Why CrossFit, Inc. May be Worth $500 Million?

Note:  My Athletic Life is in no way affiliated with CrossFit, Inc.

Reebok has proclaimed that with CrossFit, “the sport of fitness has arrived,” but what about CrossFit, Inc. the business?  Has it arrived?

While I am in no way privy to any inside information, it would appear that CrossFit, Inc. is likely a business that is capable of making money in a way that would make Warren Buffett blush.

CrossFit is Valuable

Let me explain.

While CrossFit has a number of business ventures, it derives the majority of its revenue and profit from two sources:

  1. Annual fees for affiliates (currently $3000 per year – source).   Some older affiliates pay less as they signed on at a discounted rate.
  2. Certifications for trainers (approximately $1000 per certification – source)

If I multiply the total number of affiliates (3500) by the blended rate for an annual license (est. $2100), I get $7.4 million.

And if I estimate the number of certifications to be held in 2012 (200) times the average number of attendees (60) times the average price per certification, I get $12 million.

The two primary revenue streams will yield an estimated $20 million in 2012.  WOW!  Not bad for what Greg Glassman calls a “virtual company.”  From the CrossFit Journal:

“The world knows nothing of the virtual company,” Greg says. “Venture capitalists don’t get it, the MBAs don’t get it, and the media don’t get it. The very people who should understand it best are aghast at the concept.”

And given the virtual nature of CrossFit, Inc., it would seem like expenses would be fairly limited.  I would be shocked if profits weren’t 50% or better, so let’s estimate that pre-tax earnings at $10 million.

But What is CrossFit, Inc. Worth?

Well it depends on how fast CrossFit is growing.  Over the past seven years, the number of CrossFit affiliates has grown from 7 up to 3500.  According to Jimi Letchford, chief marketing officer, “today there are 3,500 affiliates in 61 countries, with about 50 added each week.”  Letchford expects that CrossFit will have 30,000 affiliates in five years.

Wow again.  It is certainly true that CrossFit has grown at a rate greater than 70% over the past few years, so growing the number of affiliates at just over 50% for the next five years seems possible.

With an estimated $10 million in profit in 2012, and growing at 50% per year for the next 5 years, how much is CrossFit, Inc. worth today?

$500 million perhaps?

And this only values CrossFit, Inc. as a standalone business.  What would CrossFit be worth to someone who could better leverage the brand with a broad range of consumer fitness products?

What would CrossFit, Inc. be worth to Reebok?

photo credit:  Wikipedia