Episode 352: Growth Through Acquisition: Why You Don't Have to Start From Scratch

What if opening a second location wasn't your only option for growth?

In this episode of the Female emPOWERed Podcast, Christa Gurka introduces one of the most overlooked growth strategies in the boutique fitness and wellness industry: Entrepreneurship Through Acquisition (ETA). Instead of building a new studio from scratch, what if you could buy an existing, profitable business with an established client base, trained team, and recurring revenue?

Christa walks through the real numbers behind buying versus building, explains how SBA financing works, and shares why acquiring an existing business can help you skip years of startup risk while accelerating profitability. Whether you own a Pilates studio, PT practice, yoga studio, or wellness business, this episode will change the way you think about scaling. 

In This Episode, You'll Learn:

•  What Entrepreneurship Through Acquisition (ETA) is 
•  Why buying a business can be less expensive than starting from scratch 
•  How SBA loans can finance up to 90% of a business acquisition 
•  The real math behind buying vs. building a second location 
•  What makes an existing business valuable to buyers 
•  Creative acquisition strategies, including seller financing and earn-outs 
•  How to find acquisition opportunities in your local market 
•  Why profitability, systems, and recurring revenue matter more than size 
•  How acquisitions can accelerate long-term business growth 

Key Takeaways

✔️ Growth doesn't always mean starting from zero.

✔️ A profitable, cash-flowing business may cost less to acquire than building a new location.

✔️ SBA financing makes business acquisitions accessible to many small business owners.

✔️ Systems, leadership, and recurring revenue increase both business value and acquisition opportunities.

✔️ Thinking like an investor can dramatically change your long-term wealth-building strategy. 

Resources Mentioned

🌐 Work with Christa
Christa Gurka Coaching Programs

📈 Elevate to Exit
Learn how to increase your business value, reduce owner dependence, and prepare your business for future growth or sale.

📲 Instagram
@christagurka

Connect with Christa

🌐 Christa Gurka Website

🎙 Subscribe to the Female emPOWERed Podcast for weekly business strategies designed specifically for Pilates studios, cash-based PT practices, boutique fitness studios, and wellness business owners.

SEO Keywords

Entrepreneurship Through Acquisition, ETA, buying a Pilates studio, business acquisition, boutique fitness business, SBA business loan, Pilates studio growth, wellness business expansion, studio ownership, recurring revenue, business valuation, fitness business coaching, Christa Gurka, Female emPOWERed Podcast.

