In this episode, Matt and Rick discuss whether or not you should change your fitness business model. Spoiler alert- it could mean more profit and less drama!

As a gym owner, changing your business model can be a tough call to make.  Sometimes, it’s the only viable option to solve the problems you face in the gym and increase your profitability.

Part of being an entrepreneur is realizing that your business model is not cast in stone. Remember episode 94, where we talked about the Ugly Baby Syndrome and how it can affect your business?  Your business is your baby, but is it really successful and profitable?

For example, here at Alloy Personal Training, we changed our business model to small group personal training for the sake of simplicity, scalability and profitability.  In fact, this change fixed most of the problems we were experiencing with the previous model, such as scheduling, complexity, and high churn rates.

We will discuss five areas to examine on determine if you should change your fitness business model.

What resources are needed to run your current business model. So when you really look at your current business model, like what are the resources needed to drive your business model like labor, time and money. How much time is it going to take to create more activity and efficiency? So how much more money is it going to take? What is your cost of new customer acquisition? Customer acquisitions is a challenge for all fitness businesses. Are you really going to double down on all of your efforts, costs and time to gain that 300 members? And is that going to fix your business model? Or is it that you’re charging too little?

We have consulted with gym owners recently that own boot camps that are down to 300 members and need to get back to 650 members to be at their target profit margin.   We talk about how they need to more than double their business, but how long is that going to take and what  resources have to be invested?

What is your volume and revenue relationship. What we found with the Alloy franchise model, with higher paying customers at a much higher margin, we didn’t need to have as much volume. Once we had this model of taking care of clients and our business is built and holding strong, we actually get to be in the fitness business. We are actually in in the business of taking care of clients, not on this hamster wheel of churn and always looking for new client acquisition, like in the big box fitness club business.  To continually grow your business by gaining more and more members there are hard costs that come with that growth.

How complex is the business?  Complexity is expensive and it’s messy. If it can be simple and clean, and very profitable, that’s the way you want to do business. With Alloy we have had good friends we consulted with that have pivoted their model by getting rid of classes. They were studio based and not a big gym, and eliminated classes and went to small group training like Alloy. They loved that it is so simple, more profitable, cleaner coaching, easier scheduling, and all their problems went away.

Do you have an adequate profit margin?  Rick has consulted with many in the gym industry with average margins of  12%. That’s terrible. You would not want to make an investment that had margins that low. Let’s use the shake bar example. Run the real metrics on a shake bar. If you are a small personal training gym, you don’t have a high enough volume of member visits to cover the labor and costs of running that bar. It will cut into your profit margins.  The low volume of shakes, even though your shake margins might be 100%. You’re not going to sell enough of them in a smaller volume facility. Does the shake bar work in a in a big 10,000 member gym? Yes.  Does it work in a 200 member gym? No!

How quickly can you get a Return on Investment (ROI)? . We talked about the resources required to open a shake bar in this podcast. There’s an upfront investment, inventory, labor to run it, and time to get it set up and running. So when do you get a return on the investment? If you’re opening a brand new business model, you should be thinking how quickly can you get return on investment? These ROI discussions happen in the franchise world, but in the regular gym world, these discussions don’t happen like they should.

Here’s the deal. If your business is struggling or you’re looking to grow, look at your overall business model. Disassociate yourself from the baggage and your sunk cost in the business. Be honest with yourself, if it’s too complex, you’re going to want something more simple and profitable with less drama.

When we looked at focusing the Alloy business model we asked questions. What do our most successful clients do? They do small group training, because it’s more affordable than one-on-one personal training. Small group training provides the positives of being in a group setting with the accountability and motivation. We wanted to have a business to solve a problem. We saw an open gap in the market where the population age is from 45 to 65, which was  underserved or underrepresented by most fitness brands that were class based. We saw that one-on-one training was just so expensive and not scalable even from a labor model. We found our sweet spot, with the advantage of working with clients that paid more, stayed longer, and they got the results that they wanted.

So you should start with what’s the best thing for your customers and then build a business model around that and quit adding complexity.  Keep it simple, keep it profitable, keep the drama down, go make some money.

Listen in to learn why you should consider changing your business model to solve your business problems and increase profitability!

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Key Takeaways

  • Should you change your fitness business model (01:46)
  • The Ugly Baby Syndrome (05:43)
  • What are the resources needed to drive your model (06:04)
  • Are you a marketing business that does fitness on the side? (08:34)
  • Know thy numbers (09:30)
  • Keep your fitness business model simple (12:03)
  • Evaluating the ROI of your model (14:32)

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Mentioned in this episode

Rick Mayo 

Alloy Personal Training Franchise

 

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