Friday, August 10, 2018

Go Big Or Go Small With Your New Fitness Business Location?

Revenue vs. Risk in a fitness business is mostly influenced by your location and rent

I have a little challenge for you.

So first of all, I just want to let you know I'm really excited about the Fitness Pro Freedom Facebook Group and my work as a coach in the boot camp world, and I'm honored to be a part of that and honored that anyone would want to listen to what I have to say.

So with that being said, I'm gonna let you know a little bit about my history. Maybe a different part of my story that you haven't heard before. And what I've got right here are some numbers to show you. So I used to own a gym, and I thought that was the end-all-be-all of a fitness business dream.

It was our way to financial freedom in our future. It was going to grow from one club to three, maybe five. And more, and we're all going to get rich—at least, that was the idea back in 2004, 2005 and ultimately opening in 2006.

The gym that we had generated somewhere around $30,000 per month of revenue.

That's a lot of money for a guy that was just a personal trainer not too long before that.

The trouble was that the club was 6,400 square feet. There's $500,000 worth of equipment and the rent was 13 grand.

And then there are equipment leases, there's insurance, CAM (Common Area Maintenance) charges on the building. There's the electricity bill, there is payroll, which is massive. There's payroll tax which nobody usually thinks of when they first start a business and how high that is. Soon you realize that you're bringing in a lot of money, but you've got sales tax you have to pay.

So your perspective can be widened and you can get all starry-eyed about the top-line revenue.

A lot of gurus out there always just talk about top-line revenue. It's not the complete picture!

All that matters is what's leftover at the end of the day when the bills are paid. And that's your net. So in this example, our expenses were 28,000!

See the problem is whether you've got a difference of about two grand... So that's what you're living off of.

And when you run an operation like that, you're working 80, 90 hours a week. That's the reality for most small business owners in America that own a brick and mortar business.

I think the whole concept is pretty stupid because I'm sure there are ways to get your expenses a lot lower than that.

Here's my question for you and my challenge for you:

Why do we even set ourselves up for failure by starting with things that are so high in risk because of overhead?

Why are we looking at saying, "Well, I got to buy the best equipment and I need a bigger space and I want to grow and a lot of the gurus out there are always preaching bigger is better!"

But a lot of them are still promoting a picture of what I consider the big box club thinking and the big box is where you've got a lot of overhead. So if you're a startup trainer and you're training one on one in a gym or you've managed to do an outdoor boot camp to keep your costs low, it's as if they're there constantly tormenting us with this concept that unless you're in the box, you're not gonna make any money.

Most of the ads you are seeing are all focused on "the box".

Many well-respected fitness consultant gurus make fun of outdoor boot camps and they say they are unprofessional. Or they say that you can't charge the fees that you need. And I get their point. But they're so extreme with that message that they sometimes leave you with this thought that, well, unless you're going to go all the way, then you might as well not be in the game at all.

And the problem with that is that that was what I needed to be successful. If I had listened to that, I would not be successful—I wouldn't have ever gotten my boot camps off the ground to begin with. I used outdoor boot camps and I used extremely low cost, low overhead methods to get them going. It was boot camp on a budget. It was on a shoestring. It was a bootstrap boot camp. It was anything I could do in order to get things moving and produce some income so that I could survive. A lot of times they're setting people up to think the only way that they can be successful is if you just work at a gym for a long time, save up your chips, and then eventually you'll be able to own your own place.

And what is this place? It's typically said and it needs to be 2,500 square feet minimum, and preferably 5,000 square feet.

That's the average for a good group training business model boot camp or CrossFit box. They say it doesn't make any sense going smaller than that. They're just not really enough space to get the numbers you need. And so that's the sweet spot.

They always say, and I agree if you're going to do warehouse locations, as in the CrossFit model, that the ideal size is 2,500 to 5,000 square feet. Still, depending on where you live, you might find that for dirt cheap. And if you do, it's something to look at. But what if you can't find that? What are you going to do?

