Thomas Plummer

The business of fitness

Monthly Archives: February 2017


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Mainstream is dead… long live the training gym

You risk everything you have to create a new business.

You raise money, build your vision, take the risk of being in business and yet nowhere has anyone guaranteed you will make this dream a financial success this time. Yet, when the business struggles, we often get pissed at the universe, because there is always a sense of entitlement within us: since we took the risk, we should be entitled to succeed.

This sense of entitlement often masks the real issue, which is the business never had a chance to be successful in the first place. Often, our vision of this business, secretly honed each night during those last 20 minutes before we fall to sleep, just doesn’t match what the consumer wants to buy, and while this seems so irritatingly obvious, this is why so many fitness businesses, along with thousands of other small businesses in this country, continue to fail year-after-year. You simply built something that no one wants to buy. You simply built what you wanted instead of giving the potential client something he wanted to buy.

What one person represents your target market?

Where does your potential client live, what does he make financially,                                                        how does he live and what would he buy from the right gym owner?

Most owners force one methodology into a market instead of                                                     understanding that different clients, at different ages, might want different products.

The majority of these failures are actually very much alike, although each one may be from a different industry. These failures often represent someone trying to copy someone else’s successful business too late in that business’ timeline/lifecycle for success.

In other words, being the 50th startup company to try and copy  the Curves franchise model back in the 90s probably didn’t turn out too well; as is copying the $10 model twenty years after its inception is copying a dying plan. Copying an overexposed, out of date, worn out idea is not good business, yet in this industry we are doomed to repeat the past… or are we?

Every business concept has a life cycle. There is a long slow growth period that can last for a decade or even two; there is a rapid growth phase as the new business concept reaches tilting point and takes off; followed by a long, and sometimes, but not always, static period of slow growth. Finally, there is the eventual failing of the concept illustrated by the steady decline and final demise of the concept. This is called, “S Curve Theory” and it can be applied to most business concepts, but works particularly well for the fitness industry.

Used wisely, the S Curve is the modern equivalent of having someone read your tea leafs back in the day to predict your future. The numbers in business simply never lie, but our emotional connection, maybe this sense of, “I built the damn thing, and of course my idea/business concept is what the consumer wants” entitlement blocks our ability to see the future that is so clearly in front of us.

Take a look at the computer industry as an example. Up until 1984, it was estimated that only about 1-3% of the population in this country had computers or access to computers. In 1984, the famous Apple ad, the rage against “Big Brother” was shown and changed the course of computer marketing forever. From 1984-89, the number of people with computers rose to 15%. It wasn’t until 1997 that at least 30% of the people in the US had computers.

But from 1997 on the computer industry took off and more than doubled in just 10 years. Since about 2007, when it was estimated about 85% of the people in this country had access to a computer; traditional computer sales have flat lined and now have started to decline. The old school, box computer that lived under your desk is fading rapidly and even laptops, the desk computer killer, are starting to fade replaced by tablets and the new generation phones.

In summary, there was a long slow growth from the 50s through the mid 90s, a rapid growth phase that more than doubled in less than 10 years, and now we have that long slow decline as this product/concept of a box computer fades away replaced by a better and more efficient idea.

What has this to do with our industry? S Curve Theory is why the mainstream, big box gym is on the going extinct list and why the training gym, or training-centric mainstream hybrid, is replacing this failing concept.

The mainstream, all-purpose, be everything to everybody, fitness facility started slow in this country in the 1930 and 40s, built through the 60s, had its Apple commercial minute in the early 1970s with the arrival of Nautilus, went through a fast and furious growth phase in the 1990s and during the first decade of the 2000s, and then flat lined followed by the present decay phase.

In other words, the mainstream box fitness facility has run its course as a concept and is dying and there isn’t a damn thing anyone can do about it unless the concept is reinvented, and a few pioneers are letting their chains evolve (change is possible, but hard to get leadership locked into the vision of what they built and own to admit their baby is ugly and no one wants to babysit it) or if nothing changes, then this concept simply goes the way of the pager and Palm Pilot, brilliant ideas back in the day, but now replaced by the “next big thing” that will destroy the older technology.