Transcript

0:51

Hey there, everyone. Welcome back to another episode of the Female Empowered podcast. I am your host, as always, Christa Gurka, and today's episode, I'm really, really, really excited about it because it's something I've actually not spoken about before, and it's something I've realized that a lot of people don't even know is an option, and a lot of people in our industry are not talking about it. So I wanna be a trailblazer, and I wanna be the first one to bring it to you because I think it's going to change how a lot of you think about growth, about, your future, about ownership. So let's get into it. Okay? Right now, somewhere in your city, there is a Pilates studio, a PT practice, or a wellness business with a great client base, a trained team, an empowered team, an accountable team, real cash flow, and the owner is ready to walk away. So you could open a new location from scratch, or you could buy that business, keep the clients, keep the revenue, and then skip the two years of being in the red, the two years of ramp-up time, the two years of wondering what if. So this is not a fantasy that is reserved for private equity. It's a financing structure that's available to you right now with a fraction of the cash that you think you need. So what we're talking about today is called growth entrepreneurship through acquisition, and I'm gonna walk you through some real, real numbers like I always do. Real cash flowing, already built businesses are sitting there waiting for you, so you do not have to only compete against the big guys buying up the industry. You can be a buyer too. Like I said, this is called entrepreneurship through acquisition or ETA for short, and it is one of the most overlooked growth strategies in boutique fitness and wellness for small independent studios. Most of us only know one way to grow. Go open a second location, a third location, start from scratch, build it from the studs up, hire slowly, market from zero, grind for two to three years hoping you break even. And that is the only model most of us ever thought was possible, but it is not the only model that exists. So today, what I'm gonna do is walk you through exactly what ETA is, how financing actually works, and I'm going to do the real math with you, buying versus building, right? So you, you can see for yourself which one actually gets you profit, right? So you can build it on your own, you can buy it, or you can borrow, right? So there's ways to do that, and it's how I grew Pilates in the Grove actually when I was opening multiple locations, and it's something that is available to you right now. So what does ETA actually mean? It actually simply means becoming an owner by buying an already operating business instead of starting one from the ground up. So this concept comes out of the Stanford Search Fund model, originally built for MBA graduates who raised investor money to go find a business to buy. That is what they call a funded search. So That means that they have investors that are going to fund this buy-up, okay? That's not s- technically what I'm going to be talking about today. The version that I'm going to be talking about today that actually matters for us in this industry is what's called the self-funded search, where you use your own capital or a small business loan, an SBA loan, right, an SBA 7A, to buy the business yourself. There's lots of different ways you can do this. You keep the ownership, and then you are not reporting to investors or a board, right? So here is the number that should actually get your attention, and when this was brought to my attention, I was flabbergasted. So SBA financing can cover roughly up to about 90% of the purchase price. I think it can go up to $5 million. So that means that your actual cash out of pocket, your down payment, is typically only 10 to 20%. And part of that can even come from the seller in what we call a seller's note, which I did in my sale, right? where it's basically seller financing for a piece of the business. So this way, you're not raising millions of dollars or hundreds of thousands of dollars. You are not running a hedge fund. You are not doing, like, going out and m- taking a second mortgage on your home. You are doing what a smart Business acumen owner does using leverage the same way you'd use a mortgage to buy a house instead of paying cash for it, right? So here's where I wanna get into buying versus building, right? I want to walk you through this with actual numbers because like I always say, feelings are not facts, and I want to see... I want you to see this on paper. Okay? So let's start. So let's say you're gonna start from scratch. So you're gonna do what we call build, right? Build out... Let's even say we're gonna take f- a small space, maybe 1,500 square feet. You're gonna do six reformers. it's probably gonna cost you, depending on where... I know this is, like, depending on where you are in the city, in the st- country, I mean, what city you're in. It's probably gonna cost you somewhere between fifty thousand to a hundred thousand, including, like, your first, last, and security, the construction, the floors, the, the equipment, the desks. I would say it's probably gonna cost you somewhere between fifty and a hundred and fifty thousand, right, to get you going. Again, this totally depends on where you are, and obviously, if you're doing a mat studio, it's probably not gonna cost that much for equipment. But when you then are trying to set up for some marketing and client acquisition, if you are being someone who's like, "I need to pay for marketing 'cause I need to get in front of people," which I do believe back in the day you didn't