You’re thinking about buying a yoga studio, but you have a lot of questions—that’s good, because there are more things to consider than many imagine: prior financial statements, insurance, leases, and instructor requirements, just to name a few. Before you get in over your head, take a deep breath and relax—I am here to help guide you through it.
Before buying a yoga studio, you need to: Know why the owner is selling, consult a business broker who will help throughout the process, understand the lease and property management, scrutinize the financial statements with a CPA, understand instructor training requirements that best suit your clientele and finally know what kind of insurance you need.
I’m going to share several things that you will want to know before buying a yoga studio. I’ll tell you what professionals can help you evaluate whether this is the right yoga studio for you, and I am going to tell you how to evaluate your lease and landlord. I’ll also tell you a little about insurance you should have and what kind of training your instructors need so that your clientele and business is protected.
You’ll need to know the real reason the owner is selling
This is information you will want to get right off the bat, because there are some problems you can address yourself—and some you can’t.
An example of problems you can possibly work with are staff issues or clientele dissatisfaction with class offerings. However, even these issues should give you caution, so evaluate carefully. Business and finance website Entreprenuer.com says, “As you do your research, make notes of anything negative. This could be something as simple as a one-star review for a product or as serious as a legal matter. Because here’s the thing: Once you buy the business, all of the previous owner’s problems instantly become yours.”
One thing you just can’t fix is a bad location—no matter how cool the studio is, or how great the classes are, if people don’t attend regularly because the location or parking is inconvenient, they will eventually drop their memberships or stop coming. You simply can’t afford that.
However, don’t expect the current owner to be 100% transparent as to why they are selling, either; you are probably going to have to do some detective work.
According to financial company Commercial Capital, LLC., “Most owners describe their reasons for selling in a positive light and always use generalities. Promotional materials may include statements about the owner retiring, focusing on a different venture, moving to a different state, etc. These explanations may be accurate but could also disguise ulterior motives for the sale.”
You’ll want to consult with a business broker
You’re probably thrilled about the idea of turning your passion into a profitable business, but it is important not to let that cloud your judgement! It’s a good idea to have a few neutral third parties help evaluate the studio’s profitability.
Before you invest a lot of your time, hire a business broker. A business broker is like a real-estate broker, but for businesses. They know exactly what information to obtain to protect you, the potential buyer. They can also help you to acquire all the necessary permits.
A business broker can help you determine if buying the yoga studio is a good decision by obtaining all the pertinent information from the sellers, investigating the yoga studio’s profitability, and identifying potential problems. If all goes well, the business broker can advise and assist you in getting financing for your purchase and negotiate the purchase price on your behalf.
You’ll need to know all about the lease and property management
Something you will definitely want to familiarize yourself with is the lease agreement. Along with knowing the monthly rent charge, you’ll need find out how long the lease term is.
Another important factor in the lease is the escalation clause, or the rate at which the rent will increase each year. Compare the rent increase rate with the Consumer Price Index to determine whether it is reasonable. A steadily increasing rent can easily sink a business, so be sure to know this number!
In addition to the lease, look into the landlord or property management. Before you commit to buying a yoga studio with a long-term lease, be sure the property owners are responsive to problems that may arise with the building, such as plumbing or electrical repairs, air conditioning issues, roof leaks, potential safety hazards, etc. If there are other tenants in the building, talk to them about their satisfaction with the building and management.
What It Takes To Open A Yoga Studio
You can’t make a good decision based on bad financial statements
In order to gauge the profitability of the yoga studio for sale, it is necessary to scrutinize its financial statements. Taking on an existing yoga studio business gets dicey when financial statements are inaccurate.
The often-tedious nature of creating financial statements increases the risk of less-than-precise books, especially if the yoga studio owner is doing their own bookkeeping. According to Commercial Capital, “Buyers should not take financial reports at face value. Financial reports should be carefully examined and verified. This type of due diligence requires detail-oriented work, as many transactions must be verified individually. It’s best to enlist the help of a CPA familiar with this type of work.”