I guess the point of this little mini rant here is that yes, the box is one way to do this business, but it's not the only way. And I just want to say this to encourage you because if you haven't "arrived" yet or if you're already here and you're trying to expand and you're thinking, "Well, I need to go get another one, or I need to bump out a wall and make a huge one in order to make my money," then I want you to stop and consider all your options before racking up more expenses.

Then you're talking "big box" and you could produce a lot more revenue in it, but you also might have huge expenses. And so you might be going, "Okay, I kind of get your point, Jesse, but why are you so fired up about this? And where are you leading us with this?"

So here's where I want to lead it to. The key is, just one bright idea will spit out cash for you.

A bright idea spits out cash. What is your big bright idea? What is it that you have that so unique and special? That's why I've been talking about niche which is a part of the picture. Big ideas or bright ideas are actually what sets you apart from the competition—because that is what makes you money, not your big box. Because if you get into the big box mentality, there is no other route than to hire trainers underneath you and then you have to open up another big box and so on and so forth for duplication. Yes, that makes money, but for most people, it equals huge nasty risk. I'm telling you what nobody else wants to talk about; risk never comes without a price.

You will pay a price, and what if it doesn't work the first time around?

Now I always used to say, "Oh, don't talk about it. If it doesn't work? It's gonna work, it has to! We're going to make it work"

Seriously, what if it doesn't work? Have you thought about the worst-case scenario so you can adjust and pivot and survive without crashing and burning?

What if your big idea doesn't work the first time around? Eventually, you can be successful, but what if you invest all this money and open up the place and it doesn't work?

Over the years, I've been there multiple times and I can tell you the pain that it creates is so intense I could have quit and left the industry. I have had many chances to do that, but instead, I chose to go back to what really is the source of our freedom, the source of our financial and time freedom as fitness professionals. The source of it all is a creative idea, so get back to your big idea.

That's why we're talking about a niche. We can't talk about marketing, we can't talk about systems until we know what it is that we're really trying to provide.

Okay, so now let's let me get past that and move onto this next concept which I think will be quite useful for you.

So you've got basically this idea (or you need to come up with what your big idea is for your specific niche in fitness) and that you're going to try to avoid the risk and massive overhead. Why? Because it's all about profits. It's not about revenue, it's about profit. That's capitalism in its simplest form and profit is not an evil thing. By the way, money just makes you more of what you already are. If you're a good person, become more generous. If you're a stingy person, become a big jerk. So we're not judging money, it's just the tool.

But what profit really is, is creativity. It is an idea, it is an ideal to work towards.

I know we want to get down to business here. So another concept that's going to help you with this profit model is you can take your creativity, and I'm gonna give you an example here. What if I could create a higher, more profitable Bootcamp business, or other large group fitness training system with as little overhead as possible?

Would I be happy?

Yeah, I would.

How can I do that was the question. So here's what I came up with. I started a brand new bootcamp to experiment with and provide for you some data. I started tinkering in November with the ideas. January I started one from scratch.

It's doable, the workout outside, but it's pretty cold and there's snow or just terrible rain and it's just pathetic outside, you know, kind of miserable. And so not exactly appealing outdoors. So I thought, well, what can I do to launch this bootcamp? If I had to relaunch it, what would I do differently this time around?

In my last business, I had four cities, eight trainers working for me and paying rent and all these different places and looking at opening up a standalone location that could have been good maybe, but it didn't work out. It wasn't in the cards. My payroll was extremely high. We had a camp do $14,000 a month but I still was living on $1,500 bucks because I was trying to reinvest in the business to grow it.

What I wanted to do was restart in a different way. And so here's what I did. I kept all the overhead as low as I possibly could everywhere possible. And it was hard. I mean, for example, I didn't want high rents, but I still wanted an indoor location. When did I use the indoor? Primarily in the morning.

