Retirement Planning for Gym Owners

So I was listening to a podcast where the host was interviewing a gym owner turned guru. We have a lot of this where the gym owner basically fails at what they do and then they become a guru or a mentoring service, um, to other gym owners. So just as the caveat to nothing related to what I want to talk about, always do your research on who you're mentoring with. There are some amazing mentors out there Don't fall for the scuzz buckets. Um, and one of the things they brought up though in the conversation, which I agree with because I've seen the numbers, is that as a gym owner, the gym itself that you own, that someday if you decide to retire you'll sell, is not a very sellable asset. Um, Unfortunately, it is what it is. Gym owners sometimes go into it thinking that as an owner, their exit strategy to retirement is being able to sell it, and it's just not the case. You are looking at— if you have amazing systems, I have seen a gym sell for a little more than its annual revenue. If your gym is not super profitable, you're likely selling the assets and maybe a little bit of what's known as goodwill, because there's going to be some recurring revenue there. But from, from a sale price, you're likely somewhere between the value of the assets at the time you sell up to your annual revenue. Again, there are some exceptions to that case, but that's likely what you're going to sell for. So then the question becomes, well, How do you plan for retirement? You should be planning for retirement. You should be thinking about this right now. You want to be doing things that get there because at the end of the day, you don't want to be on the floor coaching people if you are 90 years old or 100 years old. We work hard and, you know, let's enjoy those silver years or sunshine years of our life. I don't know what people call them. I don't know why I call them that. So, with that in mind, what can you be doing knowing that you are not likely going to be able to sell your gym for millions and millions and millions of dollars? What can you be doing now? It comes down to freeing up cash flow. You need cash right now in order to put into your retirement strategy. So, the first thing that you can do I mean, shameless plug, buy Profit First for Microgyms. We have a lot of great techniques in there on how to manage your cash. One of the things I talk about is this concept of productive expenses versus not productive expenses. If you don't do anything, if you don't want to read the book, if you don't want to buy it, at a minimum, go through your last set of statements. Look at November statements or December statements and look at every expense and ask yourself, Was this expense productive for my gym? Did it add revenue? Did it leverage something which ultimately saves me money? Does it serve my members, which improves retention? Or did it really do nothing for me? Am I spending money on things that really aren't adding value to my members' experience? Am I spending money on things because it's an ego play versus a value creation for my Members. So look at your expenses, productive versus non-productive, because we want to free up cash flow. We want to be able to increase your owner's pay. We want to be able to increase how much you take in profit distributions. By doing that, then you need a plan that allows you to take that extra cash that you've now created and put it into your retirement plan, whatever that may be. A common popular one. It's very safe. I know arguments on both sides as to pros and cons of 401s or IRAs. But for the vast majority of people who aren't really interested in educating themselves on a bunch of investment things, a 401 is at least something. It's better than nothing. So contributing money into that is a way to start your retirement plan, and you save some taxes while doing it. Obviously, we cross our fingers that the government isn't going to screw us if we have money in there. There are certainly other great ways too that aren't related to 401s or doing a self-directed 401, but it's an easy mechanism to at least get started on something. IRAs work the same way. It allows you to contribute a certain amount of pre-tax dollars into it. Or, you know, if you have big plans, doing a Roth IRA might be better, where you're actually putting in tax money that you've already paid tax on, so that when you get to retirement years and you pull money out of the Roth, you don't pay income tax at that point. Lots of things there. Uh, investing in general. If your gym is profitable enough and successful enough, let's start saving some money so that we can create a down payment so you can buy your building. A rent payment is just burning cash. If you're able to buy your building, uh, at least the monthly amount you put towards those payments every month is building something for you that is a tangible asset that you'd be able to sell as well. And you may— when you sell your gym down the road, you may not have to sell the building, and the gym could continue to rent from you as the landlord until they're ready to buy it from you. That's also an option. Or you can then sell the commercial property at the same time, but you've used the cash flow from your successful, profitable gym to help create an additional asset. So Buying buildings, if your gym is successful and profitable, I kind of use a 20% net income barometer to consider if I— if the gym owner should be buying the building or thinking about it. So if you're in that situation, that could be a great option for you. But it does take a down payment, even on an SBA loan where you need to put 10% down. That can be a big chunk of change. So setting aside that money now will be really helpful. And then you may have passion for other assets. Maybe you like rental properties. Maybe you like oil investments. Maybe you like the stock or the stock market. Whatever it may be, find some assets, additional assets that you can invest in. I don't recommend just saving money and sticking in a savings account. That's going to be a terrible return. You want to at least put it into something that's generating a decent interest rate. So these are all things that you can be considering because, look, your gym is not going to give you as much money when you sell it as you may be thinking. And it's better to plan ahead so that when you get to that point, you're not feeling like now you have to work another decade because you weren't thinking of your retirement situation ahead of time. Hope that helps. There are certainly a lot of resources out there if you want further information or looking for more ways in which you can invest your money that's better than a savings account that might be considered safe. Or talking with a financial planner is always a great idea, someone who's actually licensed, who can sit down and figure out what your goals are, how many years you have before you're looking to retire, and they can help you balance conservative investments with some more risky investments, because in that— in the finance world, the higher the risk, the higher the reward, but also the bigger possibility of a loss. And so you want to find the right balance for your age and what you're looking at doing to balance investments that are, you know, the principal's guaranteed, but your return on it isn't going to be as high versus the riskier ones. And of course, always investing into your gym itself to create additional cash flow that then allows you to create other assets isn't a bad idea either. So hope that helps. Thanks again, guys. Remember, profit is a choice. Choose to be profitable.