Gym Financing and Budgeting

Financing and Budgeting my group-class gym

If pandemic response regulation and shutdowns taught us anything as gym owners (besides proper hygiene), it should have been this: access to proper gym financing, and a clear focus on budgeting is of the utmost importance. 

My partners and I took over ownership of Real Change CrossFit in February 2020. The previous owners saw their membership base decline from over 90 members at the beginning of 2019, to just 30 members by the end of 2019, then announced that they were shutting down. The community was breaking apart, but was worth saving.

We scrambled to announce the new ownership group in an effort to retain as many members as possible and we reopened the doors on February 1, 2020 after just 2 weeks of being closed to find only 13 members would return.

Although 13 new members is a fine start to a group-class gym in its first couple of weeks, the first of the pandemic response regulations would hit us on March 16th, 2020. If we had not had adequate financing, clear and attainable budgeting, and a commitment to providing value to our members, we would have been forced to close just as an estimated 15-25% of U.S. gyms.

Part I: gym financing

As it goes with anything sustainable, cultivating partnerships with like-minded individuals or businesses is crucial.

I found our best financing option - for terms, rates, fees, and the overall working relationship - came from a personal relationship I had developed prior to seeking out financing. Networking doesn’t always mean joining a “for-pay” networking group or association, it should simply require asking questions and being interested in what others do, and being willing to support those that share a similar vision or mission to your own.

*When is the right time to start looking for financing? *Should I be prepared to commit significant personal funding and/or time to operate the business?

Look for connections within your social group

Our ownership group included a female, and a member of the U.S. Armed Forces. Financiers don’t just look for a well-written business plan, they also look for a viable revenue generator. Having partners that come from different walks of life are not only advantageous for the valuable insight they bring to operations, but they will also attract a diverse customer base. Diversity, at the very least, offers a larger pool of potential customers. 

*Should I seek out opportunities to bring in more diversity into my leadership group, and how?

Highlight diversity within your organization

I chose to work with a bank that was eager to invest in small businesses. Although they had recently made large investments in new sports stadiums and large tourist attractions in my area, the bank was committed to growing through small business loans. Other financing options existed because of the makeup of our ownership group. Local banks and credit union’s can offer better rates, or easier application and acceptance to potential small business owners that fit their ideal client model.

*Should I use a big bank, or local bank? *What type of financing options exist, and what details will they look for to offer us those options?

Ask around to discover the financiers that are most eager to work with you and your ownership makeup

How much money do you need to finance your new gym?

Prior to receiving approval for our financing, I was asked how much money we would be seeking. We had already determined and promised to pay the balance needed to equip the gym. We had the terms of lease already from the landlord. We also knew the general cost for systems and technology for startup.

*Should I buy new or used equipment? *Is financing the equipment a good idea? *What systems should we purchase, and what operations can we handle ourselves to avoid added expense?

On January 16th, 2020, with only rumors of the new virus that could spread throughout the world, we requested financing in the amount we thought would carry us for 6 months if we had 0 (zero) revenue. No one could have predicted the importance of this single decision. 

*What are the types of expenses I can predict? *Are there potential hidden expenses I can plan for?

On top of startup costs, estimate a minimum of 6 months of expenses with zero revenue as a starting point for new gym financing

We were required to shut down completely between March 16th and June 1, 2020. We decided to put a hold on all recurring membership fees, and we continued to pay our coaches through the shutdown as we did not know what options they would have for their everyday needs. For 2.5 months, our worst-case scenario estimate of “financing needed with zero revenue” came true. Our more “normal” operations began picking back up around July 1. Although my state had some of the most lenient restrictions (and subsequently higher transmission rates), the community remained cautious about returning.

*How do we continue to provide value during serious business interruption? *Are there ways to alter or upgrade our initial financing position once a serious business interruption occurs?

Part II: budgeting

Although we didn’t know how long the pandemic shutdowns would last, we knew that we could possibly see the end of our financing before we saw profitability. In an ideal situation, a new gym will add new programs and new streams of revenue as the member base grows and as the rate of growth steadily increases. We were 3.5 months into our new ownership; we were not at a growth rate ready to expand into new streams of revenue, but more revenue was exactly what we needed. Budgeting was crucial.

