The gyms are not the actual business. The cost of running them can be considered to be a promotional expense if they contribute directly to acquiring customers. But I dunno… Louie is a weird guy.
Perhaps Louie and Mark Bell are not the best people to look to pattern for opening a gym…
Unless I’m a pure genius at lifting with something else to sell (which I’d say at least Louie is and Mark Bell has probably forgotten more about powerlifting than I’ll ever know).
There are revenue models of gyms which are closer to home. A gym charging $10 per entry isn’t going to make enough to cover the rent if that was their main source of revenue. They would be taking a loss from that price. The idea is to encourage a large number of people, who wouldn’t have done so otherwise, to sign up and then sell them other things which cover the loss and make a lot more than if they just relied on a normal membership fee as their main source of income.
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This shows you need to put in way more research before you seriously consider this. I say that because there’s no way to answer.
What’s your rent like per square foot? How many square feet? Do you have an option to expand in 6 months? A year? Without moving?
You need to sit down and do a business plan. If you don’t know how there’s going to be a small business center near you that is government and will help you probably for free. You need to look at demographics, location, neighbours (will the people you share walls with sue you for all the noise?) parking etc.
Oh I for sure need to do that. This isn’t on a 3-6 month time frame until opening. I’m looking at 2-3 years out minimum. This is the appraisal stage more or less to see if it’s even something I want to go forward with. I suppose I could have framed my question a little bit more thoughtfully. What would you recommend as a capital expense budget for purchasing equipment only and how many months operating expenditures would you recommend in pocket on the front end?
I do not plan on drawing a salary for at least a year. I can support my family on what I make now with this as basically a long term investment.
How much of an initial investment ($) do you think a single owner should have before opening?
Re: Mark Bell and Super Train, I’d think he makes most of his money off the supplements and slingshot stuff.
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If you have a family, a day job and a side business you will be stretched really thin. I didn’t like it. No matter how organized I got something was sub optimal.
This is a crummy response to your question but: everything depends on your target market and how well you reach them. If your business is a flop no amount of reserves will work.
What will your competitive advantage in your market be? How will you create value for customers in your market that your established competitors don’t now? As a small independent business owner you will be fighting a major uphill battle. You need to do something better, and customers have to value that. Can your competitors just copy or incorporate your hard won advantage?
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Assuming you’re paying for everything cash (not leasing) I’d say you’ll need at least $100k depending on the gym. Cardio equipment will murder your budget faster than weights.
You’ll want at least 6-8 months of operating expenses. Keep in mind you can reduce that if you’re willing to work open to close type thing and do the cleaning and maintenance yourself.
You’ll also want multiple streams of income as people have pointed out the gym itself is never a huge money maker. If I were going to do it this is what I’d look at for revenue streams:
- Gym fees
- Personal Training Fees (either internal or external, honestly external is probably more profitable)
- Apparel
- Supplements, whether direct or as a kickback from a local store for sending your peeps
- Gear such as belts, straps etc. FYI you can probably get anything leather made locally at a decent price and support a local craftsperson at the same time on this one (I make all sorts of leather goods so I’m in this community).
- Social Media. If you and your gym can become influencers you can make a lot both directly and indirectly by encouraging business. Imagine if Steve P. had been the guy to capitalize on his image and the “do you even lift” rather than sitting back and watching other people make bank off him.
- I almost didn’t say classes as they kind of fit in the PT aspect but they probably deserve their own space.
- Hosting. Host seminars, actively look for people like Eric Cressey, Cassandra Forsythe, Tony Gentilcore, etc etc etc to come and talk in your gym.
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That is extremely helpful. I’d heard as low as $40k investment cash on the front end, but I think those were more box type gyms with minimal cardio aside from a couple rowers.
These might be tough questions to answer since there are so many factors to consider, but how much revenue would you expect a gym with this kind of investment to generate and how long would you expect the breakeven on the investment to be?
Well look at it this way:
Commercial Cardio equipment is $6k-$12k a piece.
Commercial Squat Cages start around $1500
Commercial adjustable benches are around $500-$1000 each
Iron is about $1/lbs used.
D-Bells are around $2/lbs used
Commercial Selectorized is say $1500-$5k per piece or more if you want a big combo cable rack.
Plus another $10-$20k in bars, balls, medicine balls, mats kettlebells, bands, chains, blocks, steps, boxes. . .
Now we haven’t even talked about the rental, insurance, signage etc. . .
So If you want a tiny Garage gym you could make a decent one happen for around $5k with a single cage/platform combo setup, a few bars an adjustable bench and iron.
If you want a basic tiny metal head gym you’re looking closer to $40k
if you want a serious gym that will attract a variety you’re anywhere from $100k and up. . .
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There’s zero way to tell. It depends so much on how well you can work your revenue streams, what the market in your area will bear, who you’re marketing to.
Honestly the most profitable and minimally costly type of gyms are crossfit and private training studios that cater to people who have a shit ton of money, want to pay way more than market value because it makes them feel special, and never actually want to accomplish anything but want a good sweat a few times a week so they feel like they are.
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It seems without multiple revenue streams a gym even a crossfit type does not make a lot. 100 members at around $100 monthly would be $10,000 before insurance, rent, employees etc. Do you see these gyms making $4-6k take home?
