Our team meets with potential new owners looking to follow their passion of owning a gym or club on a daily basis. Most of the time these prospects are long time exercise enthusiasts who have “lived in the gym” most of their lives. As we’ve seen in sports, it’s not a given that a great player will become an exceptional coach. In fact, it’s quite the opposite and the same can be said with regards to working out/owning a fitness business.
Let’s look at the global picture for a moment:
Only 48% of the Fortune 500 companies from 2000 are still in business. If we were to go back to the 1950’s, only 10% of those companies remain. In 1955 the life expectancy of a Fortune 500 company was 75 years. In 2021 the life expectancy of a Fortune 500 company is less than 15 years. While there is no definitive data on the life expectancy of a health club, quick research of the top chains from 1980 bear out similar statistics. European Health Spas, Bally Total Fitness, NY Health & Racquet Clubs, Town Sports International, Lucille Roberts, Vic Tanny, Sports Training Institute, and so many others – all gone.
The Fitness Industry:
The average length of life of a traditional health club is now just 5 years. That’s right, FIVE years. Why is this? Many new club owners are passionate about what they want to bring forth and go into it for the right reasons. They want to open a club to give their community members an opportunity to be healthier, stronger, and create an epicenter of activity that is affordable, fun, and creates pathways of success for members striving to achieve results. But their passion, in most cases, lacks THREE KEY INGREDIENTS FOR SUCCESS:
- New club owners vastly underestimate the fixed costs of starting a fitness business. The result? they often fall short with regards of cash flow thus become unable to either grow or stay afloat. Being undercapitalized is the #1 reason for failure.
- The second ingredient is a strong knowledge of operations. Business skills such as budgeting, hiring professionals (as opposed to friends and family), scheduling, payroll, accounting, use of software and managing personalities are all skill sets that are imperative to creating a successful long-term venture in the active living space. Lacking operations experience and failing to hire the right individual to operate the business is the #2 reason for failure for a new owner.
- A successful owner often possesses a mix of fitness skill, operational experience, and passion for the industry. But to truly be successful, an owner also have the skill to develop and implement a strong sales & marketing strategy. Lacking the ability to effectively message and market, particularly with today’s emphasis on social media, is the 3rd skill set we find leads to failure if lacking.
If a potential owner checks these three boxes, they will still have a shot to succeed initially however are not armed to battle with potential competition or prepared to address the many nuances that differentiate our industry from others. This results in stagnant growth and eventually failure.
The obvious challenge is competition. Once a program has proven itself and works, others will attempt to copy. The balance of price and value is another challenge owners must overcome. Low priced predators in the fitness space often take a high percentage of the population who are only partially invested in active living. A third challenge is status quo. If a club has early success, how long does it stay the course before injecting new programs and strategies to remain cutting edge.
Mike Kryzysewski once stated one season is a lifetime when discussing one season of college basketball. As history has proven, in order for a club to have long term success, more than the current average of 5 years, it’s important owners reinvest in the business on multiple levels to stay relevant in their community. Is it easy? No. But in order to beat the averages, this reinvestment on multiple levels is THE key ingredient to ensure long term success. And just when it’s been all figured out? A new cycle must begin for the club to remain cutting edge, current, and exciting to retain the members they’ve worked so hard to get. But that’s a lesson for another day!
Stay Active!