By ignoring three popular pieces of advice, a rookie gym owner can beat the odds and improve the bottom line.
You roll out of bed without the need for an alarm clock, completely refreshed and excited to start the day. Before you head out the door, you have a long cup of coffee with your wife, talking and laughing without even a hint of feeling rushed.
You get to the gym around 9 a.m., spend a few minutes chatting at the front desk, and say hello to a few of your favorite members before retiring to your office for an hour.
At 11, you have four of your favorite training clients. The workout flies by.
After a sweaty high five, you’re off to have lunch with an old friend who’s in town for the afternoon. Again, you’re surrounded by laughter and friendly chatter.
You return to the gym just as your wife and kids arrive. For 20 minutes, your office becomes a playground as you catch up. They leave as the evening crowd rolls in. Some nights you train clients or teach a group class. Other nights you work the room, spotting someone here, sharing a story with someone there, but mostly enjoying the sights and sounds of a thriving, successful gym.
Your thriving, successful gym.
On nights like this, you’re oblivious to time, your life and work working so seamlessly you feel like the Mexican fisherman talking to the American businessman.
And the best part? You’re getting paid to spend your days like this.
That’s what you imagine owning a gym will be like. Maybe not the first year, but definitely sooner rather than later.
Of course you know the potential pitfalls of gym ownership. You can look online and see hundreds of gyms for sale, or read an article like this one at the PTDC, or hear horror stories from unhappy gym owners. You may even know some who’re barely hanging on, or who’re in the black but still feel strangled by too many obligations and too little time.
Even worse, you’ve read that eight out of 10 new businesses of any kind fail in their first year.
But let’s return to the fantasy. You know there are more than 36,000 fitness clubs in the U.S. Nearly one out of every five Americans has some kind of gym membership. Globally, it’s an $83 billion industry, with 200,000 clubs and 162 million members.
So someone’s making it. Right?
Absolutely. I’m one of them.
My small-town gym in southern Illinois has been open for 10 years, and has been profitable for 108 consecutive months. I also co-own a successful personal-training facility and a pay-per-class spin studio. That’s three different gyms, with three different business models. Each is doing well.
I guarantee it’s not because I have more intelligence, knowledge, or business savvy than my fellow gym owners. Nor do I have some kind of secret formula.
But I have seen patterns in failed fitness businesses. The biggest: the owner’s inability to control expenses.
Partly it comes from overestimating revenue and underestimating costs. Often, though, it’s because a new owner has listened to three really bad pieces of advice:
- Work on your business, not in your business.
- Start with the highest-quality equipment, because you get what you pay for.
- Invest in continuing education. It always pays off.
While each of them makes sense for someone whose business is already up and running, they can be disastrous for someone who’s just starting out. By ignoring them, you can save more than $75,000 during your first two years, and set yourself up for the entrepreneurial life you’ve imagined.
Work On Your Business, Not In Your Business
To be clear, I’m not saying this is bad advice for someone who’s running a successful gym, or even someone who’s not yet making much money but isn’t in the red. It’s all about context.
Here’s why I believe you must work in your business for the first 12 to 24 months:
1. You can’t master what you don’t know.
You need to know your business inside and out. You can’t train a new employee if you don’t know exactly what you need him to do. You can’t improve your gym’s efficiency if you don’t know how to sign up a new member.
Chances are, you’ve worked for a boss who sits in his office all day, and then blames his employees when the numbers don’t work. Or who goes to a seminar, hears about a great new system, and immediately orders his employees to put it in place, even though they warn him that it’ll make things worse.
You never want to be that boss.
Your first year or two should be spent learning: learning about your members, learning about your employees, and most of all, learning how your gym operates. That kind of education won’t come from sitting in your office and making plans for the future. It comes from you working in your gym now, all day every day.
Get your hands dirty. Do the small things along with the big ones. Action, not reflection, is what will put you among the 20 percent of businesses that make it beyond that first year.
Said another way: If you’ve read The 4-Hour Workweek, and imagine that opening a gym frees you from your 40-hour grind, well, you’re half right; you’re trading those 40 hours for 60.
Why? Because …
2. Payroll is the biggest expense you can control.
Imagine that you’re a business consultant to a gym owner who calls with bad news: His landlord just jacked up his rent. Now the only way to break even is to cut his payroll. But, he tells you, there’s no one to cut. He runs a lean operation.
