but how quickly can you start seeing a return on that investment? Because I know that's probably real hard for especially gyms that are struggling. You know, it's hard to take that you know, What they are making and plow it back into, into consulting? You know, I mean,

Jim Thomas  25:06  
yeah, and I get it's an interesting question, because it's not as difficult as you might think, to start seeing results quickly, okay. And there's a couple reasons for it. Number one, is a lot of these folks when the business is trending down, they're not maybe doing everything they should or could be doing right to make it work. And one of the common things that I'll do in nearly every situation is we'll do an analysis of the existing assets, the website, how you answer the phone, your sales process, your referral process, these are things are already spending money on. So we're not spending more money, we're just doing a better job with what they already have. I mean, something as simple as putting Facebook Messenger on their website. Yeah. It can get you a sale a day. Yeah, I

Ed Mysogland  25:59  
remember you saying that. I could not believe that. That was that that was the low lying fruit. You're talking about that? That? That Facebook Messenger? I totally, I can totally see it. You know, and because I, I asked you what, you know, what, what, what in the world? Is someone going to ask on Facebook mark, or on Facebook Messenger? And you're like, well, that's a real easy one. What are your hours? How long are you know, what's the what's the pricing structure? You know, what's the classes and so on? So forth, then, and I, what you said, and I totally understood it. But I, I'm with you I didn't? I think you're right, that there is a lot of opportunity with little to no expense outside of the, the consulting costs, because you're already you're not adding layers, you're just fixing the what's broke.

Jim Thomas  26:56  
That's it, there's one simple secret to it. For these folks that we talked to, they have to be ready to make a change.

Ed Mysogland  27:03  
And that's always, that's always the hard. That's the one simple.

Jim Thomas  27:07  
That's the one simple key to it. If that's in place, really sky's the limit. And you can almost start having some results day one, believe it or not, just because it is it's simplistic kinds of things. Things like getting a referral or hack, maybe putting out a press release. Right. Right. There's a media, there's a media even though you're there, and these none of these things.

Ed Mysogland  27:29  
No, that's right. I that's a that's a I don't say a funny one. But that's interesting that you you had you know, that it can go that quick if you have, you know, I don't say if you just believe but if you you know, if you're willing to buy in or give it 3060 days, you can you can recoup that cost associated with with the consultant, I get it. I meant to ask, I don't think I asked you last time, but what's the what's easier to run an operate a co Ed gym, or an all women gym?

Jim Thomas  28:10  
Oh, you know, from a process standpoint, and everything you look at, they're identical. I think the key is it your where's your passion? I've owned both of them. I've owned women I've owned, that's why I'm asking. And I've had co Ed facilities, I found no, no different now, I will say this in the COVID facility, your cost is a little higher, because your equipment costs is higher, because you're having to buy heavier equipment, because the guys are lifting some real heavy stuff, okay. Whereas the women aren't really lifting at that level of weight training and things like that. But to me, they're identical. I think it's where your passion is and in what you like, I'm personally a fan of the women's only business. I'm a little surprise, you don't see more of it out there. I think it really would open up a marketplace to a lot of folks that are not currently attending facilities, I think.

Ed Mysogland  29:03  
And I don't know if it was in your neck of the woods, but we had curves. And so they kind of evaporated and I don't know what happened to him. But I know that kind of that kind of was in your same Bailiwick of, you know, of women, you know, that, that women owned or women, you know, businesses that are geared toward women would be successful. So I don't know what exactly happened.

