Thomas Plummer

The business of fitness


Protect Your Gym during the Virus Scare

It is going to get tougher to keep your business open during the next several weeks, but if you can, and this is my personal opinion, do not close until you are forced to by the local governments.
There are two ways to look at this problem for gym owners.
First of all, we could voluntarily close for several weeks and do everything we can do to keep the virus from spreading. This is an option many of you will feel comfortable with and I will give you some guidelines for this if this is your choice. If you are personally concerned about the virus, then do not hesitate to close.
The other option is more complicated. We should be, and can be, a beacon of calmness and a safe haven for those who need a place to go, are not willing to give up the benefits of fitness and health defending them against illness, and who need support.
If we do everything right, we mitigate the risks associated with staying open and become that one place a person can visit and feel safe while doing something good for themselves. But that is if we do everything right, which means your gym has to be the cleanest it has ever been, you need to practice commons sense on the sizes and contact points with your groups, and that you need to be part of the solution, not part of the craziness by refusing to spread rumors or become so politically lopsided you cost yourself business.
The harsh reality is that if many of you close you do not have the reserves to last for more than a month or two. I have given you a few ideas in the first two of these letters that are worth reviewing, but I am going discuss shutting down in this one.
If you have to close your gym…
·     If you are forced to close, try to limit the closure to two-week blocks but you may be forced to close indefinitely by your local or state governments.
·     Immediately assess your reserve capital and go proactive. I would assume you will need two-months of reserve to get by. This includes rent, debt service, utilities and other essentials.
·     Do not try to cover shortages after the damage has been done. Figure out your situation and the money you will need and start trying to put it together prior to getting in trouble.
·     If you have a good bank relationship, ask now about setting up a quick line of credit, again trying to cover at least two months of reserve.
·     If you have an investor, see if it is possible to borrow two months’ operational cash paid back over five years at a decent interest rate.
·     Pay your staff for as long as you can. Some of you have staff that have money in their lives, but most of our staff are people who are living one check away from being seriously hurt. If you can, pay your staff for as long as you can. Yes, they could file for unemployment, but that takes weeks to get done and there will be an influx of people filing.
·     If your members are on contracts, and all clients should be, then let them know that all time missed will be added to the end of their agreements reassuring them that they will not lose anytime while you are closed.
·     If you close, contact the members daily with tips and stuff they can do at home. Do not lost contact with your base. If you can scramble together park workouts or other suitable situations that do not break gathering rules for your town, then try that too
·     Talk to your bankers, landlord and investors about your monthly payments and what can be done if anything. For example, here is a landlord talk:
“My gym is going to have to close for two months and I will have limited income during that time period. I have cut expenses of course, but I still need to pay my staff. May I take my next two rent payments and skip them now but then amortize them spread over the remainder of my lease?”
For example, your rent is $4,000 and you have three years left on your lease. You are asking the landlord to skip two payments, or $8,000. This $8,000 would then be divided over the next three years of lease payments since you have three years left.
Banker talk:
“My payment is $3,500 per month. May I skip two payments and add them to the end of my loan period, or may the two payments be split over the remainder of my loan. I have cut all other expenses, but I want to still pay my staff and be ready to open in two months without being so far behind I will fail.”
The banker and the landlord have an incentive to work with you since putting you out of business doesn’t help them get paid.
·     “BIG.” There will be recovery loans available from the states and local governments when the situation lightens up, especially in those areas where small businesses are forced to close for a considerable amount of time. You need to be ready.
Keep exact records of what you lose in income with documentation
Keep your financial statements up to date. Talk to your accountant about making sure you are financially prepared to apply for one of these loans when they become available.
Document any deals with investors and landlords.
·     If you are a team gym depending on large groups, try offering small group or 1/1 to your clients stressing you will have no contact except with a limited group or just an over-sanitized coach. If you do this, offer a limited, 90-day agreement only for this service. Do not offer packages and sessions for this unless you are already using that system.
·     Promote daily that health is the best defense against disease using all social media platforms
·     Video people working out and post letting your community know you are still there
·     Post online workouts daily your clients can do at home
·     Weather permitting, get your members together in a park, but honor the group limitation rules per your community
If you go proactive, you have a better chance of surviving this situation as a business owner. Wait and see what happens, or try and fix any financial messes too long after the fact, and you might get hurt.
Take leadership in this situation. The gym is a safe haven that tries to protect the people who trust us. Stay in touch with them, support them, give them ideas to help them get through this, but do not lose touch with the people who support your business.