So you visit the gym, and, indeed, all the employees look like they’re busy and productive … except for that one guy who pops in and out, trains a client here and there, and otherwise sits in his office most of the time.
Your first thought would be, “What if that guy actually worked?” What if he maintained the equipment, or gave tours to new members, or took a turn scrubbing the showers? How much money could he save if he stopped paying employees to do things he could do?
New-Owner Action Plan
First six months:
Do everything, even when you have an employee you can delegate it to. Work the front desk, make sales, train clients, run classes, form partnerships, and, yes, clean a few toilets.
Don’t hire anyone until you absolutely must, when you can’t possibly work another hour and have a line of potential customers waiting to hand you money.
You aren’t doing this just to keep your hands busy. You’re immersed in your gym so you can create a system, checklist, or process for everything you do, with the goal of making yourself replaceable. This is key for any gym business plan.
Next six months:
Test and tweak your systems and processes.
After 12 months:
Hire someone who will eventually replace you, even if you can only afford to hire that person part time. Shift your focus from systems and processes to employee training.
After 18 months:
By now your gym should have a strong enough financial foundation for you to begin working on your business while your employees work in your business.
Quick note about the turnover problem:
As hard as it is for a gym owner to make ends meet, imagine the challenge for your employees. Low pay, erratic schedules (busy in the morning and evening, dead in between), and few benefits mean your best people will be on the lookout for a better deal.
That’s another reason to spend your first 18 months minimizing expenses and maximizing efficiency. Do it right, and you should be able to pay good employees more than the industry standard. You should also be able to train new hires in a way that gives them a sense of ownership over their positions.
When someone does leave, you’ll have a training system in place, making it easier to get the replacement up to speed.
Your savings during the first 24 months:
Reduce your payroll by an average of 20 hours a week at $16 per hour, and you can save $33,280 your first two years.
Start with the Highest-Quality Equipment, Because You Get What You Pay For
This isn’t necessarily wrong. But it’s often misinterpreted.
Your equipment is typically the biggest purchase you’ll make, and also a big reason why you want to own a gym in the first place. It’s your playground, and who doesn’t want their playground to have the best equipment in the known universe?
But it’s when you decide to acquire that equipment that you run into two major problems:
1. In a battle of David vs. Goliath, Goliath usually wins.
You’ll never have more equipment than the Gold’s Gym or Planet Fitness down the street. You simply don’t have the budget. Borrowing to close the gap will only handcuff your growth. And in the end, the more established gyms will still have more stuff.
2. Even if you win on equipment, you can still lose on churn.
There’s a certain type of customer who joins just to rent your equipment. But appealing to that market creates a high churn rate. You enter a vicious cycle of gaining, losing, and then replacing your members. You run more ads and offer more incentives to join. But with each ad buy and special membership rate, you increase the cost of acquiring new members.
Instead of trying to outspend the chain gyms, focus on something they don’t do well: creating and nurturing a community. Find small ways to show your staff and your members how much you care. You’ll have less employee turnover and better client retention.
Develop those relationships, and your members won’t care if you have a dual-axis cable crossover machine or treadmills that let them watch Vanderpump Rules in HD.
New-Owner Action Plan
Start with used or refurbished equipment. You can find high-quality commercial equipment for 50 to 75 percent less than you’d pay for the newest model. The majority of your members won’t know or care if it’s used. They just want it to work and be clean.
That means you have to be vigilant about maintenance and hyper-vigilant about repairs. How quickly you fix your equipment is often more important to a member’s satisfaction than the quantity and variety.
If you hunt for bargains, you can outfit a small health club for $75,000 or less. For a one-on-one training studio, you can do it for less than $30,000.
Where to look:
Cast a wide net. You never know what you’ll find on eBay or Craigslist.
Probably your best bet will be companies that specialize in reselling equipment. For example, one of my resellers just offered Keiser M3 spin bikes with power consoles for $450. A new one retails for $1,794.
When you find something you want, always negotiate down from the asking price, especially if you’re ordering multiple pieces. Resellers often have limited warehouse space, and if you catch them at the right moment, when they have new equipment coming in, you can get great stuff at a steep discount. But you’ll never know if you don’t ask.
Quick note about how to keep members happy:
Start with simple courtesy—making eye contact, greeting them by name when they come in, making yourself accessible for questions, concerns, and complaints. All that will do far more for your gym than a new Woodway treadmill.