What we don’t understand is that the training gym, and its close sibling the hybrid mainstream training facility (think $19 base membership,but with over 40% of the gym’s membership paying more for some type of coaching/training/group experience), are on a separate S Curve altogether and are not affected by the mainstream curve evolution.

The modern training gym did not begin until 1996. Its long, slow growth period lasted until just a few years ago and now we are just starting that decade long growth period. This category of gym is to mainstream fitness as to the smart phone was to the pager…. a killer with no defense.

So what does this mean to us for the future? What will the industry look like during the next 10 years? Here are a few basic ideas as to where we are headed in the future, not just domestically, but worldwide as well:

  • The low priced guys will just keep going lower. You cannot, no matter what you believe, defend a business on price alone, because no matter how low you go someone will be crazy enough to go lower. This was a fallacy in the first $10 model as everyone bragged that they owned the bottom. Now look for $5 per person, or cheaper, memberships in the next few years. This will be a tough category to compete in since everyone knows that when the cannibals run out of tourists to eat, they then start eating other cannibals. Look for a price war within a price war as they attempt to kill each other.
  • The hybrid, mainstream training-centric facility has life. This is where you can show low in price, but average high in average return per client served. There are chains and franchises already looking at this and during the next few years you will see a few brave leadership teams take the lead and own this segment before everyone else catches on.
  • The first very poor attempts at trying to franchise the training concept have appeared, and they will fail. It is not about the workout, stupid, it is about the coaching experience. If programming were the solution, all the chains that attempted to do functional programming in a back room would have been wildly successful rather than stumbling. Those chains, along with the new franchise companies emulating training gyms, don’t understand that a good training gym is a coaching delivery system and not a magical routine any aerobics diva from the 90s can learn in 15 minutes.
  • The third generation training gyms are going to set the industry on fire. Small gyms in the 6000-10,000 square foot range are already changing the way you have to compete today. When you see gyms this size doing between a $1.2-2 million a year with fewer than 500 clients you have to understand that ding dong the witch is dead and good luck trying to generate that revenue with 4,000 clients with 12 other competitors in your market chasing the exact same client during the coming years.
  • Nutrition is the next big thing. We have done nutrition so poorly in the market for so many years it has been forgotten as a serious revenue component, yet this is changing too. Companies such as Precision Nutrition and DotFit offer solutions that can be used to generate enormous revenue in the gyms, but we are just now as an industry ready to listen and learn.
  • The restoration of natural movement will also change our world. We have created an entire generation of clients who look good in a tee shirt, but can’t tie their shoes without a struggle. Looking good is cool; moving well into your 60s and beyond is everything in life and we can sell this to the consumer soon. Companies such as Functional Movement Systems are already leading that charge and it is becoming a hot issue worldwide.
  • The death of the $39 guy in the middle. No one lasts in the middle. S Curve Theory demonstrates that you are on the edge or you die and anyone trying to cruise down the middle of the pack is going to lose. Look for that category of gym to complete fade away within five years.

What is the future of everything?

Maybe there future is returning to what made us important to people in the beginning, where the industry existed to help the maximum number of people get into the best shapes of their life in the shortest period of time. It was all about the coach at the dawn of the fitness industry and it is rapidly becoming about the power of delivering coaching again…. and that spells the end of the membership era.


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The 5 hard lessons of the gym business

Hard lessons in life and business are usually the end result of someone denying the truth until the truth kicks their ass. We call these lessons, “hard,” because not grasping these ideas earlier in our careers or life cost us so much time and money doing everything, “the hard way.”

Small business owners are often forced to learn these lessons quickly when things go bad. You wake up someday with about $10 left in your account and a letter from the landlord that you are going to get booted and all of a sudden you now are now open to a few new ideas. Waiting until the shoe of doom is heading for your ass is just too late. These lessons are the core of so many business books and are always there for anyone to learn before the need to survives inspires you to now learn.

The importance of one single sale

We get so busy being busy we become too busy to make any money. Then, suddenly, we become really scared because the business isn’t performing. We show up everyday. We coach everyday. We look at the lack of new clients being added to the gym each month and blame the weather, the time of year, the competition, our dog and the staff for that, “almost, but not quite enough” new client number being added each month.

If you want to change a struggling business, go sell just one new client; just one and feel the power you have to change the course of things in your business reality. Selling a new client a membership to your gym is the physical act of recapturing the power you willingly gave up to control the business you own.

