How To Not Bankrupt A Gym

Yes, this post comes in light of the recent downfall of a large fitness chain. The Malaysian Body is trendy like that.

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The fall of an empire

I’m not even shocked, something felt amiss when they mentioned “relocating” their Sri Hartamas location.

Well, this isn’t even the first time a fitness center went bust this year. In January, Gorgeous fitness abruptly ceased service. Havoc ensued in it’s Klang outlet, and the manhunt is still on for it’s founder.

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(Gulp)

It’s a sad state, especially for members who’ve just committed long term contracts.

In any case, this post aims to showcase how not to run your fitness business to the ground.

Who am I?

My credentials, experience and expertise backed by years of managing one of the largest gym franchises in the South East Asia will not be revealed here.

Or anywhere for that matter. I don’t even manage my family’s Whatsapp group.

At the very least, I am from the fitness industry. Take this as advice from a personal trainer/ fitness equipment supplier. I’ve been helping clients turn fat into muscle build muscle and burn fat for 10 years. For the past 2 years, I have been with FITBOX .

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If there’s one thing I’ve learnt from equipment dealing:

Fitness equipment cost a shitload


Large fitness chains usually purchase brands from Germany/ USA (Technogym, Precor, Life Fitness), where a regular treadmills costs at least RM30k per unit. Let’s say that your elliptical, stair climbers & bikes cost around the same price (they usually are), multiply that by 50 (average number of cardio equipment in gym): RM1,500,000

For the sake estimation, say the free weights machines total the same amount: RM1,500,000 (They’re slightly cheaper, so let’s have the totality of flooring, accessories, and potential discounts off bulk purchases included in this very meager estimate).

Sum total of equipment cost: RM3,000,000

For an average of 15,000 sq ft location, renovation cost should be at least RM500,000 

RM3,500,000, before operations begin.

And so it begins. Rental for a 15,000 sq ft space is around RM30,000 (meager for the space, especially in prime location), and you have 20 staff with an average of RM2,000 salary, plus other costs, it should bring costs to around RM80,000/ month x 12 = RM960,000/ year.

Being at least RM3,580,000 “debt” even before asking customers for a single cent: Great start.

Month 1: say you have a (very) miraculous start of 1000 members signing up with an average annual fee of RM2500 (above market average), that would give you a quick injection of RM2,500,000

Then you have a (super) miraculous number of 50 new members a month, 600 new members a year: RM1,500,000leading to a revenue of RM4,000,000

Financial year 1:

Very frugal cost : RM3,500,000 + (RM960,000) = RM4,460,000
Very positive revenue: RM4,000,000

RM500,000 debt, even in the best case scenario

(I omit the profit from personal training and the hidden costs the business, I think they largely even out. The nitty-gritty is not the purpose of this article, )

Are We Fucked?


Don’t go cancelling your gym memberships yet.

I’m not saying that large fitness chains are bound to fail. Be my guest and point to successful case studies in the comments section. They exist, and they should be exampled for the way they’re run.

I’m merely trying to show the financial reality of operating a fitness center.

If you ever have 5 million dollars lying around, and you’re toying with the idea of starting a gym… go toy with something else.

Typical fitness businesses are approached in such a backward manner it’s a miracle any of them come out of the red.

If you ask me, it’s the same problem in startups: investors pouring money into a product that has yet shown any potential for revenue.

Even if you don’t have cash to play in the big league, you’re not free from these numbers. The main point of this post is to provide an insight to people who want to own a gym because…

“I’m passionate about fitness!”


You’re sick of the morning traffic, sick of your desk, sick of your boss, sick of replying e-mails, sick of stalking your ex on Facebook at 345pm, sick of the drive home…

When you get into the gym… Musics’ blasting, blood pumping, heart racing, adrenaline rushing, endorphin releasing, you experience rebirth! Suddenly…

“STARTING A GYM IS THE BEST IDEA EVER(RRRRRRRRRRRR)”

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I’ve been in the industry long enough to see countless passion ending in heartache. I’ve tasted it, myself, too.

Passion doesn’t insulate you against the reality that equipment, electricity, staffing, rental, renovation need money.

You must be thinking, “Oh, I don’t have that kind of money, I’m planning to start a small gym”, you’re not entirely free from the perils that plague large fitness chains.