I have really considered opening a cross fit type gym with no machines or cardio equip. aside from prowlers that catered to overweight and/or women. Niche would be that I offered personalized training and nutrition for a small additional monthly charge. I already do it without seeing clients I feel it would be easier when I can actually see and work with the people. Do you see a market for this?
Most of the boxes around here are closer to $150/month.
With any business there’s two basic ways to make more money:
- Get more customers
- Get more money out of each customer
Obviously you’d want to sell memberships to drive item number 1. For item number two it comes down to additional products such as supplements, apparel, and equipment and to additional services such as classes, personal training, group training, nutritional councelling etc.
If you’re looking for a great market and are in a reasonably affluent area I would go after people with a high BMI (women mostly) and off “personalized” diet and nutrition programs to help them lose weight. Make it a 2 month or 3 month program and then have them share the fuck out of their results on social media. Give them a kickback or incentive for every person they send to your program (MLM).
If you’re looking at those folks basically anything will help them lose weight and women are super group creatures (in general) when it comes to exercise. They love the support and the social aspect of working around and with other women. This would be a market you could kill on, again assuming you’re in a reasonably affluent area and reasonably competent.
Relevant:
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Classes, particularly the ones you probably hate and will shrink your testicles(BodyPump, Metafit etc), are cash cows. Fitness classes account for 62% of the revenue at the company I work for. We also get a lot of budget gym members who are dismayed at the quality of classes in their current gym, coming over to us.
Your biggest ROI will likely come from cardio equipment and easy to use resistance machines. The free weights will attract mostly arseholes who will basically create a no go zone for most of the members, particularly women. Nearly every time I take a woman into this area, during an induction, usually ends up with them mumbling that they’ll ‘never use this area’.
Creating a ‘journey’ for the customers will also create value and possibly increase retention. An induction, program, follow up and check ups should suffice. Make the punters feel wanted.
Make sure your staff are open minded as well and unlikely to force their own personal fitness agenda down peoples throats. Most customers only care about feeling good and seeing some reward for their efforts. Not about the Bulgarian method or EPOC.
So yeah, basically open up a GloboGym or whatever its called nowadays…
As an aside, I also invested in a S&C style gym, heavily influenced by Defrancos. Somehow it manages to turn profit with next to no advertising or social media presence. It’s all down tpo offering something for the meatheads who are depressed with the commercial gym experience…
Speciality bars for one! We get guys messaging us asking if we have Texas Power bars, SSB’s, cambered etc
Lots of racks as well. The squat rack has went from being a glorified clothes horse to a bustling hive of activity in the commercial gym scene, One of the biggest reasons we pull in these guys is because they get pissed off waiting for a rack in their current gym.
Hopefully this is a help mate.
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There is nothing I want as a customer more than racks and/or cages.
As far as real business advice goes I would say: your one biggest cost, and the one that you have least control over, will be rent (or mortgage repayments). Retail businesses usually go bust in Britain just before the end of the quarter, when the rent comes due.
How much revenue can you pull in for each square foot of real estate you use? That’s going to determine what margin you can make. How many times over does your turnover cover your rent? That’s going to determine your cash flow.
Using cheaper space obviously helps (fill a warehouse with racks! Woohoo!) but only if you can get your customers to come to you. Expensive retail space is expensive because it’s somewhere with lots of footfall - fashion, bars, and restaurants locate there because they want to be where people are and they have to wear the real estate costs.
If you have a membership business model, footfall isn’t so important because you’re relying on repeat customers who treat you as a destination.
High-rent gyms seem to concentrate on selling 12 month contracts to walk-ins and hoping as many people as possible don’t show up - the margin comes from overbooking - but the alternative is to concentrate on differentiation and building up repeat customers, and get margin from saving on the rent.
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If you think about it there are like three common business models. There’s the Big Name Gym:
Uses expensive prime retail space and lots of expensive cardiovascular machines. Not that many staff and they’re mostly sales-focused. Spends big on marketing to build name recognition, mostly interested in walk-ins. Look and feel designed to be non-threatening for people who don’t want to be there. Capital intensive and scalable, which is why they’re usually chains.
There’s the Yoga/Pilates/Dance Studio:
Doesn’t use much space and very little capital. Staff are absolutely critical because the whole experience is personal. Customers usually try a few and then get loyal. Doesn’t care about footfall because marketing is recommendation-driven, so doesn’t need to be prime retail (although it does need to be respectable and handy for either work or home). Ultra labour intensive and doesn’t scale, which is why they’re usually freelances.
Xfit Box/Boxing/Martial Arts/Hardcore Lifter Gym:
Needs lots of space somewhere people won’t mind the screams and dropped weights. Doesn’t use as much capital equipment as Planet but uses much more than the yoga chick. Actively dislikes casual walk-ins, recommendation is important. But it can’t go totally word of mouth only because it has a fixed cost base. Has more choice of where to operate than the other two but isn’t as low overhead as the Yoga/Pilates one. Needs real trainers, unlike Planet, most of its customers can get on without them, unlike the yogini’s.
The HIIT shops aimed at women like Soulcycle are an interesting hybrid because they are usually somewhere toney, use certified trainers, and spend a lot on gear and also on fitting out for the look and feel.
I suspect the secret is either that they’re pricey as fuck, or else the business doesn’t really work and one day the backer will pull out. Xfit works as a business as far as I can see because they charge a fortune.
So your choices seem to be: strip quality out and market like hell, strip overheads out and build relationships, or strip fixed costs and find a way to up your prices.
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