Wednesday, November 23, 2016

How To Sell A Boot Camp Business, Part III

This is a continuation of a coaching conversation I had with a consulting client of mine who is working on selling his successful personal training boot camp business. You can read part I here and then part II here.

I have again removed his particulars to protect his identity, but the lessons contained are very instructive.

If you are thinking of selling, or if you are still planning your business, this post will be essential in developing your fitness boot camp business exit strategy.

Hi Jesse,

I hope you're well.

I was hoping to get your opinion on some pricing options as I am about to speak with trainers this week and this is an extremely difficult thing to go through.


Firstly, from our previous emails and using the example for Location 1 below, I wanted to ask why/how you used a 6-month figure of $900 x 6 months? Based on this type of small boot camp business, is a 6-month rate like this a good standard number and would a 12-month rate (i.e. $900x 12 = $10,800) be way too much. 


Take the profit (after trainer expense, as listed) and use that as your investment requirement for 6 months. For example, camp one has a $900 profit per month. So you will sell the camp for $5,400.

Below are my numbers in RED that I will be proposing based on your suggested 6-month figure to determine the Upfront amount.
The payment plan amount is the monthly profit x 9 months, then divided by 12 payments (so it will be less than the monthly profit but paid over the 12 months so they feel more secure if there are lean months.

Location 1
Members: 13
Monthly Revenue: $1,900
Trainer Costs: $1,000
Profit: $900

Upfront = $5,400
Payment Plan = $675 per month

Location 2:
Members: 22
Monthly Revenue: $2,800
Trainer Costs: $1,300
Profit: $1,500

Upfront = $9,000
Payment Plan = $1,125 per month

Location 3:
Members: 9
Monthly Revenue: $1,210
Trainer Costs: $480
Profit: $730

Upfront = $4380
Payment Plan = $547.50 per month

Location 4:
Members: 15
Monthly Revenue: $1840 
Trainer Costs: $1,160
Profit: $680

Upfront = $4,080
Payment Plan = $510 per month

Website and Transfer:
* What I was thinking of was to keep the website running as is (instead of giving them their own URL for their own location), but at the end of their 12 month period they can continue to basically use the brand's name and the site for $40 per month (this covers any minor things like website timetable changes along with basically a license fee to use the name)
If they wish to move all their clients over to their own business and brand they can do so as well and it will just end the license agreement and I will remove them from the website.

Would love your thoughts on the 6-month number and also your feedback on my numbers in red and also the website and transfer.

It is more of a license than a complete cut-off, but as you said in your previous email they are buying the value in the brand and the website, not just the clients, and an outright buyer to take the whole business is going to more time consuming and energy draining than what I want to go through.

Thank you

Kind Regards,
R.







Hi R.,

Great job on this breakdown.

Your first question is why did I pick 6 months of profit as the amount to sell for?

Answer: You are right. It is because if I were a trainer, the twelve  months would seem like a lot of money, and since these are all "small-time" operations run by one owner-operator (essentially sole-proprietor businesses), it would be too easy to envision simply starting my own and trying to steal the clients. Remember, even the most honest and forthright person you are dealing with is also a personal trainer average Joe or Jane. They have needs and time constraints, and no one is impervious to greed. They might look at big numbers and think twice.

With that being said, in the end, it is YOUR decision and you have to gauge each person. It's like anything else: If you think you can sell it, then go for it! Heck, if you feel strongly about it and think you can sell it, you should triple the price! Sell it for two years worth of profit on some payment plan like you have laid out here. My personal opinion is to stick with the 6 months timeline.

Your second question had to do with my thoughts on your numbers, including the payment plan. I think it is ingenious and perfect. I love the idea of six-months bulk buyout gets them a discount, and the nine-month option is paid out over twelve months. Perfect. That makes the sting of giving up the profit each month even less, and essentially gives each trainer a monthly raise! Brilliant. Even easier to sell.

Your third question was about your ongoing licensing fee for the brand and website. I think you are underselling yourself, but I am not one to talk since I am doing the same thing. I think the $40 is very reasonable, but I might try starting that from day one instead of after a year. In other words, the $40 starts immediately and is simply bundled into their monthly fee. Add it to the total so they see it and get used to it and it just stays there for a minimum of one year (if they are on the payment plan) and then after that they can convert to month-to-month. If they simply buy you out with the lump sum, then the $40 is a go immediately at month-to-month.

I think overall you have done a very good job here R.!



Hi Jesse,

A huge thank you for your feedback, this is a great help!

Thanks for confirming the 6-month pricing, and also the payment plan concept. I will put this together in a more formal package.

In regards to the license fee of $40 per month, I like the idea of getting them on it from Day 1.

I know it is dirt cheap at $40 per month. Is there an amount you think is a better price point?
Also re: the testimonial - YES of course mate! I will have some time this weekend to put something together for you that you can use in your marketing, no problem at all, you've been an incredible help thank you!

Regards,

R.


Hi Richie,

I like the $40, but I also think you could throw out something like $75 per month and see what they do. Remember, if the sign on with someone like Fit Body Boot Camp, they will pay $500 to $750 per month per location. You could get away with as much as $300 per month and be very reasonable. However, once you go above $100, then you are kind of complicating the "sale" of the business and making it more like a straight up franchise or licensing arrangement. Your hybrid requires you to keep it low. So, if you want, stick with $40 if you don't want to get them thinking about canceling too soon, or if you feel like they can stomach it, then go with $75. Also remember that they are going to pay someone at least $50 a month to maintain a website for them, and some companies are charging several hundred.

Again, up to you and your comfort level. I like to keep things lower to support the owners and help them win and then you are overdelivering and underpromising, rather than the other way around.

-Jesse



If you are thinking of selling or have questions about creating an exit strategy for your boot camp business, feel free to comment below!

No comments:

Post a Comment