A gym can be an amazing and profitable business when successful, however, reaching success takes a lot of hard work, perseverance and avoidance of critical mistakes.
We take a moment to explore the three biggest mistakes gym managers make that limit growth and profitability.
- Mistake 1- Failure to work “on” the business
- The famous business book the E Myth by Michael Gerber states that business owners should spend more time working “on” the business, rather than in the business. This concept is true in every industry. Many business owners and managers spend far too much time working in the business rather than “on the business”.
I see this time and time again in the fitness industry, where managers will be running group fitness classes or training clients. In some ways, this could be seen as positive. That the manager isn’t afraid to roll their sleeves up; however, it often means time is being invested in the wrong areas.
Many managers and owners start as trainers or gym instructors. And slowly make their way up to the point of being a manager or perhaps decided they want to go out on their own and open their own facility. They rationalise that they know how a gym runs and they do. They know all the technical elements of running a gym from writing a program to managing rosters to equipment maintenance.
The reality is running a successful gym is more about understanding business skills such as marketing, sales, customer management and finance rather than the technical elements.
Focusing on these areas is “working on” the business and is where most managers or owners attention should go.
- Mistake 2 – Failure to understand the mechanics of the membership business model
- Most gyms are based on a membership business model.
This is a beautiful business model when done right due to its the foundation of recurring revenue.
Essentially a gym is one big business system that is made up of several subsystems.
If we boil things down to its simplest form, then there are only two key elements of running a successful gym
- Member acquisition
- Member retention
Everything else matters very little.
Peter Drucker, the legendary management guru, said, “The purpose of business is to create and keep a customer.” If you want your business to grow, it’s critical to keep your existing customers happy and add on new ones
The more you optimise these areas, the more profitable your gym will be. Many gym managers and owners invest only a small amount of time and energy each month into these areas.
This brings us to the two most important metrics in your gym.
1. Cost to acquire a member
To be profitable, you must be able to acquire members in a cost-effective manner. Any dummy could spend 1 million dollars each month on advertising and bring in a bunch of new customers. However, they would be losing buckets of money to acquire those customers. The better your marketing and sales conversion processes, the lower your cost to acquire a member will be.
2. The average length of stay (or customer lifetime value)
Member retention is everything in a membership business model. As your competition grows, it becomes harder and harder to acquire new members in a cost-effective way. If you churn through most of your membership base every 12 months, you will find yourself on a sinking ship. Almost every gym under invests in member retention.
If your gym isn’t tracking these two metrics, you are driving blind and will struggle to maximise your chances of success.
- Mistake 3 – Failure to copy proven systems
- Learning through trial and error can be a long and expensive process. Learning through mistakes can be positive however sometimes we do not have the luxury of making too many mistakes. Too many mistakes can lead to the competition getting the edge or our membership declining too much to sustain profitability.
As mentioned earlier, a gym can be seen as one big system that is made up of several smaller subsystems.
For example, the process of generating leads for your gym is done through a lead generation or traffic system.
The good thing about systems is they typically can be copied and successfully transplanted.
If you can identify systems or processes that are already working for other gyms, you can “model” that system in your gym and expect similar results.
Identifying a proven system that you can model and implement in your gym is that closest thing to a shortcut there is in business.
I do not believe there are “magic bullets” in business, success takes a lot of hard work, ongoing improvement and persistence, however identifying successful systems that you can model can help you reach your target destination a lot faster than via the trial and error process.