What makes a Gym Profitable?

[TomK]

I belong to a large corporate franchise gym. It is one of 4 similar facilitates within 5 miles of my suburb. There are only 50,000 folks in our burb. This gym already has 2,000 members. However, the gym is only crowded from 4 – 8 pm Monday thru Friday.fficeffice" />

The gym has a typical membership: Lots of cardio bunny moms who drop the kids off into the free day care and hit the treadmill for 60 minutes – just enough teenage boys working on bench and biceps (getting all swole) to be annoying – group class junkies – a few characters and of course, a lot of folks just trying to move iron every day.

It strikes me that the gym makes real money from selling extra services – personal training, nutrition planning, drinks, supps and clothing. Everything else is covered by the base fees. However, that doesn’t match the managements’ behavior. Instead they are solely focused on selling and upselling memberships.

Does this mean that the business model is based on expecting the client to fail? For example, they get them to sign up for a year – fully expecting x% to fail out in 90 days or less? If so, then it seems to be an unsustainable model – at some point they will exhaust the population of people willing to try the gym out (or does the same bunch of lemmings just move to a new gym each January?).

I’d appreciate any insights.

[deschain]

I don't know about the actual business side of running a gym. However, I would guess that from a strictly money aspect, there is much more to be made from selling memberships, than in the extras.

A 1 or 2 yr contract is money each month for 12-24 months (longer if the member retention people are any good). Whereas, supplements, clothing, etc is money earned on the side, so to speak. Most people aren't going to drop a contract, b/c they tend to carry a hefty early termination fee. So, even if they aren't going, they are still paying.

I would think that long-term wise, focusing on member retention (not just selling initial contracts) would be the smarter way to go, as, like you said, you will eventually exhaust your market if you are only interested in getting them to sign the initial contract. In other words, don't just get them in the door, keep them coming back.

[Jean-Paul]

You ask an excellent question. As a gym owner, I can tell you that getting a healthy "receivable" is major priority. Gyms aren't cheap to operate. Equipment is always breaking down needing to be replaced, construction is expensive, and commercial real estate, whether leased or financed, is very pricey in just about any market that has that much access to a population like the one you just described.

Ancillary income from sources like services and smoothie bar/supplement sales are important to a well-managed gym. Personal training is a HUGE profit center if you know how to go after that market and you have some talent working for you. PT is very labor-intesive though, so it is best not to depend on it.

Staffing a gym is very expensive as well. On top of their income, there is additional tax, workman's comp, liability insurance, benefits (for some gyms), uniforms, training expenses, etc, so you can't exactly have a ton of really qualified people just sitting around waiting for a customer to have a need.

Truth is, I really don't recommend opening a gym to anyone. If you love fitness, you can make a lot more money working for a really cool, upscale gym. I have had trainers making in the 50's working for me. There is so much behind the scenes SHIT involved with owning and operating a gym that you can quickly learn to dislike the very industry you were once so passionate for.

It takes a special kind of person to be an entrepreneur (I make no mistakes of being one myself to tell you the truth). I know very few REAL entrepreneurs. I am just a technician who got in over my head but was too stupid and stubborn to quit, so by vitrue of my pure misguided endurance I made it as a gym owner for the last 14 years. I loved fitness (still do, but have a different perspective now) with all my heart, but passion doesn't carry a business. It doesn't pay the bills. It doesn't file your 941's and your state sales taxes. It doesn't make sure you aren't getting stolen from by your own employees.

If you know how to use it properly, it is the guiding light behind your vision, and it is reflected everywhere you look in your fitness center. But the day to day minutia must be done with mastery, and all your systems need to be in order or your passion will lead you right into a ditch.

If a gym owner who loves this industry (as I do) can find that magic balance between providing a service that really makes a difference in someone's life and making money to pay all the bills and hopefully have enough left over to pay himself, then that is the gym in which you want to work out. Big box gyms are usually just that. A box with equipment in it, staffed by apathetic 20-somethings who could care less if you ever walk through that door. But they are usually cheap so people gravitate to them, because despite what most people say, they really are not willing to pay a little extra for atmosphere and services. All anyone ever wants is a "deal."

Hm, don't know if I got off track with my answer, but you can probably see that I am slightly cynical. Hope you find the gym you're looking for.

[John Izzo]

Originally Posted by Jean-Paul

Truth is, I really don't recommend opening a gym to anyone. If you love fitness, you can make a lot more money working for a really cool, upscale gym. I have had trainers making in the 50's working for me. There is so much behind the scenes SHIT involved with owning and operating a gym that you can quickly learn to dislike the very industry you were once so passionate for.