Jim Thomas  29:37  
You know, it's interesting on those guys, and I was never really involved with them. And they were they were just you know, south of where I'm at here a little bit. But in large part a lot of that growth on that type operation. It came in these communities that were maybe under 200,000 people where it was easy to get a low rent, it was easy to advertise easy to mark Get in a lot of those places, you know, 100 members, you know, maybe 200 members in at work. And as they started hitting, you know, okay, we're kind of fall we need to expand. And now all of a sudden, we're gonna go into Los Angeles and Dallas and Atlanta, the rents were much higher, you had much more competition, and it didn't lend itself to who their customer was at franchise or I get it. And wasn't what was

Ed Mysogland  30:25  
what you said, since I brought up the franchise. So we talked to men and men and CO EDS. So franchise versus independent, which I don't want say, which is better, but I mean, what in your consulting? What are you seeing as the superior you know, is there isn't that much difference, I guess, is my

Jim Thomas  30:47  
girl that's I'm a little bit I tried to actually compete against those franchises. And I'll actually class part of my marketing, no franchise fees, no long term contracts, no, no royalties, because bring a consultant on, just pay for what you need. And you stay in, in in control of your business, whereas the franchise are going to dictate a little bit to you. So now we work with a lot of franchises. But the folks that come to me by and large, they want to maintain control. And they'll just say, Hey, Jim, teach me how to do it. And I'll go out there and do it. But they're all good. Yeah, me for folks. Oh, and one of the things if you're doing something really big, you know, the franchises are nice, because SBA likes those kinds of things, because they've got that kind of seal of approval. There's a proven system on

Ed Mysogland  31:35  
it. Yeah. Well, but again, it's back to the the system, you know what I mean? That, all right. I don't mean to, to not imply I don't mean to imply that it's not complex. But after you get the system, what's left other than just add gas or revenue? You know, and it just seems it just seems that, you know, I just don't I don't see, I don't see the value, I just don't see the long term value.

Jim Thomas  32:09  
Yeah, I mean, it's like anything that you're doing, everything has to evolve, right? I mean, everything is going to change. I mean, you can look at when I was building them to what they are now, heck, I can look at my consulting business and what it is today and what it was 10 years ago, I mean, it's night and day difference, you know, the business has to evolve. But you know, it can't just be, you know, membership revenue, you know, whatever those other ancillary sources are going to be personal training, supplementation, retail, your whole online component, there's really no shortage of growth. And, you know, just kind of, you know, business 101, you know, the three things you look at is we have to acquire more members, more clients, right, make more sales, we have to get more money per customer, and we have to get them to buy more often. And we've got to what amounts to everybody in our marketplace has to know who we are. And if we don't do that, you know, we're going to struggle, but when everyone knows who we are, what a great competitive advantage. Sure. And now you're dominating, and that's what you're trying to do. You're not trying to compete.

Ed Mysogland  33:16  
Yeah, no, it's funny. So, so the, my wife was talking about, you know, what appeals to her to at a gym? And the funny thing is that, her and her little group, it's about the cleanliness of the facility, not necessarily, you know, the hours. I mean, it's nice that they have equipment in this that and yeah, but it's like, the cleanliness, you know, is this a is this a dump to go to the bat, you know, go into the bathrooms, which to me is another, I don't wanna say low lying fruit. But if you look at the funny thing is, if you look at Google reviews, or some of the other review sites, one of the primary complaints you see, it has to do with cleanliness and hygiene and things like that. So I think that's a another area to, to consider low lying fruit, you know what I mean?

Jim Thomas  34:14  
You know, it's interesting that when we're opening new facilities, you know, probably 80% of your finish out dollars to finish that new facility. 80% of it is going to go into your front desk reception area, and into your locker rooms. And from a selling from a selling perspective, you know, we want that front desk to have that wow factor when they walk in, because that's what's going to grab them, but to your point on cleanliness, that locker room, it needs to be pristine. It needs to be as clean as what you have at home, because that locker room from a client standpoint, is one of the number one things it's going to affect your member attrition. Yeah.

Ed Mysogland  34:58  
And and, I mean, it's so only make sense. I just never really, you know, you pay attention when it's not clean and you don't give any thought to it when it when it's, you know when it is. And so, alright. Well, switching gears to Oh, like, you know, we've got some businesses that are that that just aren't going to make it. And, you know, so some of its self inflicted some of its competition. So how does a business owner, wind down the business and make as much as they can on the way out? Knowing that, you know, perhaps there's a personal guarantee on that. On that lease, perhaps there's some, some leases on the equipment, but how can I, you know, I don't want to eat cheese, but I want out of the trap? How do I do that?

