The short answer
An owner-operated pilates studio in Australia is commonly worth roughly 1.5 to 2.5 times its adjusted owner earnings: the profit after every expense, with the owner's own wages and personal costs added back. A studio producing A$150,000 of adjusted owner earnings is therefore worth somewhere between about A$225,000 and A$375,000 as a going concern, before the unredeemed class packs come off and before any equipment finance is settled. Where a studio lands in that range depends on four things: how much of the revenue is recurring membership rather than prepaid packs, how many members would follow the founder out the door, how long the lease has to run against the fit-out it funds, and whether the studio is a franchise. Studios run under management, particularly with more than one site, are valued on normalised EBITDA rather than owner earnings and trade higher. This is a calibration guide, not a valuation: the number that survives a buyer, a court or the ATO comes from a documented file, which is what a signed engagement produces.
Owner earnings or EBITDA: pick one basis and say which
Small studios are quoted by brokers on seller's discretionary earnings, usually shortened to SDE or adjusted owner earnings. It adds the working owner's full remuneration, superannuation and personal expenses back to profit, which is why the multiple is low: the buyer will have to do the owner's job or pay someone to. Larger studios, and anything a lender or an accountant will rely on, are valued on normalised EBITDA, which charges a market salary for the owner's role and therefore produces a smaller earnings figure and a higher multiple. The two describe the same business from different sides, and a 2x SDE price and a 3.5x EBITDA price can be the same dollars. The error to avoid is applying an EBITDA multiple to owner earnings, which overstates a studio badly, or an SDE multiple to EBITDA, which understates it. Every figure on this page is on an owner-earnings basis unless it says otherwise, and our multiples table for Australian private companies, which is EBITDA only, is the reference for studios that have outgrown the owner-operator model.
Reading the class book
A pilates studio's goodwill is its recurring membership book, and the profit and loss cannot show you its quality. We reconstruct the book from the booking software export and look at five things. Active members by product, because an unlimited direct-debit member is worth several times a casual visitor. Churn and tenure, because a studio that replaces a fifth of its members every quarter is running to stand still. The split between recurring memberships and prepaid class packs, because packs are cash today and a liability tomorrow. Utilisation, because a twelve-reformer room with thirty classes a week can sell at most 360 places, and the gap between peak-class waitlists and empty off-peak beds tells you where the growth is and is not. And realised price per class after intro offers, which is often well below the rack rate a new owner would assume.
- ·Recurring memberships as a share of revenue: above two thirds supports the top of the range
- ·Monthly churn below about 5 per cent and average tenure over a year: the book is an annuity, not a churn machine
- ·Unredeemed pack balance: comes off the price or is settled at completion
- ·Utilisation above 70 per cent across the week, not just at 6am and 6pm
- ·Realised price per class, and how much of the last year's growth was a price rise rather than new members
The instructor who founded it
The largest deduction in most independent studio valuations is not on the balance sheet. It is the founder who teaches most of the classes and whose members would follow them anywhere. That is personal goodwill, and it does not transfer with the lease and the reformers. The ATO's market valuation guidance expects a valuer to separate it from the transferable goodwill rather than capitalise the lot, and a buyer prices the same risk through a handover period, a restraint of trade and often an earn-out. We measure it from attendance by instructor and from what happened to the book when instructors left. The second instructor question is cost. If the owner teaches twenty classes a week, replacing them at Fitness Industry Award rates or better is a real expense that comes off earnings before any multiple is applied, and a studio that engages its instructors as contractors carries a superannuation and sham-contracting exposure that due diligence will find.
Reformers, fit-out and the lease
A reformer studio is one of the more capital-heavy small businesses for its size. Commercial reformers cost several thousand dollars each, a full room is a six-figure fit-out, and much of it sits on equipment finance or a landlord contribution with conditions attached. The valuation has to know what is owned, what is owed and when the beds need replacing, because the capex cycle is cash the buyer will not keep. The lease decides whether any of that is worth paying for. Term remaining, options, the assignment clause and the make-good obligation move the number directly: a studio with eighteen months to run and no landlord consent to assign is not worth what its earnings suggest. Rent as a share of revenue is the quickest health check, and a studio paying a related-party landlord below market is restated to market rent before it is valued.
Franchise and independent studios price differently
Franchised reformer systems have driven much of the category's growth, and a franchised studio is valued as a franchise first. The remaining term and renewal rights, the territory, royalties and marketing levies, the franchisor's consent to a transfer and any transfer fee all sit inside the number. A resale the franchisor can veto is a different asset from one it has already approved, and the deductions in the agreement never go away, so the earnings a buyer capitalises are the earnings after royalties, not before. Independent studios carry no royalty but rely entirely on the transferability of their own brand and class book. Clinical pilates inside a physiotherapy practice is a third case again: since 1 April 2019 private health insurers have not paid extras benefits for pilates as such, and only physiotherapists and exercise physiologists can deliver exercise drawn from pilates within a rebatable consultation, so those businesses are valued as allied health practices with practitioner dependence in view.
A worked example: one studio, two very different numbers
Take an independent twelve-reformer studio turning over A$520,000, with a reported profit of A$60,000 after the owner draws A$90,000 in wages and runs a car and phone through the business. Adjusted owner earnings are about A$160,000. On the face of it, that is a studio worth A$240,000 to A$400,000. Now read the book. Forty per cent of revenue is prepaid packs and A$28,000 of classes are unredeemed. The owner teaches 18 of 30 classes and attendance dropped a fifth the last time an instructor left. The lease has fourteen months to run with one option, and A$45,000 is still owed on the reformers. A buyer who has to hire two instructors to replace the owner, settle the pack liability, clear the finance and negotiate a new lease is not paying 2.5 times; they are paying nearer 1.5 times a lower earnings figure, and the realistic price is closer to A$180,000 than A$400,000. The same studio with two thirds recurring memberships, an instructor team that runs the timetable without the owner, and five years of lease with options would sit at the top of the range. Nothing about the reformers changed between the two cases.
What a defensible pilates studio valuation file contains
A number that will survive a buyer's diligence, a court or an ATO review is documented, not asserted. For a pilates studio the file contains the following, and the report walks through each item rather than presenting a conclusion.
- ·The booking software export reconciled to the bank and the accounts, with members by product, churn, tenure and utilisation
- ·The unredeemed class pack balance and how it is treated in the price
- ·A normalisation schedule: owner remuneration at market, related-party rent restated, one-off items and personal expenses identified line by line
- ·Attendance by instructor and the evidence for the personal goodwill deduction
- ·The lease, the equipment finance schedule and the replacement cycle for the reformers
- ·The franchise agreement terms where one exists, and their effect on maintainable earnings
- ·The basis of the multiple, the comparables relied on and a cross-check by a second method for anything above an Essential engagement
When the number has consequences
A sale negotiation can absorb a rough number; a tax event or a court cannot. If the studio is moving into a company or trust, the ATO's market value substitution rule applies to the transfer and the value has to be evidenced at the date it happened. If the owner is claiming the small business CGT concessions on a sale, eligibility can turn on the value of the business and the assets around it. In a family law settlement the studio is valued at today's date by a single expert whose report will be cross-examined, and personal goodwill is usually the whole argument. For those matters the Comprehensive report from $3,995 + GST is the usual fit, and the Defensible engagement from $8,995 + GST where the figure will be contested. For a benchmark before a conversation with a buyer or an instructor who wants to buy in, the Essential report from $1,495 + GST prices the book on a documented basis in 7 business days. Oliver Group is not a registered tax agent; we value the business and your accountant applies the tax.