What is the best way to Budget my new gym?

Is it even possible to appropriately budget as a new gym owner with little or no experience? 

*Yes

*but having a partner like JumpStart Fitness in your corner helps significantly :)

A very important action to take prior to applying for financing is to do your research locally. Research should include taking classes, or participating in community events hosted by other similar or even competitor gyms. Ask to meet the owner(s). Be up front with them that you are interested in opening your own (potentially) competing gym. I was blessed to be able to meet with 3 other local owners prior to our first day open. I love to workout and experience different training modalities, so exploring the chance to get some advice was not difficult for me.

*How do I go about setting up an appointment with another owner? *What is the etiquette in having potential business discussions with another owner? What questions should I be prepared to ask?

Gym ownership is a growing industry. There are about 103,000 gyms open in the U.S. and roughly 231,000,000 (million) Americans of eligible age to belong to a fitness program. There is plenty of room for all of us to serve in our own unique way!

Ask other leaders about their costs and revenue generating strategies

In an effort to minimize expenses, I created my own budgeting tool to which all partners in the ownership group had access. It was color-coded, contained notes, and clearly tracked actual versus expected results. It is important to track necessary and permanent expenses alongside but separate from fluctuating and impermanent expenses. Some expenses can be negotiable at cost, and some expenses can be removed by choice or by necessity. 

*What consumer software is available to help me budget? *What expenses should I expect, and will new expenses arise over time?

Design or implement a clearly understood form that tracks both expected expenses and revenue, and actual expenses and revenue. Make adjustments monthly.

Budgeting would not be complete without a clear, attainable, and actionable sales goal! This goal should adhere to your stated mission - meaning, if your mission includes providing a thorough movement analysis over the course of multiple sessions for new members, committing your sales goal to 30 new members per month may strain your abilities to on-ramp new members successfully. Likewise if your mission is to provide a fitness space for predominantly volunteer firefighters, but set your sales goal to be 20 new members per month, there may not even be more than 20 volunteer firefighters in your locality to attract!

*How do I create a mission? *How can I make sure that my mission also has a chance at being profitable? *Do I need to be exclusive or picky about what potential new members I attract? *Should I purchase leads, offer promotions, pay for outside advertising, and what methods work best?

Clearly state and track your sales goals / expectations

Finally, combine your hopes and expectations for your sales goals with your financial outlook. If your attainable sales goal shows you running out of money within your allotted “6 month of zero revenue” plan, and there is no backup financing option, tweak expectations, the mission, impermanent expenses, or revenue generating strategies to make sure you are giving yourself months of financing left in the tank for a rainy day… or a pandemic.

*What other options might be available if my mission is rigid, but profitability may be more difficult? *What cost savings strategies exist that will not harm the value I provide?

Identify places to make adjustments in the plan to assure higher chance at profitability

We were anxious to begin new programs and create new revenue streams - and we did risk spending more on certain programs that we thought would pay off immediately, or sow the seed for pay off over time. Ultimately we said “no” to more purchases than we said “yes,” but by investing our resources in providing value to our members and employees, while also creating some new revenue streams, we hit our first month of profitability after 7 months of full operations following the pandemic shutdowns.

*What programs and revenue streams are best to begin and when do we start them? *When should we start seeing the pay off of these new programs?

Our members wanted us to succeed and so supported us in fundraising drives and community events, and passed on their experiences by word of mouth (and social media). We did not receive any federal, state, or local funding, or grants, but still were able to set up the processes necessary to show profitability, which in turn, allowed us to negotiate for further financing options!

*Are there gym assistance programs available even without a pandemic?

Financing and Budgeting are processes that give some people anxiety. This is not uncommon, so don’t be afraid to be mindful of that anxiety and channel it into asking questions and seeking advice. Just like in nutrition, or with fitness modalities, building a successful group-class gym will be a unique process for you with certain ingredients that are known to work for everyone. Send us an email, or DM, and let’s build a customized plan that will focus on finding the ingredients you need to hit profitability, faster!