Anyway, enough negativity. If it’s of any value, a good thought process to follow on your journey to gym set up:-

The primary source of revenue for your business = Gym members. So you need to fulfill the gym members’ needs. What do they need?

1. Feel Like They Belong

I wholeheartedly agree that Powerlifting, Crossfit and Bodybuilding are awesome disciplines, and it’s great we’ve found light in these practices. However, such communities come with exclusivity: the opposite of inclusiveness.

Scenario: Topless, sweaty bodies, barbells and bumper plates bouncing all over the chalky mats, screams, shouts and grunts from members that blend in harmony with the blasting background of EDM music.

“That’s fucking awesome”

I think so, too.

However, how many people, who have never touched a barbell, ever, would actually step foot and train in such an environment?

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There’s an anecdotal fallacy in the industry: Just because I enjoy something, everyone else should. To all fitness professionals (myself included):

We are not representative of the larger population

I’m not saying that there’s no place for niche disciplines. However, from a financial standpoint: People that can afford higher end fees and services are primarily outside of the fitness industry: Corporate employees, middle to late 30s, who have amassed a decent amount of wealth, at the expense of neglecting their health for the past 10 years life. I personally think they’re a large, under-served population.

Put aside the question of affordability: 10+ years of bad health practices and cumulative stress, they are the ones that actually need to get into fitness.

Rather than create an exclusive bubble that caters only to the Bodybuilders and Cross-fitters of the world, it would be financially prudent, and just right to aim to serve them.

This is a long-winded way of saying this:

Instead of building a specific community: create a place for a specific group of people seeking for a community. As I pointed in the above example, under-served, stressed out and not very healthy corporate employees.

How do you do this? Instead of setting up a niche environment off the bat, create one that aims to include everyone.

This means no metal music, no unnecessary slamming of weights, clothes have to be on while training etc. And only then, establish further modifications that benefits (in descending order): the business, your existing following, and your personal ideal.

(On a side note: Having sponsored many Crossfit competitions over the past 3 years, it’s no doubt that the Crossfit community has grown. But we’re not sure if the growth is enough to feed the rising number of boxes. Crossfit is no longer a niche, we feel. We advice box owners to really find a niche and stand out in this highly saturated market)

2. Achieve Fitness Results

“Fitness Results” is broad ranging. However, when most people say they want to be “Fit”, most of the time, they’re saying: I want to look like Captain America/ Wonder Woman.

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Dang. I want to look like her

The most optimal method to achieve said goal: Resistance training and a nutrition plan that suits a person’s lifestyle.

If you’ve been in the industry for long enough, with a deep passion for improving and upgrading the health of yourself and others… and you have an ounce of sense, you’d be able to filter the bullshit that plagues the industry.

Cough detox Cough vibration plates Cough body sculpting Cough alkali water. I digress Cough.

With this in mind, you can prioritize: You don’t need a RM30,000 elliptical or RM12,000 leg extension (yet), nor is there a need for a RM4,000 Olympic bar. Also, majority of customers probably don’t give two hoots if your dumbbells are from ROGUE or the Chinese brand ROUGUCHA.

Cover the basics: Barbells, dumbbells, benches, a multipurpose cable machine, a piece of cardio equipment (preferably not a treadmill). Heck, even with a yoga mat, you can bring beginners far.

Having a large budget doesn’t mean you have to splurge it at one go. Get the bread and butter, let the business run, and add equipment based on reliable feedback from your established following.

This will cut your cost by a shitload, meaning you can invest in…

3. A Cosy Environment

With the money saved from equipment side, invest in something for the members.

A foosball table, a comfortable sofa, community computer desk, 1GBPS wifi, a reading section with recommended reading lists; make the gym “loungable”.

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For illustration purposes ONLY

People will enjoy their time in your gym, and would highly recommend their friends to come and hang there, too. This effect compounds.

In Closing (…touchwood)


This is merely the tip of the iceberg in what makes a successful gym. The question of scale, staff, location, establishing a niche, operation costs, social media, advertising is something that requires much work and research.

But hopefully, your foray into building your fitness empire starts with these key steps I find largely lacking in the current fitness sphere. No doubt finances have to be out of the read, but to do so without doing anything to give back is unsustainable.

