With increasing consumer awareness around nutrition and wellness, you might consider becoming a personal trainer. However, starting a business from scratch can be difficult, making it more appealing to buy an existing personal training business. Nevertheless, buying a business requires some legal steps, from conducting due diligence to reviewing property leases. This article will outline the process of purchasing a personal training business.
1. Due Diligence
Before buying a personal training business, ensure you conduct due diligence. Due diligence will help you assess all the risks and benefits of the purchase before investing. Additionally, you can ensure that the business meets your needs. For example, you may prefer a business that comes with equipment and a customer base.
During due diligence, you may review:
- financial statements;
- business contracts;
- property leases;
- customer lists;
- equipment;
- legal documents; and
- incorporation documents.
This guide will walk you through the due diligence process when purchasing a NZ business.
2. Reviewing the Property Lease
Most personal trainer businesses will operate from a specific facility. This helps to ensure all equipment, such as weights and machines, are in one place. Therefore, you should confirm before purchasing whether the current business owner can assign or transfer the property lease to you.
To check whether the lease is assignment, you can review the lease agreement for assignment clauses. Your seller will need to discuss the transaction with their landlord and acquire their consent. Note that the landlord may request details from you, like your financial statements and business plan. Your lawyer can help draft a deed of assignment that will detail:
- the landlord’s consent;
- your consent’s;
- the seller’s consent;
- a description of the property being assigned; and
- the property lease.
In some cases, the existing property lease may not allow an assignment or transfer of property. Hence, your seller may need to terminate their existing lease. After that, you can enter into a new lease with the landlord if they consent. During this, you can also amend the property lease terms if you wish to match your business needs. For example, you may want to alter the rent amount or rent review method.
Continue reading this article below the form3. Employees
The existing personal training business may have employees for management, operations or marketing purposes. It is your choice as to whether you will take the existing employees on. Commonly, buyers will take on some, if not all, the employees for a seamless transition and aid the business in continued operations.
If you take on the existing employees, you must draft an employee agreement for each person in writing. Failure to do this can result in hefty legal penalties or fines. Your employee agreement can outline the following:
- names of employer and employee;
- work description;
- place of work;
- hours;
- salary or wage rate;
- nature of employment;
- holiday and leave entitlements; and
- dispute resolution.
4. Assessing the Equipment
A personal training business requires robust machines in good condition. Additionally, other equipment, such as barbells, weights and kettlebells, should be in working order. You can engage with a professional to confirm this.
If any issues with the equipment are discovered, you can request your seller to conduct repairs and maintenance. Additionally, your seller should transfer any business to you without security interest. Otherwise, it can be challenging to obtain a clear title to the assets.
5. Sale and Purchase Agreement (SPA)
Your SPA will detail the key terms and conditions of your purchase. It finalises the sale and sets out the settlement process. Your SPA can include:
- price and payment;
- deposit;
- assets included in the sale;
- property lease;
- intellectual property;
- representation and warranties;
- settlement date and process; and
- termination.
During the settlement process, you should ensure that your seller transfers all relevant intellectual property (IP) over to you. This may include the:
- business name;
- logo;
- customer base; and
- social media accounts.
To transfer the business trade mark, they will need to apply for an assignment with IPONZ. Additionally, they should speak with their hosting service to transfer any website and domain name ownership to you.
Key Takeaways
Buying a personal training business can be rewarding and a great way to make use of your hobbies. The process can be complex to navigate and involves conducting due diligence and reviewing the property lease and equipment. Further, you should determine whether you will employ the existing employees. Lastly, you can draft and sign your sale and purchase agreement to finalise the sale.
If you need help buying a personal trainer business, our experienced business lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page.
We appreciate your feedback – your submission has been successfully received.