Totally agree. I never understood why so many trainers leave a business to start they're own after 1-2 years in service. You can make a decent salary working at a successful club (clients always being fed to you; mass-marketing on your side; support; business education; team atmosphere). My first few years were in commercial gyms and I made a great salary never feeling the "need" to start up my won place (even though everyone would tell me to). Now I manage someone's else gym and the headaches are ridicuolous. JP didn't even touch on the the litle things that owners have to deal with (staff training, customer service, managing disputes, utilities, performance plans, etc) The list goes on....

I have a friend in San Diego, CA who started his own PT studio and he is OVER his HEAD... working 60 hours a week and leaving himself a few $$$ for profit --just enough for 1 week vacation for his family once a year.

[Jean-Paul]

I have a friend in San Diego, CA who started his own PT studio and he is OVER his HEAD... working 60 hours a week and leaving himself a few $$$ for profit --just enough for 1 week vacation for his family once a year.

I know that drill all too well. The last 13 years pretty much fit that bill, and it's no way to live.

The problem with most trainers (and I'm sure this crosses industries) is that they see where I am now and they just think that they can skip straight to that step without that pesky decade or two of paying dues. You can't envy someone with a business until you have found out just how much suffering it took for them to get there. But that ranks up there with stuff people would rather not even think about when the entrepreneurial fever initially grips them.

No matter how easy you think it is, it's never easy. Ever. And just because you're smart and have some great ideas, you're not immune to all the problems that come with the business.

I am happy to be reporting to all of you from this side of the fence now, but I can tell you that if I were forced into a time machine back to some point before I opened my business and given the choice to do things differently, I would have never submitted myself to that (frustration, agony, etc).

Things look pretty sunny now, so I have a much better attitude, but I don't ever want people to be misled by me on the whole business thing. If you're going to do it, no one can stop you, but just go in with some idea of what you're in for. I'll always be willing to help in any way I can.

[trian2]

These issues are not specific to owning a gym. Just remove the word "gym" and add any business you can think of.

And these issues do not just apply to starting your own, brand-new business. Buy an existing, successful business and you will still have growing pains...even if you have been successful in starting and growing two other businesses.

Owning a business is just not about being an owner. The money will/should eventually become quite a bit better than a wage, but there are alot of other benefits that are more psychological than monetary.

I could never go back to being an employee. If I had to, I probably could, but I would not be happy.

And to reply to the first poster, most businesses quickly realize that it costs you less to keep a customer, than it does to find a new one. I cannot remember anymore where it came from, but I have always remembered that for every dollar you spend to get a new customer, it only costs you 20 cents to retain him. A loyal customer is where you make your money.

[Jean-Paul]

I could never go back to being an employee. If I had to, I probably could, but I would not be happy.

Couldn't agree more with that statement. I have actually joked that I am not even employable at this point.

[Bill2380]

JP, your business and mine, tire sales and automotive service, are alike in that they both require expensive real estate, expensive equipment which must be maintained and updated, costly insurance and knowledgeable, well paid employees. These things, that make you wish you'd stayed an independent contractor some days, are the very things that keep a new entrepreneur, without deep pockets, from opening up down the street from you. The problem I see is that we sometimes price our services to meet competition, even if they're stupid, rather than what it actually costs to run the business, assuming that our costs are in line. Who was it who said, "we have met the enemy and he is us"?

[PowerManDL]

After having some experience working in the back-end of a gym environment, all I can say is have at it. It would quickly make me crazy(er).

[Vahagn]

JP, what is most important here: is it the fact that the fitness industry is a hard one to succeed in, or is it that you didn't anticipate the challenges enough when you started out? I think every industry has its areas where things are tough (or just plain pain in the ###), but would you agree that the fitness entrepreneur generally is not enough prepared for / knowledgeable about the challenge?

PS. Nice slogan

[Jean-Paul]

Vahagn, somehow I missed this last post, so this is a late answer... Sorry.

I think that the problem with the fitness industry is that most fitness professionals are just not business-minded. There are obviously some people making veritable fortunes in the fitness industry. There are just a lot of fitness pros trying to make a go at it who have no business running a business.

Sometimes for fun I secret shop my competition to see how they sell themselves on the phone, and I am generally appalled and amazed that they get any business at all. Rarely if ever do I get asked a question, like my name or how I came across their names. They spend way too much time telling me about what bodybuilders they have trained, or competitions they've won. They are shockingly lacking in understanding of the market.

