A while back, while up in central Maine visiting my wife's family for the weekend, I couldn't help but notice that the local gym in the center of town had gone out of business since the last time I'd visited. When I commented on it, my wife's response was: "No surprise; there have been three gyms there before it, and they've all gone under, too."
It's not all that surprising, given how many health clubs, gyms, and fitness facilities go belly-up each day in America. What was a bit surprising, though, was that while you'd think the other businesses in the area would be struggling in light of the recession, that really wasn't the case at all.
About 1/2 mile up the road, the parking lot at an "Adult Film" store was completely full. I would have snapped a picture of that, too, but it probably wouldn't have made the patrons in the parking lot too happy.
Instead, I got this one of a doughnut shop not too far away. Yes, the place was hopping at 3:30PM on a Friday afternoon - not exactly what I'd call pristine "doughnut consumption time."
Recession, huh? Would you consider porn flicks and doughnuts necessities? Surely, if people have the disposable income to splurge on fornication and chocolate glazed awesomeness, they can front the $20/month to get rid of the spare tire that's hiding their unmentionables from view.
Taking it a step further, this doughnut shop has over 3,000 locations, and apparently, the porn store dude has several locations in the area and has done quite well for himself. So, why can't the gym catch a break, in spite of their noble intentions?
Very simple: they likely made some big mistakes that their more successful counterparts avoided. Right off the top of my head, here are three:
1. They likely went too big. - This gym opened at over 6,000 square-feet, while the porn store started as a small location with lower overhead and (presumably) grew into more locations over time.
Cressey Sports Performance started at 3,300 square-feet, then moved to 6,600 square-foot facility (which was renovated to add another 1,000 square-feet). Only after five years in business did we make the jump to our larger, 15,000-square-foot dream facility. In short, we bite off off what we can chew, and nothing more.
2. They likely overpaid for commercial space on the main road. - Location is important for a business, no doubt, but too many people think they need to pay for crazy expensive commercial property just to get as many drop-ins as possible. This isn't exactly in line with the "niche" name, either, as it implies that they're pushing to be a specific location that people seek out because they serve baby boomers better than anyone else. The porn store was on a side street. Why? People seek it out; they don't just drop in to pick some up on a whim.
Cressey Sports Performance is in an industrial park in what seems like the middle of nowhere - but it works because we are in a niche and clients will travel to train with us.
3. They likely wasted money silly equipment instead of investing in their greatest assets: their people and their relationships. - This is quite possibly the biggest mistake I see upstart gyms make; they spend thousands on cardio equipment and fixed-motion resistance training equipment rather than spending conservatively in this regard, and instead investing those financial resources on their true assets: people.
For the $30,000 it costs to purchase a treadmill, elliptical, recumbent bike, and 4-5 apparatus fixed-motion resistance training circuit, those folks could have purchased more effective equipment for 1/3 the price and instead spent the remaining $20,000 on staff education and referral bonus gifts for existing clients. They probably blew a ton of money on direct mail and newspaper advertising, too, when they should have been out hustling to network in the community and tap into their existing clientele for referrals and help spreading the good word.
In short, they probably devoted money to depreciable assets when they should have been using them to add value to existing investments.
You know what porn videos are? Investments. People rent them, and they pay themselves off over time. Seated triceps extensions doohickeys don't.
Several gyms had already gone out of business there previously, and it seems readily apparent that these folks tried to improve on a flawed business model instead of just scrapping it altogether. They changed the oil on a car with no wheels.
Unfortunately, this kind of failure is pretty rampant in the fitness industry - and there were surely a lot of other factors that contributed to the business not making it. While I don't claim to be a true expert, I can say that we've had a thriving business for almost five years now - and I've been fortunate to communicate on a regular basis with not only fitness industry business experts, but other guys in the field who run successful businesses.
Pat Rigsby, co-founder of the Fitness Consulting Group, is among the former. Mike Robertson, co-founder of Indianapolis Fitness and Sports Training, is among the latter. And, the three of us have teamed up to create a product called The Fitness Business Blueprint, which is a great resource I'd encourage you to check out for more fitness business strategies like the ones I discussed in this post.