Now here's the thing, you can do outdoor bootcamps in the afternoons and the warmest part of the day in my area. If you're in a hot climate that might be the opposite, but in my area, he needed to have something indoors at 5:30 in the morning. That's what I chose. So I made a side deal with the owner of a space to sublease and I got it down to $200. Two-hundred bucks used to be the lowest I've ever paid in rent per month. Results will vary in your area.

I think it's fair. It's all just "found money" to them. It's money they wouldn't normally be making and  the $200 was basically to cover my access to a small gymnasium at a boys and girls club. Later, I went to an indoor soccer facility for $100.

Now, I'm not saying that you go now do that because I've been all over and seen many great options to start a fitness business. There's gymnastics facilities, martial arts studios or other fitness-related businesses that aren't direct competitors like gyms. There's so many places. There's community centers and churches and private schools and whatnot. By the way, if you can pull that off in a public school, Kudos to you, but there are so many options that are very easy to arrange.

I found one in my town that made sense, that had a nice space that no one else would want to use it at that time. 5:30 in the morning. I negotiated a 100. I could've gotten lower, but I just felt bad, you know, I wanted to pay something.

Only one or two clients covers the cost of the rent!

Then I do the park as my supplemental and that's zero cost for most cities (if you are in California you guys have been shut down, but it still isn't impossible to negotiate a fair deal).

Now all the gurus are saying that the parks are terrible and they don't provide enough professionalism. It's not the location that provides professionalism, it's YOU that provides professionalism and the quality training, so if you can, you can even find people that want to do the outdoors more than anything else because they love the feeling of being outdoors, especially as it gets into spring and summer (in our area). Many people prefer the great outdoors, so that is a niche right there that might be worth capitalizing on.

So unless you're in a climate, this is ridiculously hot or cold or otherwise terrible, I actually recommend the opposite of what the other gurus are saying.

I recommend you do outdoor boot camps and if you're in the cities where they cracked down on them (of course a lot of these gurus are advertising from places like California where they cracked down on the practice of using parks for boot camps), I'm telling you right now—instead of just caving in, why don't you go make a deal with the Parks and Recreation Department?

Why don't you go find some friends on the inside and offer to give them free camp or whatever you gotta do? It's so easy to say, "Oh, that's a bad idea to have to pay for a park." Well, you go rent a traditional retail space and you're out two, three, four, five, $6,000 and then you are really under the gun!

Yes, and if you're in a position to do that and you're like, "Jesse, whatever, you're just being silly," Well then more power to you, but what if you had to start over today and you had zero money?

I want to encourage you because there's a lot of people that you know you can help or if you're looking to duplicate yourself and you're looking to help someone else become a trainer and train for you to ultimately buy your gym, but the only way you're going to do that is by making it easy for people to get started financially and you want high-quality trainers who are going to do a really good job and provide an amazing service, so you have to make it easy for them to be successful and you can't do that when you are burdened with high expenses. You are going to be strapped for cash and stressed out. When it comes to selling your business you need it to be cash flow positive by a wide margin to attract a buyer.

To me, high-overhead gyms are ridiculously risky and dangerous.

So rent of $200 or zero. Equipment expenses for a boot camp upon startup? 500 bucks.

I really think if you get smart with boot camp equipment, you can even make some of your own. You don't want to do things that look chintzy, obviously, but don't spend a lot of money.

So there you have it; your very basic stuff.

And really, how I did this was I got clients first to commit and I did bodyweight exercises.

So you don't even need equipment!

You get a couple of them to pay you, you cover your rent and you take your first check and hopefully, you can use it to reinvest in the business (or at least the second or the third, depending on how starving you are).

So now you're in 700 bucks and you're good to go.

In this last example, by April first, I was bringing in a revenue of $2,590. So I was more than covering my expenses. At the time I had internet expenses, like email software super cheap websites.

The domain name was like 15 or 20 bucks a year, whatever that ends up being. And I just used my private email. I didn't do anything fancy and I used email software for some of my email promotional stuff, but I didn't even do that until months later.

