How to Build a Multimillion Dollar Fitness Company.

Multimillion dollar fitness companies abound all over the world.  In fact, there are billion dollar fitness companies such as LA Fitness, 24 Hour Fitness and Life Time Fitness.

A good number of brands are doing hundreds of millions like Orange Theory Fitness which did over 700 million in 2017.

The reason I bring this up is to help you think just a little bit bigger.  So often people start fitness companies with a passion for fitness but no aspirations to grow beyond a few hundred thousand in revenue.  Hoping maybe to hit one million dollars in revenue one day.

The fitness industry is approaching 100 billion globally and is showing no signs of slowing down.  It’s ok to start small but aim high.

Now that you’ve got an idea of what’s possible it’s time to start thinking about building your multi million dollar fitness company.

Weather you’re franchising or starting your own concept now is the best time to build a multimillion dollar fitness company.

multimillion dollar fitness company

The goal of this post is not to persuade you on the best strategy to build your empire but to help you gain clarity and expand your thinking.

Here’s 3 thought provoking things to consider when aiming to build a multimillion dollar fitness company.

One decision you need to make when just staring out is if you’re want to buy into a franchise or start your own concept.

1: Franchising – Pro’s and Cons.

Let’s weigh the pro’s and con’s of both franchising vs starting your own fitness concept.

fitness franchise pros and cons

First here’s a list of pro’s and con’s to franchising.

Pros:

  • Proven business model.  Most the time but not always.  Do your homework.
  • Support. You get training and support which is great especially if you don’t have prior experience in the industry.
  • Brand recognition.  Only if the brand is large and spends money on national advertising.
  • Systems.  It’s nice to have a set of pre configured systems in place for sales, operations, and training.
  • Collaboration.  This is a big one. Having the opportunity to collaborate with other business owners can give you a big advantage and short cut your success.

Cons:

  • Financial. This could be a pro and a con.  The pro is you get a discount on equipment and other pricing benefits from mass purchasing power.  On the flip side, you have to pay upfront and ongoing franchise fees normally a percentage of revenue.
  • Control.  If you are the kind of person that has a hard time following someone else’s system then franchising might not be for you.  Franchisees are bound by restrictions on brand image, operational freedom, and can be forced to purchase new equipment or other things if the brand updates or pivots nationally.
  • Win or Lose.  Jumping onboard a winning franchise that’s gaining popularity can be a an uphill ride until the brand starts failing.  Curves is a perfect example of a brand that grew really fast but didn’t look far enough into the future and failed.  When the franchise fails…so do you and that’s beyond your control.

Pros and Cons of starting your own concept.

multimillion dollar fitness company startup

Pros:

  • Franchisor.  If you find a winning formula then you can now franchise the concept to others to accelerate growth.
  • Flexibility.  If you’re a good strategic thinker who can identify needs in the market then you’ll have flexibility and speed to pivot as needed.
  • Creativity.  You have complete control over your brand, the marketing, and operational functions.

Cons:

  • Higher Risk.  When starting from scratch you take on higher risk vs using an already proven model.  If you have little or no experience this would probably not be your best route.
  • Your on an island.  If your starting from scratch you have no other associates to collaborate with which can slow your growth due to lack of information.
  • The initial climb.  When you have no brand recognition it may be harder to compete with other well recognized brands the first few years but that doesn’t’ mean you can’t.  It happens all the time.

A quick glance of this list and you may recognize if franchising is right for you or not.  There are fitness companies on both sides of this equation that have multi million dollar operations.

A few things that matter for your decision are direct industry experience, business acumen and your personality.

2: Multimillion Dollar Fitness Company Growth Strategy

how to build a multimillion dollar fitness company

Let’s talk about the high level strategic growth strategy for you fitness company.  This is not a “how to” but thoughts to stir up your mind and to point you in the right direction.  If you’re interested in learning more about marketing your fitness company check out the post called gym marketing hacks.