Incomplete or inaccurate financial statements are indicators that all may not be what it seems. Commercial Capital warns “Buyers cannot make an informed decision unless they have accurate financial reports. They should consider walking away from any acquisition whose finances cannot be accurately determined.”
You’ll have to pay for the yoga studio loan, rent, insurance, taxes and utilities. You’ll also have to pay your staff and pay your own salary every month. You need to know exactly how much money the yoga studio makes per month in order to decide if what’s left over is worth it.
You’ll need to know your requirements for potential instructors
The truth is, if you do decide to buy, not everyone is going to stick around when the yoga studio changes hands from the old owners to the new. Some instructors will decide it is a good time to move on. At this already busy time, you’ll probably need to hire more staff. It is important to know ahead of time what sort of yoga classes your clientele wants so you can get the best staff for the job.
You’ll want to know what sort of certification and/or training the instructors require to meet the needs of your clientele. The minimum amount of training most yoga studios require of their instructors is 200 hours, according to yogabaron.com.
In general, most instructors can teach Hatha yoga, but if you’re going to offer a wider variety of yoga, such as Bikram yoga or hot yoga, be sure to look for specialty instructors who have advanced training, 500 hours or more. This will protect your clientele from injuries, and your business from lawsuits.
What Happens In A Private Yoga Class
You’ll need to have a clear understanding of your liabilities and insurance
Yoga studios, as with other fitness studios, require more tailored insurance than do other businesses. As the owner of a yoga studio, you should purchase, at minimum, general liability insurance.
General liability insurance will offer protection against these risks:
- Bodily injury and medical expenses
- Property damage
- Legal defense and judgements
- Personal injury
While you may not be required to purchase liability insurance for your yoga studio, business research magazine Profitable Venture says you’re probably going to need it, anyway. “Even though yoga studio insurance is not legally mandatory in the United States, it is a practical necessity to keep your studio safe and afloat in the long term. Lenders and investors won’t fund you without adequate coverage, potential customers and partners won’t trust you without it, and top – notch employees won’t take you seriously without it.”
Speaking of insurance, it’s a good time to mention that you should have worker’s compensation insurance for your employees. Not every state requires worker’s compensation insurance, but it is wise to have it to protect your workers and your business.
Yoga as a business is quite different from yoga as a hobby
You’re probably excited about the prospects of becoming the owner of a yoga studio, and understandably so, but as you’ve learned by now, there’s a lot more to it than a love of the lifestyle. In order to truly make your dream a reality, you must be very cautious when choosing to buy a yoga studio.
Take the extra time and money to consult with the right people to make sure everything is in order and take a hard look at all the numbers before entering any contract. In addition to a broker and an accountant, it is a very good idea to hire an attorney to look out for your interests when buying a business.
If everything checks out and looks profitable, that’s great! If it doesn’t, well, that’s good, too, because you just saved yourself a whole lot of expenses and trouble down the road! Keep looking until you find an ideal situation, and then make your dream come true, no strings attached!
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Frequently Asked Questions
Yoga takes up a lot of space, so err on the generous side to avoid injuries and property damage. A class of twenty students requires at least a 20×20 feet space. A class of 30 students should be in a space no smaller than 25×30 feet.
Ideally, yoga studios should be centrally located, yet not too noisy, with good visibility from the street (or great signage), and off-street parking. Locations near childcare are at an advantage as parents drop off their kids and drop in for class. Look for complementary businesses nearby!
To learn more about starting your own Yoga Business check out my startup documents here.
Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
Meet Shawn Chun: Entrepreneur and Yoga Fan
I’m a happy individual who happens to be an entrepreneur. I have owned several types of businesses in my life from a coffee shop to an import and export business to an online review business plus a few more and now I create online yoga business resources for those interested in starting new ventures. It’s demanding work but I love it. I do it for those passionate about their business and their goals. That’s why when I meet a yoga business owner in public at a studio or anywhere else I see myself. I know how hard the struggle is to retain clients, find good employees and keep the business growing all while trying to stay competitive.
That’s why I created Yoga Business Boss: I want to help future yoga business owners like you build a thriving business that brings you endless joy and supports your ideal lifestyle.