So it took me planning and testing in January, February, and March. So within three months, I was already getting a profit of not quite $2,000 without any high-tech stuff and without any paid advertising at all, and that's not bad. See, that's something you could even possibly live off of if you're brand new (and young, and don't have a wife and kids, etc.).

So here's the kicker—You got the expenses which is 700 bucks and you've got your profit, but what don't you have in this equation? Liabilities!

Remember, I was saying the big box club I owned was expensive and we had to sign leases with personal guarantees and we were trying to live off $2,000. The landlord didn't care if we were successful; he wanted to get paid no matter what. It was long-term leasing obligations!

Sometime in the future, you want that to be making $10,000 or $20,000 a month. But sometimes it doesn't happen or it doesn't happen as fast as you want. It can take years to be successful in a brick-and-mortar business. I made a little less than $2,000 per month as a traditional gym owner, but I had massive headaches.

So let's say I make about the same amount of income, but what I no longer have to deal with is debt. Debt equals risk, making payments on stuff and signing your name to the bottom line.

I accumulated over $2.2M in debt in my late twenties and early thirties, owning a gym and having rental properties and other stuff because I believed that debt equals freedom.

Well, it doesn't; it equals risk.

And if something goes wrong, you lose everything. That's the number one thing you don't have here.

Number two—You don't have the stress.

In fact, we didn't talk about that in our cash flow (income and expenses) and balance sheet (assets and liabilities) discussion earlier. Nobody talks about that in budgeting class.

But stress, when you working with bigger numbers, becomes bigger too. Sometimes the perceived stress is very high. You have bigger numbers on the gross revenue side. Great! But if it comes with bigger problems and bigger numbers on the expense and liability sides, you are in trouble. Your assets are high, but your liabilities can be higher, and that equals massive stress.

And here's the other thing, you don't have a crazy schedule when it comes to the low-overhead business model.

The point is here is that you could do this in about six hours a week. I could do more if I wanted, like two a day for three days a week. That's six hours. I don't do a whole lot of administrative. That's maybe 20 minutes a week. I might text-message my clients and occasionally do pump-up calls. And then I might do facebook posts and some emails and stuff, but that's it.

So let's say I'm working 10 hours a week Max. Let's just say it's going to be roughly $2,000 a month revenue divided by let's say 10 hours a week times 4 weeks a month, which is 40 hours a month. That's a nice easy $50 per hour. Granted, it could be done in less than 10 hours. Probably 7 hours, which would make it $71 per hour. And, as I proved more recently for myself, I can do $2,000 a month with just one boot camp session instead of two, so it's $100 per hour.

What I like about this is that I can also do a little one-on-one private training separate from the boot camp, and around the hours of the class. It's way more fun. And if I lose one client, it doesn't matter because there's more to take their place, whereas if I'm doing personal training for 50 bucks an hour, then you lose a client, you're out your money. Or if they reschedule you're out your money and time because there is no boot camp class to anchor you in your schedule and give you reliable income.

Now, what could you do in two months with your experience? You may be a better trainer than me. You may live in a more lucrative area that I live in. So I'm just throwing this out there as a case study of somebody who just started a few months ago and boom, I am already making enough to survive off of.

You may want a lot more money than that. But here's the point, if I can make $2,000, I can make $4,000, which means I can also figure out a way to make $8,000. I could probably make $16,000 with a system like this if I scale properly.

I can keep it growing and I don't need to get to the point where I'm hiring other trainers for a long time, or buying into a big box space or creating a bunch of overhead right away.

I can wait until I have a lot of profit to do it so I can do it debt free.

What if you can do all this debt free and almost risk-free?

We're not even talking about the additional streams of income I have that I attached to the bootcamp.

The bootcamp is only part of it, so I've got all the other streams of income that I tapped in there also, which over the last few years has doubled my training income.

I'm really excited about what the future has in store for you!

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