necessarily need to do that, but I do think you need to do that now, you can budget, like, two thousand dollars on the low end to, you know, four to ten thousand dollars on the high end, right? Depending on how much you're gonna put in and what kind of budget you have. So because nobody knows that you exist yet, you need to get out there in front of people. Whether you're gonna hire someone to do this or whether you're gonna do this on your own, right? You have now, like, a timeline to profitability, right? So you can be anywhere from twelve, twenty-four, thirty-six months before you're actually profitable and before you're paying yourself a six-figure salary and having a fifteen percent profit, right? So sometimes it takes two, three hundred thousand just to break even, and then on top of that need to pay yourself, and then on top of that need to have... Save for taxes, and then on top of that, need to have some profitability. All right? So if you are starting from scratch, let's say you're gonna put out Let's even go on the low end. Let's say your first, last, and security is gonna cost you, like, 20 grand. A build-out, let's even say you do it small, and it's gonna cost you, like, 30 grand. So now you're at 50 grand. Equipment is gonna cost you 50 grand, so now you're at 100 grand. Okay, you're hiring, you're putting in marketing. So for the first, let's say, 18 to 24 months, you're not really paying yourself, so that is gonna cost you a couple hundred thousand dollars of, of no salary, right? So now you're looking at, what, 250, $300,000 with grinding, right? Grinding day to day. Now, let's look at buying an existing studio, okay? So say you find an existing studio, whether it be mat or yoga or spinning or whatever the case may be, and that business is doing, let's say they're doing 600, $700,000 in annual revenue, and they're at, like, a 15% profit margin. So let me do the math just so I do that right. So let's say they're doing 700,000 in revenue, and they're at a 15% profit. That's 105,000, right? And let's say that the owner really is stepped away. The owner's not teaching. The owner is not really responsible for the day-to-day, and she pays herself $50,000, right? So now you're at $150,000 of what we would call seller's discretionary earnings, okay? So that is... They're cash flow positive. They have their systems down. They have their-- They have a lease that they're signed into for the next, I don't know, eight to ten years. Businesses right now in our industry are running anywhere from, like, 2.5 to 3.5 or 4, that multiple. So let's even go on the low end. So let's say 150,000 times, let's just say, three, okay? So now the value of that business a- is, like, 450. The-- Again, this is just simple, high... There's a lot that goes into it. Please don't think it's that simple, but it's just high, high... What do you... what would you say? Like, h- high numbers, like, you know, from a 30,000-foot view, right? So if you apply for an SBA loan, and you can get roughly 90% of that financed, that means that your loan will be about $400,000, okay? Which means you have to come up with about 45, $50,000 to... at closing, like, for a down payment, okay? And maybe you can get the seller to give you $25,000 as a seller note, and you can come up with 25,000 to put it down, all right? On a ten-year SBA loan with around 11%, your m- your monthly debt service will be about $5,600 a month or about six... What is that? 5,600. Five... Let's say 5,000 times 12. That's about, what, $60,000 a year, okay? And the studio is still generating $150,000 on day one in profit. So you get to take right away a salary, plus you have that capital to be working towards to grow the business. All right? Yes, you have to be able to meet that $5,600 a month, but if the business is doing $100,000 in, annual profit and you divide that by 12, they're doing in profit like $8,500 a month. So that will definitely cover your 5,600 plus your salary. Okay? So you're not really in the red, right? So you're paying down an asset and you're paying it down over 10 years. And so here's what you look at. It might cost you $250,000 over an 18-month period to start up a new studio versus 25 to $40,000 startup fee, and then you have 18 to 24 months to, to basically break even. Okay? So you're It's like And I'm telling you, this is with a, a business that has, like, built-in systems, built-in clientele. They're doing cashflow. All right? So Ag- let's just look at this again. Okay? So if you were to open up one on your own, you have to go find the place, negotiate a lease Pay first, last, and security, buy all the equipment, have it ship, build it out, start from zero. Versus if you buy an existing studio, right, that the owner wants to sell, you can wrap it into your own brand, okay? So you can... We did this at Pilates in the Grove, and you're already starting with clients. You already ha- you don't have to buy the equipment. You have a lease now that you're guaranteed in for hopefully the next... If you have an SBA loan, I think you need 10 years on that lease. and you already have a ramp-up time, right? And if you take an SBA loan versus, like, seller financing, then you're coming to the table with, like, maybe 20, 30, $40,000 at the most. And yes, you have to pay down that debt. You have to be paying it year over year, but it's like $5,000 a year versus coming out of pocket $250,000, like, from the get-go to start a new place. So this is what we call entrepreneurship through acquisition or what I like to call growth through acquisition. So if you are thinking of, "I want to expand," but the thought of starting firs- from scratch is really hard, you can go on places that