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The Illogical Logic of the Fitness Business

There is little logic in the fitness industry.

We endlessly repeat the past building exact replicas of 1995 over and over again; we scream the market is jammed and there is no way another gym could squeeze into this town, yet here comes one more pretender; and we hire the same tired leaders to get us the same dated results, hoping we can find a hotel guy or Starbucks person who will finally understand fitness has little to do with room bookings or coffee.

We talk about a national fitness revival in industry conferences, then drop our prices so we stay trapped in the equipment rental business where $10 will get you a gym with no service but you do get to walk slowly on a treadmill seven days a week. And we open more chain gyms while the country gets fatter, proving again the mainstream fitness world exists to take the money and run, and has little to do with true fitness or getting results for the clients who trust us with their money.

Even our one ray of sunshine in an industry gone mad, the hybrid training gym–where results for the client are traded for fair money–is ignored by our largest trade associations, which remain dedicated to protecting the biggest players and their own self interests.

The gym industry is currently a business representing all what we used to be, and little of what we could be if we embraced evolution instead of remaining trapped in the Dark Ages of the 90s. We have become a business segment that ignores the logic of good business, replacing logical growth with a chase for the glory days when we all rich and all beautiful in the fitness world.

It is illogical to think that growth in this industry follows a logical pattern.

Approximately ten years ago, there were about 2,700 fitness facilities in Australia. During a workshop there, I was asked if I thought growth was possible for a market that already appeared saturated to those in the business?

My answer, which was met with twenty minutes of denial, was that the market would double in less than ten years. It did. And the Australian market will double again within five more years.

The U.K. market was fairly flat a decade ago. The big players had the best locations, the training gym (please never again use the words “studios” or “boutiques”) hadn’t arrived from America yet, and the mom and pop gyms were regulated to small villages in Ireland. And the UK market doubled in a decade. And it will double again in five more years.

In the U.S. as of 2017, there were about 38,000 gyms in operation. The growth here is happening in the training-gym segment, where 1,500 to 3,000 square feet gets you a boot camp or single methodology gym. We have 38,000 gyms now. We will see this double in ten years. No, this growth isn’t logical, but it will happen.

Growth in this industry is fueled by emotion. The “what is next” drives out the old. The “It doesn’t matter how many gyms are in this market. I will be different and beat them all,” mindset is still alive and well, now driven by investment money cast out from other industries, such as retail. Emotional growth is fueled most often by ego, and backed up by cash, but growth witjhout reason is coming, and it just isn’t logical in many markets.

It is illogical to think single methodology businesses will survive over time

Single methodology fitness facilities are the wild children of the industry and date back to the 1950s of last century when Arthur Murray dazzled us with his dance moves and commercial dance studios, a predecessor to the modern fitness industry.

Single methodology, such as the old Curves model, is where you have a single product offered at a single price point. Modern examples abound disguised as boot camps, forty-five-minute circuits, boxing clubs, mind/body studios and other single concept offerings.

Single methodology has always failed, and it always will, for two main reasons.

First of all, if you only have one price point, even with deviations on that price, someone will always cut the price:

  • I open my new single methodology circuit gym at $159 per month
  • Imitators appear and lower their price
  • I then lose members and cut my price
  • The price war ensues, and both of these gyms ultimately fail

The weakness in a single methodology business is you only have one product to offer the consumer. When sales of that product slack, it is hard to change the offering since that circuit or style of training is the product.

Sales slow, we cut our price to match the competitor and the business ultimately fails because it was nothing more than a volume-based system that dies quickly when the flow of its single price members is cut off.