One of them actually slammed me (not knowing they were talking to me). They said, "don't call him. He only trains the cream of the crop," which tells the potential client that he's NOT the cream of the crop. He also talked about how I was a Nazi on smokers, which tells the potential client that JP is more serious about accountability. I couldn't believe it... The guy was so stupid that he was selling me FOR me! Then he went on to drop the names of many bodybuilders he'd trained, which for someone who doesn't know or care, was the icing on the cake. If you own a business you should try this some time. It's a good way to help you build your phone scripts.

The main thing that kills us trainer-cum-businesspeople is organization, and frankly I'm no different. I am probably better now at this point, but I know my weaknesses, and I make enough to hire someone to help me manage the business side of my business, allowing me to focus more on my strengths (sales, marketing, training). If you don't have the discipline to organize, then you'll eventually fail. If you are very organized but you're shy, you just won't last.

The people who actually make it have a combination of many traits. I don't know that I necessarily have all of them or I would have achieved a lot more by now. You don't necessarily need all of these traits in every industry. I doubt engineers have to be real charismatic.

[stingo]

I think part of the problem for any new business owner is that they take what should've been a hobby and made it a profession, and it sometimes doesn't survive the transition.

[trainerty]

Interesting stuff on this thread.

[Jean-Paul]

Chime in Ty. I know you just opened up your own facility. Pick my brain. I've had a facility for nearly 15 years now, and I have survived every pitfall you could imagine over that period of time.

[trainerty]

Originally Posted by TomK

I belong to a large corporate franchise gym. It is one of 4 similar facilitates within 5 miles of my suburb. There are only 50,000 folks in our burb. This gym already has 2,000 members. However, the gym is only crowded from 4 – 8 pm Monday thru Friday.fficeffice" />

The gym has a typical membership: Lots of cardio bunny moms who drop the kids off into the free day care and hit the treadmill for 60 minutes – just enough teenage boys working on bench and biceps (getting all swole) to be annoying – group class junkies – a few characters and of course, a lot of folks just trying to move iron every day.

It strikes me that the gym makes real money from selling extra services – personal training, nutrition planning, drinks, supps and clothing. Everything else is covered by the base fees. However, that doesn’t match the managements’ behavior. Instead they are solely focused on selling and upselling memberships.

Does this mean that the business model is based on expecting the client to fail? For example, they get them to sign up for a year – fully expecting x% to fail out in 90 days or less? If so, then it seems to be an unsustainable model – at some point they will exhaust the population of people willing to try the gym out (or does the same bunch of lemmings just move to a new gym each January?).

I’d appreciate any insights.

That is a typical business model from my limited experience in the industry. A large gym with all the attached classes and gimmicks is looking for a mega-dose of people signing up. The large gym I used to work at expected a 40-50% retention rate. I believe their numbers hsould be up a bit now, but that was the brutal truth. I don't think gyms look to making a person necessarily successful. Rather, appealing to the masses. People are finicky with ideals of what they want and need from a gym. People want to do fun things and take magical supplements and socialize with others like them. Setting up an environment for these traits is more practical for gyms looking to compete with big guys.

Me personally, I do not like large gyms at all. Not that I am somehow a higher standard. On the contrary, I'm a new owner working my way through the trenches just like any other startup.

I really hated the large gym atmosphere. I worked at a very successful gym. The highest paid trainer at my gym made over 80k. The highest paid trainer in the company made over 100k. I learned a few things from this big beast of a gym:

• Be "trendy" - everyone loves bosu balls, cardio boxing, and vibrating equipment...get some
• Appeal to laziness - a few gimmicks like 10 min blitz, ab attack on a ball, britney spears cheography classes for 30min - plenty of treadmills, ellipticals and other cardio machines. Some comedian said people will go 20min out of their way to jog on a treadmill for 10min....funny and true.
• Be the hotspot - we had sales people frequent the bars and clubs to bring the local cool folks into the gym (clue- if they dont have one of those bluetooth gizmos in their ear they are probably not cool). People would literally come to our gym to check out the meat market before going to bars. Every other friday we would invite a local dj from a club in to spin while people worked out.
• Celebrities and pro athletes- we hosted celebs like LL Cool J (after that fitness book), we had some of the subway spokesmodels, arena and nfl cheerleaders (brought in a lot of guys who thought they had a chance and rich guys the girls were dating), baseball and football players. There was a NFL player who wanted to throw down with me because me and his ex were friendly
• Endorsements and connections - 1st of the month and the middle of the month we would have anyfood company and companies related to athletic apparel. Hooters,Subway,Smoothie king, sports authority, gnc, vitman shoppe etc.

Just from that marketing front we had most of the populace at least checking us out to see what was going on for the month.

just my limited 2 cents