In a previous blog “Sell More Memberships” we talked about market saturation on a per location basis.  The research shows that most gyms will hit local market saturation within 3-5 years after opening.

After this point it’s a slow and steady trend upward or staying even as you enter the maturity stage.

To grow a multimillion dollar fitness company it’s more likely you’ll need to open multiple locations.

How many depends on your model and the market each location sits in.

If you own a 25,000 square foot health club in a dense population then you can expect to have 4,000 – 6,000 members but if you own a 2,000 square foot studio in a moderately dense population in the suburbs you can expect to have 150 – 400 members.

Put a fitness studio in New York city and you can reach over 1,000 members.

gym marketing

The point is, it’s likely you’re going to need multiple locations to have a multimillion dollar fitness company.

Larger fitness facilities with, let’s say 6,000 members or more with at least a $30+ per month membership dues equals a few million dollars a year in revenue but to own a multimillion dollar fitness company you should think about opening 2 or more locations.

TIP:  Start with the end in mind and work backwards.   How many members and how many locations will you need to hit your target?

Now that we’ve established the need to own multiple locations lets’ talk location.

I’m sure you’ve heard the saying “LOCATION…LOCATION….LOCATION”

Choosing the right location is a really BIG deal so do your homework.

It’s not hard to survey the market before planting roots.  When you’re looking for locations check the density of the population within a 3 to 5 mile radius.  Once you’re outside of 5 miles, the number of people who will come to your fitness facility is pretty small.

Things you should know before signing on the dotted line for a new location:

  • Population within a 3 mile and 5 mile radius.
  • Number of people ages 25-55.  Normally the largest fitness demographic unless your fitness company specializes in youth or seniors.
  • Median income.  If your a value gym ($10/month) then this is less of a concern.  If your a middle of the road price point ($20 – $39) then you need to make sure your in a decent area.  Premium gym or studio ($50 – $200 / month) then make sure you’re located in an area with above average median incomes.
  • Fitness appetite.  Is the community into fitness or are they apathetic towards exercise.

How many should you open?

When thinking about how many locations you want it’s better to set bigger goals.   Force yourself to aim bigger because if you shoot for the moon at least you’ll land among the stars.

If you plan on opening 10 locations you may only end up with 5 but it you plan on opening 1 location you’re most likely going to end up with one.

Thinking in terms of multiple locations also forces you to ensure you have good systems in place from day one to make it easier to expand by duplicating the process.

If you have the capital, the fastest strategy to grow to multiple locations is through acquiring existing locations.

3. Multimillion dollar fitness company financial strategy.

build a multimillion dollar fitness company

When you super size your vision from mom and pop shop to a multimillion dollar fitness company you have several financial strategies to choose from.

  1. Bootstrap – start with no debt and no investors by using your own money.
  2. Debt financing – take out a loan backed by the assets of the gym.
  3. Investors – give away equity in exchange for money.
  4. Combination.  Use a combination of your own money, debt, or equity financing.

Bootstrapping.  If you bootstrap by using your own resources to get started make sure you have a minimum of 6 months in working capital to operate the business.

Debt financing.  Be careful here.  Debt financing is very common especially with equipment financing but if your not careful it can choke out your profit.  Make sure you have a realistic projection for revenue.  Be conservative when making projections to ensure your cash doesn’t dry up too soon.

Investors.  Having investors with deep pockets allows you to grow much faster.  The downside is that you will give away large chunks of your company over time if you choose to grow fast by using those deep pockets.

Combination.  Being creative can work well if you know what you’re doing.  Using a combination of financing options may land you a better long and short term deal but be careful.  If this is your first rodeo get a seasoned financial advisor or consultant to help you navigate this.  It will be worth it.

Getting caught up in the euphoria of the dream is great fuel for hustle but don’t forget to slow down and take care of the details that could bite you later.

Hopefully this stirred your thinking and expanded your vision.

Dream Big because you’ll work just as hard to build a 250k business as you would to build a $10 million dollar business.