Looking to purchase an existing gym, I have a valuation question...

Obviously, there are many ways to valuate a business. I am looking for any info anyone has on valuating a gym. I have two leading formula's but I don't know how accurate they are.

1. My accountant told me to multiply the gross times .60 on the dollar.
2. I've been reading for a gym, anywhere for 2.5-5x the annual cash flow (obviously that leaves a lot of room)

Details: The owner told me he grosses between 600-700k per year. He got a valuation of 600k but is willing to negotiate. I am going to be looking at his financials next week and reviewing with my accountant.

There is 10 years left on the lease so I want to be profitable after year 3 which will give me 7 years of profit it my lease is not renewed.

I know I will increase cash flow. I have 10 years experience in gyms and it is currently being run by an absentee owner. There is a ton of potential here.

I just want to get a fair price.

Any advice is welcomed.

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