Jim Thomas  35:56  
You know, what we've used the strategies, you know, we use them heavily during the pandemic for existing operators. And I want to answer this a couple different ways, because the rub there a little bit is that personal guarantee on that leaves. Now some of this will depend on that relationship you have with the landlord, you know, whether you file bankruptcy or not, there are some things in there there can have some effect on that. But with that said, we've had a lot of situations where we've helped club owners unwind their getting out of the lease, and they're simply, hey, I'm just gonna go ahead and shut it down. Well, here's the reality number one, they can and should sell that member base to a local club. And it's really a simple process is a three way agreement between the two owners and whoever the building company is, it's a pretty simple process. And for the club that's acquiring it, it can be done for no money out of pocket. And so you want to sell that, but there's other assets that you have, you might have some equipment, if it's not on a leash, you might have some equipment, but what you have also, you've got website URLs that likely have some SEO attached to him someone's following that, you know, appoint those to yours, one of the great ones that I've always loved is, hey, we want the phone number, we're gonna point that phone number over to our place, you know, we want member lists, renewal lists, gasless form, remember list, we want all that we want social media, we want your YouTube channel, there's value in this, so And there's so much, so much of a tendency, because they don't know how to do it, just to walk away from all that.

Ed Mysogland  37:39  
So how do I? Yeah, so I'm the but I'm the business owner. I'm like, Alright, I follow all that. i These are a great list. How do I, how do I value that? I mean, what what is, you know, and I'm not a fan of rules of thumb at all. But, um, but I'm, I'm putting myself in the shoes of the business owner. And I'm like, Oh, all right, Jim. That's great. But you know, what's my, what's my website worth? What's that URL?

Jim Thomas  38:10  
Yeah, and usually the URLs, phone numbers member list, that's going to push the multiple up or down. Okay. Okay. And so let's just say, for example, let me grab a calculator here. And let's just say, I've got a facility and I've got $20,000 A month coming in, in recurring fees. Generally speaking, I'm going to just take that times three. And that's the value of that $60,000,

Ed Mysogland  38:44  
and how you allocate it. Okay, I'm sorry.

Jim Thomas  38:47  
And then we'll work the deal right now. However, I did it on a multiple of three. But you know, what, if I've got a good URL, if I can get their phone number, if there's some good reviews out there that I can grab on Google My Business, or I can grab member list, maybe I take that multiple to four. Maybe I take it to five, and maybe there's some good personnel that might come along with it. Maybe there's personal training, I might come along with it. This will all do that. But I would start at three, I got three so and then kind of go up or down depending on circumstances.

Ed Mysogland  39:23  
The is there. Okay. So so that addresses the goodwill and the intangible assets or, or, or does that include the the equipment that's in the facility?

Jim Thomas  39:37  
Yeah, that would generally include everything at least at least that's where we would start for the most part used fitness equipment does not have significant value, and

Ed Mysogland  39:48  
that's where I was going with it because I'm certain some of some of the people are like, Yeah, I don't I don't want your I don't need I don't need another smith machine in the facility. So let's just but I damage then your customers and guest lists and thing. Yeah, the the intangibles. So, okay, so they. So you can see that three multiple really could be the just for the intangible assets. And then if you're picking up equipment can go up higher, but but at the same time, I think I'm putting words in your mouth. And let me back back that up a little bit. Because you said the three typically includes equipment, and I get it. And so I'm sorry about that. I didn't mean to, to kind of go

Jim Thomas  40:37  
mean, it can vary. It's really, I mean, over the years, you know, I don't know if any one deal has ever been the same, right? I mean, they're all they're all a little bit different. So this depends on circumstances. And I mean, there's some folks that they just can't wait to cut the deal. So they get the heck out of the room. And there's others that now we need to figure this out, I

Ed Mysogland  40:56  
get you. So one of the things that struck me in one of our original conversations was that you were doing deals, financing and sourcing. So that's a different animal. I mean, from the lenders that I've worked with, yeah, I don't want to say that they, they're, they aren't stoked about getting a gem on the bank's portfolio. But but, you know, that takes a real special bank or special lender, to, you know, to get their arms around what all is is going on, especially when you're talking about recurring, you know, the recurring revenue and the attrition of members. I mean, there's some risk to the bank. So can you talk a little bit about that financing and structuring and how are you doing it?

