So You Wanna Sell Your Pilates Studio! What’s Next?

You decided to sell your studio. CONGRATULATIONS! That is huge.

All those years of hard work – and definitely some blood, sweat, and tears – have culminated to this moment, and you are ready to cash in. But before you hang your socks and toss the keys, there’s one final task that must be completed, and it just might be the heaviest lift of your studio ownership.

Prepping your business to sell.

Yep. That’s right. While you thought opening and growing your studio was a lot of work, prepping your studio to sell can be equally as challenging if you don’t know what you’re doing.

The average studio requires 12 months of preparation before listing the business for sale. Once the business is listed, it could take anywhere from 6-18 months to close the deal.

The more prepared you are, the more attractive your studio is to potential buyers. The more attractive your studio is to potential buyers, the more you can get from the sale.

So if you’re in the market to sell, here are my Top 5 Tips for Prepping Your Studio to Sell.

TIDY-UP YOUR FINANCES:

One of the first things a potential buyer will want to see is your business’s finances. They will want to gauge how profitable their investment in your studio will be, and they do this by reviewing several reports.

P&L (profit and loss)
Balance Sheet
Accounts Receivable
Accounts Payable

These reports can easily be pulled if you’ve been using a bookkeeping software like QuickBooks or Xero. Don’t have updated books? This is your first item of business – clean up your books. You may find this to be extremely overwhelming, especially if your method of bookkeeping has been a box of receipts and an Excel spreadsheet. If that’s the case, I suggest finding a bookkeeper who can do this for you. Having clean, organized books says a lot about the financial stability of a business, so you want to make this a priority.

In addition to the accounting reports listed above, a potential buyer will also want to see performance reports.

Sales Conversion
Client Retention
Lifetime Client Value
Capacity Utilization

These types of reports help the potential buyer understand how well the studio is currently running while also showing areas of opportunity and potential growth. Contrary to popular belief, your studio business does not need to be operating perfectly in order for a buyer to want it. Most buyers want to walk into a studio that is running smoothly but can also be improved. Having detailed performance reports makes it easier for a buyer to determine how much work will be required of them to take the business to the next level.

ESTABLISH RECURRING REVENUE:

Next, you will need to analyze your current pricing structure and determine whether or not it’s time to change your pricing model. Most studios are built on a per session pricing model, commonly known as “class packs” – meaning that the studio only makes money when services are rendered. Sessions are sold in packages of 5, 10, and 20, and the studio never knows if/when their clients will purchase again.

If this is how you sell sessions at your studio, you are going to have a harder time finding a potential buyer. Why? Because studios that sell “class packs” have zero predictable income. There is no guarantee that money will come in next month, and this is very risky to potential buyers. In a buyer’s mind, “What is going to keep the current clientele at the studio after their current packages run out?”

Instead, buyers prefer to purchase studios that have recurring revenue – guaranteed revenue coming in month-after-month for an extended period of time. This way, upon closing, the buyer walks into a studio with committed clients who aren’t going to jump ship, and they will have cash rolling in on Day 1.

If your studio has not yet transitioned to a recurring revenue model, it’s time to work with a Pricing Overhaul® Coach to make this change before you list your business to sell.

REMOVE YOURSELF FROM THE DAILY OPERATIONS:

The last thing a new owner wants is to walk into a studio that is 100% dependent on the owner. Buyers want to purchase a business, not a job, so they want to make sure that the business continues to operate as usual, with as little interruption as possible, especially for the first couple of months of ownership. If the business comes to a screeching halt the moment you walk away from it, a potential buyer won’t want it.

A sellable studio is one that operates consistently and smoothly without you. It has a team of committed instructors, dedicated client services staff, and a dependable manager. If you currently own a one woman/man show, it’s time to start building a team. The team does not have to be large. It can consist of a few part-time contractors who are responsible for various operational tasks that keep the studio ship afloat. But having a team in place before you list your business will make it easier to sell.

GET A BUSINESS VALUATION:

“How much is my business worth?” That’s the magic question. As studio owners, we have an idea of how much we would like to sell our studios for – I call this the “magic number.” Knowing how close – or far away – you are from the “magic number” is crucial.

If the market value of your business is relatively close to your “magic number,” the time to sell might be now. If the market value of your business isn’t anywhere close to your “magic number,” you have some decisions to make and some work to do.

Getting a baseline valuation is key to the sales process. Similar to a home appraisal, a business valuation will tell you exactly how much you can realistically expect to make from the sale of your studio. A professional will analyze the assets of your business and put a price tag on it.

Typically in the Boutique Fitness industry, studios are valued on an Owner’s Benefit valuation. This type of valuation considers the cash flow and profit that a buyer is acquiring upon purchase. In simpler terms, it’s all the cash that a new owner will immediately start receiving in their pocket the moment they buy the business.

In order to determine the Owner’s Benefit of a studio, you need clean books (refer back to Tip #1) and detailed P&L reports and tax returns for the past 3-5 years. There are a lot of variables that determine the value of a business, so you will definitely want to enlist the help of a professional who is well-versed in the Boutique Fitness Industry.

RECRUIT YOUR SUPPORT TEAM:

Speaking of professionals, the final step in selling your studio is to build a support team. This team will consist of advisors who handle key aspects of the buying process and guide you along the way. They include:

Bookkeeper
Accountant
Pricing Strategist – Certified Pricing Overhaul® Coach
Business Broker
Business Attorney specializing in Mergers & Acquisitions

Is it possible to sell your studio without all of these people? Absolutely. But you don’t know what you don’t know, and if it is your first time selling a business, enlisting the help of these professionals will help you sell your studio faster and for the most.

Selling your studio is extremely exciting. There is something incredibly rewarding about building a business from the ground up and handing it over to a new owner who wants to take it to the next level. Walking away with a sizable “nest egg” in your bank account is icing on the cake. By following the tips I outlined in this article, you set yourself up for a quick and profitable sale.

If you’d like my help in prepping your studio to sell, reach out to me at pricingoverhaul.com. You can also download a FREE sample of my book HERE!

To Bigger & Better Profits!

-Erin

All ideas and assertions expressed in The CORE are those of the individual contributors, offered to spark conversation, enrich understanding/inspire growth and share diverse perspectives within our community. They may not necessarily reflect the views of Balanced Body®.