The more accessible you are, and the more opportunities you give them to make requests and offer suggestions, the more you’ll learn about what they really want. It’s often small things.
Recently, for example, we installed USB ports on all our windows, along with charging cords for iPhones and Androids, because we noticed our members complained a lot about forgetting their chargers at home. It cost us just $40 for two eight-port chargers and 10 cords, but it added real value for our customers.
Your savings during the first 24 months:
You can save $25,000 to $75,000 right from the jump, depending on the size of your gym and your business model.
Invest in Continuing Education, Because It Always Pays Off
Successful entrepreneurs are lifelong learners with a voracious appetite for both knowledge and personal growth.
But if you equate “learning” with “attending fitness conferences and seminars,” you’re wasting both time and money, neither of which you can spare in your first year or two. A single conference in another city can cost $2,000 or more, with most of it going to travel and lodging.
Here’s why I don’t think they’re a good idea:
1. You don’t know what you don’t know … yet.
Let’s say you go to a high-quality fitness conference like Perform Better, one with two or three tracks and dozens of talks or demonstrations over three days.
If you don’t have a good grasp on your demographics and psychographics, how do you know which ones to attend? Without that knowledge, you’ll most likely do what you’ve done in the past, when you were a trainer: You’ll sit in on the lectures you’re most interested in, which may not offer much value for your members.
After a year and change, you’ll have survey data, member feedback, and a sense of which classes do or don’t work with your clientele. That information will steer you toward the lectures and demonstrations that offer the most value to your members—and, in turn, to your bottom line.
2. You don’t have enough to contribute.
Once you’ve attended conferences for a few years, you realize that the most valuable part is the networking that goes on between sessions or after hours.
Picture yourself hanging out with a half-dozen gym owners a month or two after opening your club. They’re talking numbers and marketing tactics, and maybe griping about a vendor or two.
Sure, you might learn something from them, but what do they get from you? What have you learned in your short time in business that would be valuable to them? Networking is a two-way street. Nobody does it to share information without getting anything in return.
And think of the questions you’d ask: It would be all surface-level stuff you can find in a book or online. In private they might be happy to answer those questions—in my experience, 99.9 percent of us are in the fitness industry to help people. In a group, though, you’re just wasting everyone’s time.
But with a year or two in business, it’s a different dynamic. You’ve seen some steady growth. You know your demographics, and you’ve tested a few things that may or may not have worked. Moreover, you now have the budget to pursue a new revenue stream.
Now imagine a conversation with a veteran owner who’s making six or even seven figures a year. Imagine the questions you could ask, and how deep you could go once he understands you’re a player. He respects you for asking a good question, and for seeking him out to answer it.
This is how you extract real value from a conference.
New-Owner Action Plan
You can learn a lot without leaving home. The following resources have had a huge influence on my gym’s success. It’s not the entire list, of course, but it’s a good start.
Keep in mind that the authors usually offer a lot more on their websites or in follow-up books. Some of them will also answer questions via email or direct messages.
Start with the EMyth online business course. It’s both free and in-depth, taking you through EMyth’s seven business pillars, which cover everything from management to marketing. It forces you to take a closer look at your business (or future business) and make the necessary adjustments to achieve your vision. I can’t recommend it highly enough.
A few business books I recommend:
- Chet Holmes’ The Ultimate Sales Machine
- Steve Lishanky’s The Ultimate Sales Revolution
- Eric Ries’ The Lean Startup
- Neil Rackham’s SPIN Selling
- Greg Crabtree’s Simple Numbers, Straight Talk, Big Profits
- Mark Roberge’s The Sales Acceleration Formula
- Mike Michalowicz’s Profit First
- Al Ries and Jack Trout’s Positioning
- Any of Dan and/or Chip Heath’s books
- Any of Seth Godin’s books
- Jon Goodman’s Ignite the Fire and Viralnomics
Your savings during the first 24 months:
I estimate you can save $2,000 to $3,000 on travel and conference fees while learning just as much, if not more.
Total savings: $60,280 to $111,280.
In case it isn’t clear, I don’t think any of these three fallacies are bad advice in general. And I don’t say this to criticize the people who offer them. My only goal is to help new gym owners survive long enough to be able to make them work.
Owning a gym can be a dream or a nightmare. Your first 24 months in business will determine which one.