There is power in creating revenue where none existed before you made it happen. We forget that we can sell our way out of any bad situation if we focus on the process of selling new clients and the need to keep the business fed.

Your gym business is a lot like a new baby. The new baby needs to be fed or it is miserable. Feed it regularly and the baby sleeps like a small child was meant to do. This does not mean that the new baby might not poop all over you, as all small businesses do to all owners at some time or another, but a constant stream of new clients keeps the gym fed and happy over time.

Selling one new membership is a statement: I can control the outcome of this business and I, as owner, have the power to fix this business and all I have to do is sell one membership and set my business free to grow.

There is no such thing as momentum

Momentum is the Easter Bunny of the gym business. Momentum is totally untrue and does not exist in the business, but believing in the Easter Bunny and magic eggs just makes us feel better.

We tell ourselves we have momentum in January and we hope it lasts until the end of May. We then tell ourselves that in most markets summers are slow so we let ourselves believe that we shouldn’t expect to do much business in those lagging summer months; therefore, we don’t ever do much business.

Momentum is a self-fulfilling prophecy. We believe it is true and it works. We believe it has faded and it goes away. In fact, even the term, “momentum” is used incorrectly in most cases and is often confused with the word, “flow.” Flow represents the natural ebbs and surges any small business has if that business is left alone to suffer the wild disparities in any business climate.

The problem is we give away our power to control our business to a concept that does not exist. There is always business, at any time of the year, in any gym anywhere, if we create that business and plan to create it in advance. In other words, we can control the flow of the business through planning and investment.

Creating business where none existed before is the holy grail of any small business, but is also why so few small businesses last over time. Most owners, who don’t accept that you control your own fate in the small business world, are held hostage by the vagaries of the local business climate until the business is taken away from them. These owners believe external forces magically control their revenue stream and that if the stars align, or that old gym down the street closes, then life can be good again.

But you do not have to live this way. You can create your own future by planning your income stream at least three months in advance. You can plan now to create your own momentum/flow every month, as long as you understand what you are chasing and how you are going to get it done.

For example, you might average 30 new trial clients a month during the early months of the year at an expense of $2000 a month spent on social media advertising. Knowing this, you can plan to change the promotion starting in May for the summer and increase your spend to $3000 for the months we assume to be slower. We could also change our programming for the summer adding some type of race training camp, special events, summer client guest privileges, etc., to increase cash flow and traffic.

You get what you create in this business. You can create flow that lasts year round if you learn how to manipulate your leads and cash flow by planning for the creation of flow so many months in advance. If you wait to see what happens and hope the months will be good, then you will live by the flow and you will die by the flow.

Cash flow can be a problem for even a healthy business

             Even the healthiest of businesses can have cash flow problems. Shortage of present cash is usually not always an indication that the business is not healthy. You can run a great business for years, but all of a sudden find yourself grasping for money to cover the payroll. In other words, cash flow problems happen to good people who run good businesses.

Most new gym businesses always have a cash flow problem during the first year, because no owner on earth has ever had the discipline to keep enough reserve capital to cover expenses until the business gets healthy. Most training gyms will not cover their operating expenses until between the 6-9 month of operation; therefore, those owners will need about three months of reserves capital to cover all bills each month until the business can generate the income to cover its own monthly expense.

For example, if it takes about $50,000 a month to pay all of your bills and cover all operating expenses, then you should have had about $150,000 in reserve to cover operating losses until the gym reaches its breakeven point, which for a decent training gym is at about the 6-9 month period.

This owner who runs short of reserve can either panic and start lowering the price and running specials to make up the cash shortfall, or he can go back to the bank and investors and admit he overspent on build out or never did have enough cash to really open (remember the theme of hard lessons). One way or the other, it is the very rare new gym that won’t burn three months of reserve one way or the other.

Mature businesses will also suffer from the occasional cash flow glitch. You reinvest in the gym and then a new competitor sets you back for a few months. You have a bad hire that injures your business for a few months before you can remove him. You get sick, you get divorced, you just plan badly and spend the cash or just simply screwed it up and got caught without the reserves you needed that month. Bad cash flow happens to good businesses for a 100 reasons.