Remember, you never have to break the bank to start a fitness business, and most importantly, keep adding value to the people you serve.

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Frankly, by writing this post, I risk losing customers: The inability to make concrete, long term planning is the reason we, as suppliers, are largely insulated in this industry.

In fact, we thrive when disgruntled corporate employees decide to trade their suits and ties for Dri-Fits and compression pants.

In all honesty (what weight do these 3 words really have? You decide to believe or not) we take pride in helping grow the industry, in the way a SME can actually afford to. Incidents like this send waves through the industry and beyond, leaving a bad taste in the mouth.

And as cliched as it sounds, we hope via this post, we can protect this industry that seeks to protect health.

 

 

5 thoughts on “How To Not Bankrupt A Gym

  1. I’m totally agreeing to all the above-mentioned stuffs in regards to starting a fitness gym.

    If you know about the operation of Anytime Fitness, it is an independent franchise. Like McDonald, you buy the license and start the business. Same concept goes to AF. With all the above-mentioned costs, you would have to add up the AF licensing fees every month up to RM5-7K. Summing up the costs, you can imagine how unnecessary it is to pay for the license per se. 24-hours fitness center is the niche of AF, so that’s the main selling point. As I ,myself, working in the fitness industry for few years, you and I both know that how many people would really go for midnight workout? In fact, the memberships are actually close to RM200 per month. What AF can offer? 24-hour unlimited access to all clubs in the world. That’s it – as if I would travel around the world going to each gym in different location. That doesn’t make sense. Is it worth it? Probably not for most people who are mainly going to the one that nearest to their home only.

    In fact, being fit should be cheap and affordable; Not paying RM200 over just to get towel service, steam bath, and spacious shower rooms. All these luxuries are just gimmicks to entice people to sign up for membership. It’s absurd but it is the sad reality of fitness trend. Their mindset is: I pay so much I should get the Sun and the Moon so that I can be the Star. I believe it is the self-assurance they have when they sign up bomb-costed membership expecting to lose all the fats by just lingering around the cardio area. Sadly, no.

    Year by year, I come to realize that, in fact, we do not need all these fancy equipment just to be fit. Your own body is more than enough to be fit. As cliche as it sounds, it’s the truth! Why do you go for weight-lifting area to train when you, yourself, couldn’t even do 50 push-up in 1 minutes?

    As you have mentioned, the blooming of Crossfit/Local small gym is beginning to saturate the market right now. Not to mention PT 1-on-1 studio is starting up freshly from the scratch nowadays. Without the niche, it’s just a gym like everywhere else. Fitness business is starting everywhere because they think it’s a blooming business that can earn million. Little do they know that it takes more than just a business to start with. I actually feel pretty sorry for my owners who own an Anytime Fitness club, with zero fitness knowledge but million bucks in the pocket, suffering from the financial deficit in each passing month til the point they hired a very expensive Club Manager to run the club. All I have to do now is to wish them best of luck and it’s time for me to seek for another place.

    The closing down of True Fitness was a huge slap on the face to the fitness industry. It definitely creates fear for people in committing gym membership which in turn affecting the membership sales of the fitness clubs, and dropping of Personal Training Sales in which the trainers will suffer (from the Manager and declining income).

    Well, all I have to say is wishing the best of luck for all of us who working in fitness industry. Be optimistic. Every cloud will have a silver lining.

    Cheers!

    Like

  2. Nice post bro. The industry is changing and honestly I think the era of big box clubs is over. Back when the first brands like FF or California started, there was no real fitness industry and so they took most of the market share. But as the industry developed, more niches entered the market, PTs start going freelance, bootcamps take people outdoors, crossfit boxes, yoga studios, functional training, etc. and with the internet, YouTube, fitness bloggers, apps, the industry has become more and more de-centralised. Just like many other iindustries. Also people don’t feel they need to pay for everything that a big club offers when they only use one part, so they’d rather pay less at a smaller gym closer to home or a join something group based so they can enjoy the community part So the big clubs can’t hold on to their market share and they die due to enormous, constantly increasing overheads. It’s just economics. It’ll be interesting to see how things develop over the next decade.

    Like

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