- Fair enough. There are many great opportunities in the fitness industry. Over 60% of the American population is said to be either overweight or obese, so no shortage of opportunities. However, we receive many calls from new gym owners after only 6 months in business (or less) and they are already sending the distress signals.
Based on what we are seeing on a frequent basis, we would like to suggest the following if you’re ready to make the leap to gym ownership.
- Do your due diligence. I can’t tell you how many times I hear a new owner say they thought the recurring revenues were higher or they didn’t realize there was a retention issue with the members. The numbers must be proved out. Yes, you want to see financials, but demand to see tax returns and bank statements. Be sure and talk to the billing company handling the account. Simply as that.
- Not having enough cash in reserve. Don’t do this on a shoestring and think you’re going to promote it out. We suggest you keep one months of operational cost in reserve at all times.
- Assuming cash flow will cover debt. While a positive attitude is always preferred, you can’t become blinded by optimism. You’re adding new debt to the business; you should expect some ramp up time. It’s also worth mentioning that you should have a business plan and budget prepared so you have a roadmap for success. Don’t fly by the seat of your pants.
- Paying for potential. It’s best to have the business valued by someone in the industry with experience. Too many first-time buyers will pay a premium for the potential of the business. You don’t pay for the prior owner’s blood, sweat and tears – and you don’t pay for the great “corporate opportunity.” It’s all about cash flow.
- Don’t go it alone. The biggest issue that gyms have is the improper implementation of sales and marketing. The new owner is able to deliver a fine product and service, but they suffer from obscurity – no one knows they exist and those that do don’t have them at top of mind. Then when someone does come into the facility, there is no process or trained fundamental to properly guide the prospect into active participation as a member – they don’t make the sale. If you’re a new owner and you don’t have prior successful experience in sales and marketing – get help…and preferably industry specific. Don’t wait until you run out of cash before you get help, it will be far cheaper to start our right.
No, go start that new gym – and do it right!
Jim Thomas is the founder and president of Fitness Management USA Inc., a management consulting and turnaround firm specializing in the fitness and health club industry. With more than 25 years of experience owning, operating and managing clubs of all sizes, Thomas lectures and delivers seminars and workshops across the country on the practical skills required to successfully build teamwork and market fitness programs and products. Visit his Web site at: www.fmconsulting.net.