How do you work out the payback period for a large capital investment?

[TracyK]

I am 'THINKING' about building and running a gym as there is a gap in the market in my area.

I'm assuming that a purpose built new build maybe the same kind of money as converting and tweaking an existing space. I've got a very good builder mate who I intend to ask to do the build in exchange for a share in the business. (maybe)...

But how do I calculate the payback time for the investment? I'm thinking of maybe £300k to build and equip. Obv. will need a mortgage - but how do you incorporate this into how viable a business would be?

A bit technical - sorry - even if you don't know the answers - any good websites to point me in the right direction?

I think you should get some professional advice.

You could try the small business adviser at your bank, a good accountant, or your local Business Link.

There will be tax implications.

You need to build a business plan. You will have to calculate how much revenue and cost (including interest) you will have from running it, and how it will ramp up over time.

I agree with trying the small business advisor at your bank. Go armed with as much information as you can not just about how much it would cost to build but also to run, how much you can charge (back this up), how many people you think you can get to join, etc.

What will happen is you will put it all into a spreadsheet together to calculate what the cashflow would be. This will include financing cost, tax and so on. At the end of it you will get a line which will show how much money you are actually getting back each year. Discount to the present day (because if the money was sitting in a bank it would be earning interest) and you have your return on investment.

But if you've never done one before do get someone to give you a hand.