Is it profitable to own a gym?
In a Statista report from November 2020, 68% of gyms open for over eight years are profitable. This number fell to 52% if the gym had been open less than three years. Owning a gym is worthwhile, but it can take time.
This blog will examine whether or not owning a fitness center is profitable. We’ll also discuss what you can do to turn your gym into a good business using practical and proven strategies.
Owning a gym is not as glamorous as it seems
Everyone who has thought of owning a fitness center has probably fantasized about potential profits. There is no doubt that the market for fitness services is growing. It is important to remain realistic when it comes to the amount of work required in order for a gym operation. You will probably be doing the majority of work yourself before you hire staff.
You will be responsible for everything from cleaning to maintenance, customer service, and marketing. You can also expect to work long, sometimes even early mornings or late nights. Although owning a fitness center can be lucrative, it’s not a scheme to get rich quickly. The people who succeed in this business will be those who are prepared to work hard.
Effective Operations
It is important to know where you are now and where you will be in the near future. It can be not easy to get your business running smoothly in all areas. But there are ways to improve the processes. That’s what we’ll look at first.
Improve your performance by identifying areas for improvement
Eric Killian has joined The Fitness Founders Podcast. Eric Killian is a Certified Public Accounting and the founder of The Fitness CPA in Colorado, an accounting firm that specializes in finance for fitness businesses. Eric spoke to us during the episode about how efficient operations will help you succeed and grow.
Eric’s experience has shown him that many gym owners have succeeded by identifying areas for improvement and, most importantly, taking action. You can’t change your churn if you don’t do anything to improve it.
Identify the financial operations that are successful for your company and those areas where they could be improved. You’ll want to ask yourself these two questions in order to identify the areas that need improvement.
If you answered yes, then take action. Create a plan of what steps you’ll take to improve the area. Plan your week by taking one action. After completing the degree, you should measure its impact before moving on to the next. You’ll discover what works and what doesn’t as you move through the process.
If you don’t know, then find someone who knows. You could choose a mentor or someone who has been in the same position as you. Or, perhaps you will outsource a consulting firm. Finding the best solution is easier when you are proactive and use the right people. Eric said: Now is the right time to declare, “I am committed to making this happen.”
“I have seen owners who are really great get the right coaching, and I’ve also seen them working with consultants. I’ve watched them get their finances under control and work with their franchise. “I’ve seen these people partner with other fitness concepts and turn around their brands in their local community. You can do this.”
Plan for the future by knowing your present
The uncertainty that comes with the pandemic is a reminder that no one can predict the future. It’s important to be able to see the current state of each part of your business so that you are prepared for both the worst and best-case scenarios. Below are a few questions that can help you get started.
Can you predict the worst-case scenario if your gym has to close again based on retention and churn rate from when you first had to shut down this year?
What can you do to prevent this from happening again?
What impact will these factors have on your cash flow in the next few months?
Answering questions such as these will help you plan your financial future. We’ll discuss the finances of the business in greater detail in the following section.
Fitness business growth: Top 10 barriers to success
Find out moreAndrea gave expert advice on how to avoid financial traps and explained the three financial statements that you must understand to run a business: the balance sheet, the profit and loss account, and the cash flow. You’ll be able to see what you need to adjust in the future once you understand these. We’ll quickly explain each one.
The Balance Sheet: an overall view of your business’s performance. This is what you have, what you owe, and what’s left. This statement shows your overall growth.
Profit and loss statement: will show you what your company earns and what it spends. It will also highlight how much cash your business generates every month.
Cash Flow Statement: Similar to your profit and Loss Statement, but includes additional expenses such as tax payments and employee wages.
You can take action to fix problems and make sure your business is financially stable and profitable when you know how it’s performing. This is more difficult to do during COVID-19, but it’s a great time to review how you can increase revenue for your company. This year, you may have shifted to offering online services to your members. But that is not the topic of this section. You’ll have to be creative if you want to generate additional revenue outside of your online/in-person memberships.
Use your online store to its fullest potential
It’s not just about memberships. You can sell any product you want on your site. You can sell e-cookbooks, meal plans, courses online, or equipment bundles. Below is a simple example:
You can sell the individual items and then offer different bundles for a lower price than buying them individually. This will give you a better idea of the value of the pile.
Upsell and create value
Uber Shape Australia shows how to increase revenue while also increasing retention. The 8-week challenge is sold via the gym’s website, making it easy for customers to purchase.
I use the store to complete the 8-week challenge. The members will “buy now” straight away because it is easy.
The most recent run of the challenge saw a 100% retention from the start. This brings us to the last section about what makes and keeps a fitness center profitable.
Member retention
Getting new leads and converting them into members are important in the fitness industry. What’s more important to the success of your gym is their retention. Your revenue is based on membership fees, which ultimately affect your profit.
The online fitness market is highly competitive, just as it is when you are running your studio. It’s more important than ever to know what makes your gym stand out from the crowd.
Accountability
You know what motivates your members. They won’t get that from a random Instagram Live workout. Brittany Welk, owner and founder of LadyStrong Fitness, took her studio to the internet and kept 100% of its members.
Brittany spends time making sure members are making progress beyond just the workouts. The studio makes daily calls to its members to keep them motivated and on track.
Onboarding
Recently, Dr. Paul Bedford joined us on The Fitness Founders Podcast. Paul Bedford is an expert in retention and the owner of Retention Guru. He helps independent gyms as well as larger international franchises to develop their retention strategies.
Paul discusses onboarding, referencing his landmark study, “One Million Strong: An In-Depth Study of Member Retention in North America.” Paul’s discussion on onboarding is one of the most fascinating. He refers to his landmark report, An In-Depth Analysis of Member Retention: North America. The study found that 87% of members who were correctly onboarded remained active for six months.
Summary
It is not easy to run a profitable gym. You will be able to make improvements if you have efficient operations and an overview of your finances. Not only for long-term growth but also profitability, member retention is a major focus.