Jim Thomas  41:42  
Yeah, let me give you the two ways that we do it. And we look at it from a new gym startup, and then from an existing operation. And so from the new gym startup, it's really, it's simply, you know, personal financing, as long as they have a credit score of 680, or better in all three bureaus. And as long as you have a minimum income of 50,000 per year, and there's gonna be some underlying things, but those are the key criteria, they can get funding for up to $400,000 to start a new business. And for the lion's share of new businesses being started in the fitness industry, that's more than enough. They may not, they may only need half that. So that works now for existing operations. Of course, they have proved their business. But the way that works, it's a simple process, is we need to see the most recent 90 Day bank statements. And it's simply Hey, what's the what's the differential in there between, you know, the revenue that's coming in? And what the expenses are? And can you afford a new payment? What would that payment look like? And they can get funding? Gosh, they could get funding for up to $2 million, if they, if that spread was big enough. And so it's not necessarily the industry, it's more just about, hey, we want to see, you know, history of revenue, the longer the history, the better. And we want to see that, that is working for you.

Ed Mysogland  43:08  
So what's the what's if I'm buying a gym, what's my downstroke? Is there a percentage or no?

Jim Thomas  43:15  
Well, not necessarily. If you can finance it all out, if I'm gonna say, I'm gonna go buy something, and I'm not, I'm not in business. And so I'm gonna go get a personal loan, and I've got a, I've got a place over here, I can buy it for $300,000. And, you know, I go out here and I qualify for 300,000. I buy it, and I make my payments back and oh, so everybody's,

Ed Mysogland  43:36  
so you can you can do it without any money, any equity out of your own pocket.

Jim Thomas  43:41  
So I usually you can, you can,

Ed Mysogland  43:43  
and and so this isn't falling under the SBA. This is just sources that you have. Yes.

Jim Thomas  43:48  
Yeah, that's it. That's the challenge with SBA is a great source. But sometimes it can take a long time. And there's a lot of paperwork, and we're looking for short time and not much paperwork. Aren't we all?

Ed Mysogland  44:03  
What is the turnaround time? So I submit, you know, here's my purchase agreement, here's three years of tax returns, you're going to run my credit. Now what happens?

Jim Thomas  44:12  
Oh, if you're buying a brand new deal, and everything really checks out, I need to see your FICO scores, the higher the better, by the way, and I've got US tax returns, you could probably fund them within a week

Ed Mysogland  44:27  
really, because in my world time kills all deals. Well, I you know that you're in the same year in the same time kills

Jim Thomas  44:33  
deals. Absolutely. Wow. One of the all time great truisms

Ed Mysogland  44:39  
so tight so you can do no money down. Assuming you have a great credit score and take a week to fund boy that's uh, that's

Jim Thomas  44:51  
it here's the thing too. I would even anyone who's looking to sell, say you have someone who wants to buy and say they're struggling doing that they don't have the credit score? Yeah, then they can't qualify. So now you got a problem, right? But you know, for a forward thinking seller, maybe do some kind of a downpayment, do some owner financing, and then maybe a balloon in six months, you know, give that buyer a chance to get his credit score up and come back in here and take you out. Oh, that's

Ed Mysogland  45:19  
a good idea. So, so what I heard you say is, you know, go ahead and, and, and do the deal. Have a have a structure. So basically, you're talking about refinancing them out, for for doing the deal, I guess, if I'm, if I'm a seller, though, I'm sitting here going, boy, I'm not certain what happens if what's going to induce this guy to refinance, you know what, I guess you could structure it as painful as possible