This takes us back to reserve capital. Even mature businesses need at least three months reserve at all times. The gym business is an intense business and no owner can hold it together year-after-year without blinking at least once. Death, divorce, distress or drugs wreck havoc on us all at one time or another and we take our eyes away from the business for even a few weeks and we then find ourselves with a good business that is short of cash.

Growth versus protecting what we already have 

It is human nature to protect what we own. We find the right cave, by the right stream, with some food nearby and then we become willing to die to protect what we now own…. and human nature hasn’t changed much since then, especially in small business.

Over time, we create infrastructure that protects what we have built in our business. We hire enough sales people to make sure we can get the same sales we have done in the past. We hire just enough coaches to make sure we can cover all the current client needs. We buy just enough equipment this year to replace what we had that wore out and to give the clients one or two more toys.

And all of this kills your business. If you own a small business, if it isn’t growing by five percent per year then it is dying. The cost of everything in business goes up every year and if you are not growing by at least that five percent rate, then you are dying because you are losing ground.

If you want to survive, you have to build an infrastructure designed for growth; something most owners avoid because building for growth means you have to incur a slight risk in the business. The mistake so many make is that they wait for the business to generate enough revenue to pay for growth, instead of taking some financial risk and creating a structure that will allow that growth to take place.

Do you have the staff you need to grow your business by five percent or more this year? Do you have the right physical plant, positioned for today’s client and today’s market, which allows you to attract the new clients your business needs to be sustainable into the future? Do you have the right credit lines, reserve capital and lease and bank needs that position your business to stay out front instead of constantly chasing everyone else in the market?

Programming your business for growth goes against most of the basic human instincts. We get to the point where we are fat and happy then we shift into protection mode and concentrate everything we have to make sure what we have doesn’t disappear. The lesson is learning to build for growth and to live with the small risk this strategy entails over time.

What got you here is what stops you from being any better (concept dies)

             What made you good is what is keeping you from being better.

Over time, we create threads in our business. We learn how to make money; hire staff that often stays with us over time and we create a business that is right for the time and market.

But through the years, the threads that tie us to our past are what are preventing us from growing to another level. We learned to make money 20 years ago and think the same price specials and sales techniques still work. The staff we praise for their longevity now fights every new idea, because we have always done it this way and we sure as hell aren’t going to change now. We created the perfect business for 1995, but now it is 2017 and what made us so good over the years simply no longer works.

The hard lesson to learn is to blow your business completely off its foundation every 3-5 years and challenge everything you think you know about making money. What got you there is not what will get you there and you need to question the roadblocks that exist that stifle your growth and sustainability into the future.

At the core of this challenge to your own business is questioning your concept, which means has the product you offer gone out of style and is no longer what the consumer wants to buy?

The mainstream fitness world is in shambles, but there are still new gyms opening up that are nothing more than replicas of a 25,000 foot box from the 90s built around a sea of cardio, a giant floor with too much single plane equipment, a small functional room in the back and old school aerobics rooms in the corners. Everything is new and fresh, but everything is textbook out of date from the last century.

We continue to open brand new museums to the history of the fitness industry. Most mainstream owners aren’t certified trainers, have never worked out a single client, or at least in the last 20 years, view trainers as just another expendable front line employee and who still believe that the right combination of “the way we did it when it worked” will work once again. And this is wrong thinking.

Every service business has to evolve. You have to let go of how we made money and embrace how we will make money in the future and as of today. The future belongs to training-centric businesses where it is all about results with lesser emphasis on merely renting equipment for a monthly fee.

The consumer has evolved. The culture has evolved. How we train people to get results, and the tools we use, has evolved. Everything has evolved except the mainstream gym business who still believe in circuits and 120 group classes on a schedule.

We learn the hard lessons too late in life

             Experience is the best teacher, but we shouldn’t have to get our collective asses whooped to learn the lessons of life and business, yet we seem to accept this year-after-year.

The difference comes down to mindset. Are you reactive, which is about 90 percent of you, meaning you let the competitors dictate your business plan and you live by reacting to the negatives in life that force you to change, such as a major loss of business or divorce, or are you proactive meaning you drive the market from the front anticipating change, living for success and learning the hard lessons now before they combine to take down your business?

 

The lessons are only as hard as you let them be. You can choose your own path in business everyday and you can embrace change that creates growth in every business.