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 Copying an overexposed, out of date, worn out idea is not good business, yet in this industry we are doomed to repeat the past… or are we?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.