are, like, BizBuySell, see if there's studios in your area that are for sale. You can call up people in your area that you know and say, "Hey, listen, we're considering, growing. are you interested in selling?" Like, you can have those conversations with people. There's lots of unique ways that you can do it. You can, do what's called also, like, an earn-out. So you can pay for the business or for the equipment, for the assets, right? And then it... Let's say that new owner does wanna stay on, but she doesn't really want to be the owner anymore. You can also offer her, like, an earn-out, be like, "Any of your clients that stay for a certain period of time, we'll give you a percentage of that revenue over a period of time." So it's a win for this owner, and they stay on and continue to work in the business, and it's a win for you 'cause you're only paying out, that earn-out if these people stay and stay on as clients. So it's just something really interesting, especially if you're not doing something that you need equipment, like if you're doing mats, which is really popular right now. Look for places that could be ready to sell, and if you don't see any on BizBuySell or in your local market, don't be afraid to reach out to people and ask those questions and be like, you know, "Are you interested in possibly selling? Would this spark your interest? Could we start negotiation?" And, and I don't wanna make this, like... This is, like, high level kinda stuff looking down because there's is a lot that goes into it. There's a lot of, like, negotiation and, like, what is the business actually worth? But generally what a business is worth is its profit, and then whether you can actually add back or you have to subtract the owner's salary depending on how owner dependent this business is. but there is a lot of upside to selling, right? Or to buying and growing through acquisition. The other thing, on the flip side, let's say you're ready to walk away. Let's say you're an owner that is... that has good recurring revenue, that is profitable, where you as the owner have stepped away. Maybe you're, you're ready to, to, you know, exit stage left, and you can reach out to other Pilates studios in your area and say, "Hey, I'm, I'm thinking of making an exit. Would you be interested in purchasing my studio?" Now, there's a lot that has to happen in that process, but this is just something to kind of pique your interest and get you thinking outside of the box as far as, how do I bring up these conversations? Oh, I didn't even realize that was an opportunity for me. Let me look at these studios now. And I think there's a lot of people, a lot of owners that might be like, "Yeah, I'm ready to get out," right? The competition is fierce now. And so there's a benefit to you already being in the industry, right? And speaking the same language. You already know what a good class feels like. You know what a good instructor looks like. You know what retention actually depends on, right? And so you can have... Like, some people might be more excited to sell to somebody that's already in the industry versus, like, somebody else. So I think that it's just... I just wanna bring this idea into your minds and share something that, that maybe a lot of people haven't talked about. So it real- people are doing it all over the place. People are s- becoming entrepreneurs by buying, like, dry cleaning services, and roofing companies, and pool service businesses. So you don't necessarily have to start from ground zero and greenfield all these places and start from scratch. So you can look at it and decide, "Do I wanna build? Do I wanna buy? Or do I wanna borrow?" And I think that, you know, I'd love just to start this conversation about, again, what is available for people out there, and how you can just think outside the box, right? Growth does not always have to mean starting from zero. Building from scratch means at least 12 months in the red before you see a dollar, maybe 24 months in the red before you see paying yourself really well and profit. Buying an existing cash flow positive business can mean you inherit great clients, you inherited great team, you inherit real revenue on day one, often for a smaller dollar amount, a smaller down payment, a smaller initial investment than you think it is, right? It's basically, if you think about it, it's a financing structure available to any operator willing to do their homework. All right? So the next studio you grow into might not need to be built. It just may need to be bought. So if this got you thinking a little differently about what growth could look like for you, this is exactly the kind of strategic thinking we work on inside my Elevate to Exit program, which is where people are looking to sell their business, and this is one of the strategic moves we talk about, and also people looking to grow their business, right? How can we grow and add more profit to your business so that you can sell eventually down the road for more profit? More profit plus a bigger multiple equals a bigger payout. So if you're interested in discussing more about this, you can head over to my website, christagurka.com, and check out the Work With Me page. Or if you want just an easier way to reach out to me, you can DM me over on Instagram. I read every single one, so you can DM me. I'm @christagurka. And I would love to chat with you a little bit about it. Whether you're considering buying a business, whether you're considering building one, whether you're already in the trenches, I would love to hear from you, and chat, and keep the conversation going. So I hope you learned something today. And until next time, my friends, bye for now.