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I am purchasing a gym and some of the clients have paid in full for a year. Is this money that I should be entitled to as the new business owner ?

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Rajesh Bansal

Agile Transformation Coach | Program Manager

yes you should ask for this money because this will be your liability
These customers are entitled for unconsumed part of the year if you close down the gym, however if you plan to continue running the gym (whatever name) then you are liable to provide these customers services till their year completes

Answered almost 5 years ago

David C

I help you buy, sell, plan, value a business

Funny.. I made a video about this not long ago:
https://youtu.be/AXVpEh7ZHvc

The answer is.. It depends on what you negotiate.
The prepaid memberships should be on the balance sheet as 'deferred revenue.'
It's a debt to customers for undelivered service but it rarely appears because most gyms just record each transaction as a sale.

Cheers

Dave

For hundreds of articles and videos on buying, selling, financing and managing small and medium sized businesses, visit my blog at www.DavidCBarnett.com.
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Answered almost 5 years ago