Jim Thomas  45:51  
that it's a balloon and maybe balloon in six months, you got to refinance. But a, if you've got a good buyer, it just circumstances can't do it. But here's here's a couple things that we suggest here, A, whoever your billing company is, we're going to have that billing company, this is again, another one of those three way agreements, we're gonna have that billing company say that new owner is going to make you a payment every month of let's just say it's four grand a month, we're going to have the billing company send it directly to you at the beginning of the month, I got it, we're not going to have a pass through the new buyer is going to go straight to you. So you make sure that you get it right. Plus, we want to see that new owners p&l statements every single month, until they refinance us and take me out nice, yeah, what, uh, so we're gonna stay on it. Because if I did have to take it over, which hopefully that didn't happen, at least we know where we're at. And we can go in there and put our foot on the accelerator and make the same word.

Ed Mysogland  46:47  
So do you. I mean, are you doing a lot of deals? As far as the financing side?

Jim Thomas  46:54  
Oh, gosh, we're financing deals, it's a regular thing

Ed Mysogland  46:58  
that's gonna say, Boy, that sounds like regular that sounds like anybody can use you? Or do you have to be a consulting client?

Jim Thomas  47:05  
No, anybody, as long as it's us, you know that to have us credit scores and US tax returns. That's the thing. And, you know, just to tease a little bit, we got some more stuff coming up. So maybe if you and I talked down the road, we got even some bigger news coming up on some of this financing? Awesome.

Ed Mysogland  47:21  
Well, I'll tell you what, you know, some of the alternative financing sources are going to make a small fortune with, especially if the economy turns on us, you know, that your BAS.

Jim Thomas  47:33  
And I tell you one of the challenges. It's interesting when I talk to people about this, because most of them, and they've been looking around trying to do things, and they just can't understand it can't figure it out. And just when they engage with with me or somebody like me, that can really simplify it, here's exactly how it works. They can get that you know, that that trust in there, and it can happen so quick and so easily for folks, and they don't have to really be fretting over it. Yeah.

Ed Mysogland  48:02  
Well, I look forward to seeing what what else is up your sleeve? Because I mean, you know, you've been you've been a leader in the, in this industry for so many years. And, you know, if you do any kind of research, your name just keeps on coming up. So I look forward to it. You bet. All right, so. So I've not only have a major record twice, I'm going to ask you the same question that we concluded with the last time and see if it changed. So I conclude every interview with you know, what's the one piece of advice that you could give listeners that would have the most immediate impact on their business? What would it be?

Jim Thomas  48:45  
The number one problem that I see in the fitness industry, is a failure to properly understand and implement sales and marketing. And nothing else is even close. Coming up right behind us that issue of retention, but we can't retain them if we don't get them. So sales and marketing is the biggest problem across the board. Okay,

Ed Mysogland  49:11  
so what is the best way people can find you? I mean, I It's a fairly easy I can tell you, as a as a guy that found you, I can assure you it is pretty easy to find. You're at the top of pretty much all the searches.

Jim Thomas  49:26  
Yeah, you got the Google fitness management and consulting Jim Thomas, you're you should find us but you know, go to our website, FM consulting.net. And you'll get a host as a host of information, a lot of free information there for you to help you grow your business.

Ed Mysogland  49:41  
Yeah, you have and you have a really robust YouTube channel and we'll have all of this, all of this in the show notes. So so don't worry about if you you're unable to take notes. It'll be it'll be there and Jim, boy, I got time to do Do I appreciate so much? So much of your time? And as always, it was it was awesome, great value nuggets.

Jim Thomas  50:08  
You bet. I appreciate being here. And I look forward to doing it again sometime.

Ed Mysogland  50:13  
Well, this time I think we recorded so it will do it in a few months. We'll do a follow up when you're when you're when you're when the new financing packages come out. Oh, I'll

Jim Thomas  50:24  
keep you posted. We're day to day on getting that done. All right, but

Ed Mysogland  50:27  
I look forward to it. Thanks so much. Yeah.

Jim Thomas  50:29  
Thank you. Appreciate it.