Secondly, the consumer always moves on. Consumers get bored, and even if they love ice cream, and you have the best vanilla in town (your only ice cream) they get tired of the same circuit repeated forever until they sit in a corner crying tears of boredom and finds another ice cream store.

Single methodology is falling in love with a single tool. Fitness delivered in these models is about the repetition of this tool and the owners find it impossible to change tools as the consumer fades away since the business is based upon this tool as its sole offering. Circuit training gyms might change the equipment slightly, but you are still doing the same circuit, in the same little space, over and over again, and it dies by overexposure.

It is illogical to cling to technology we
in the last thirty years of the last century

 New mainstream gyms look just like old mainstream gyms. Same equipment, now new and improved we are told by the salespeople, in the same rows, with the same group rooms, pricing structures, old sales schemes and price marketing scams from four decades ago.

The consumer has joined these gyms in the past and has failed in these gyms. There is no need today to build a 40,000 square foot monument to the 90s when we can build smaller (20,000 square feet or less), sleeker, and more functional gyms, for clients who might want to get results for the money they pay, and will pay more than the equipment rental mindset client.

It is not logical to cover a huge training floor with single plane, fixed joint equipment in today’s fitness market. It is no longer logical to offer programming that only attracts a few percentage points of our clients, such as group exercise or childcare, swimming or basketball.

Big gyms require big money to build, big money to maintain and need a constant flow of new blood to replace the members who leave making no sense today. Why consider a 60,000 square foot castle when you could build three, 20,000 square foot gyms chasing more target specific market share more cheaply?

The biggest mistake here is we try and build a fitness palace for the entire market assuming the guy who eats at the cheap fake cowboy steak house, and orders a steak, drink, side and dessert for ten dollars is the same guy who goes to the Capital Grill for a fifty dollar steak and hundred dollar bottle of wine.

Gyms of the future have to be smaller and more target specific to survive. The training gyms have figured this out already and you can easily find a sports performance specialist, a fitness after forty gym for women, and an elite training gym specializing in one-on-one training all across the street and draining the members of the mainstream monsters who are everything to everybody and nothing to anyone.

No one goes to a cheap gym looking for a hundred dollar per hour trainer and on one walks into a training gym expecting to pay less than one hundred and fifty per month to get supervised group coaching. The clients are different, but we try and force them all to live together in one box rather than understanding likes attract likes, and the Capital Grill guy probably doesn’t like being in the same gyms as the cheap steak house guy.

It is illogical to believe you can survive in this
business without a minimum five percent growth rate per year

This is a tough business. Wear and tear destroy a gym in just a few years. Equipment dies, cost of labor rises each year, and utilities, marketing and the hundred other items in your expense section can jump a few points while you are sitting in the bathroom.

In this business, we grow or die, but most of us have left the growth part out of this equation.

There is only three ways to drive a business. You increase sales, which will become more difficult each year as the market adds new players all chasing the same clients, using the same price-driven business plan; you can cut expenses, or you can seek a higher-return-per-member-served.

Endless growth isn’t sustainable in most markets. There are too many players fighting for the bottom. Market share is impossible to grow if all you sell is price because there is always someone opening next to you next week willing to offer the same product at a lower rate.

The new trend is offering more options in a massive warehouse type of facility, at a cheap entry with a small upgrade. This too is illogical since your market is restricted by drivetime from your gym. The average consumer will only drive about twelve minutes from his house to workout (twenty minutes in the training gym specialist world) and offering more in the big box for a lower price still demands a sheer amount of volume hard to sustain.

If you can’t chase volume, then you cut the expenses, but can you cut your expenses each year to match the increased cost of doing business? In other words, can you slash five percent this year, again, to match the three-to-five percent increased cost of doing business this year, again?

Three percent might get you even, and we need five percent growth to keep the profits growing, but you cannot save yourself into profitability more than once.

Growth is coming again to this industry, but repeating the past is not the way to financially benefit from this surge. Logic states most of what we do doesn’t work anymore, but illogical behavior wins because emotion drives us in this industry.

Seek the logical, evolve away from the past, and embrace a future industry where the client gets the results he pays for at a fair price.