Welcome to Financially Fit, your ultimate go-to resource for all things fitness-related! Whether you’re an investor, entrepreneur, or manager in the fitness industry, we’re here to provide you with valuable insights and advice to help you navigate the exhilarating business of fitness and achieve remarkable success. In this post, we’ll explore the key financial considerations when opening a new fitness location or expanding an existing one. So, let’s dive in and discover how to build financial strength alongside your passion for fitness!
Thorough Market Analysis
Before embarking on any fitness venture, it’s crucial to conduct a thorough market analysis. Understand the demand, competition, and demographics of the area you’re targeting. This analysis will help you determine the viability and potential profitability of your new or expanded fitness location.
Financially Fit tip: This is one of our favorite parts of starting a new fitness business, it allows us to “go explore” both practically and theoretically about the areas we plan to operate in. Take some time to “meet the competition” and sign up to some classes and workouts in the local fitness spaces.
Make understanding the demographics and the economic circumstances of the population one of your top priorities, this will help you understand very quickly what price point you can expect and in turn what your financials will look like.
Also ensure that you are very aware of your competitive environment and build positive and productive relationships with your competitors, we can´t stress enough the incredible value of being welcomed to the market by those that have already built a reputation there. They will also help and work with you if you are on their positive side.
Budgeting and Financial Planning
Develop a comprehensive budget and financial plan to guide your decision-making process. Consider all aspects, including equipment costs, facility lease or purchase expenses, staffing, marketing, and operational expenses. A well-planned budget will ensure financial stability and help you make informed choices.
Financially Fit tip: Be as realistic as you can whilst being conservative with your upside and cautious with your down side. This may sound counterintuitive, but trust us when we say that no matter how talented of a financial planner you are, you will not generate as many revenues and you will be spending a lot more than you think.
Also, remind yourself that a plan is just that: “A plan” it is intended to help guide you through your business, but as the famous Management Guru Peter Drucker said: “Planning is the art of predicting the future and being wrong about it.”
Explore various funding options to support your fitness venture. Whether it’s self-financing, bank loans, partnerships, or seeking investors, consider the pros and cons of each option. Carefully assess the financial implications and determine the best fit for your business goals.
Financially Fit tip: Financing your business (Getting a loan from a bank, financial institution or investor) is your fastest and most cost effective way to fund your business. At the same time, it also is the hardest to access. Most financial institutions or creditors will want to ensure their funds won’t be lost, and thus will require guarantees in forms of assets and your ability to repay the loan and interest were your business to go belly up (You and I know this won’t happen, but they don´t believe in you the same way we do).
Finding a partner or partners is your other option. Whilst it is “a lot” easier for you to get your partner to buy into your vision, good partners with the ability to fund your business is also a lot harder. At the same time, having a partner in your business generally requires that you are sharing part of your business with them, therefore you are sharing in the good and the bad with them.
There are almost as many partnership models as there are potential partners in the market, just make sure that you are comfortable with the agreement being proposed and that you and your partner, will remain committed to the vision and it’s business when the going gets tough… Because at some point it will get tough!
Revenue Streams and Pricing Strategy
Diversify your revenue streams to maximize profitability. In addition to membership fees, consider offering additional services such as personal training, group classes, retail merchandise, and nutrition consultations. Develop a competitive pricing strategy that reflects the value you provide while remaining attractive to your target market.
Financially Fit tip: Be extremely selective on the location of your business, as a single digit in a zip code can mean the difference between reaching your target price point or having to discount your fees.
Explore indirect activities to enhance your revenue streams. Becoming a licensed partner of another product or service (Such as sporting events) could mean substantial increases in your revenues (both directly and indirectly).
Be ambitious yet realistic in your relentless pursuit of revenues. There is no way of over emphasizing this, revenues are the main reason for your being in this business in the first place… Ok, Fitness is the main reason, but remember that you are a fitness business person now, so Revenues just became the priority. But remember, revenues should be three things: Abundant, Effective and Sustainable. This means that whatever you plan to do, you must maximize the amount of revenues it generates, at the lowest cost possible and should be able to continue indefinitely (or at least in the long term) without any substantial increases in efforts. There is a reason why 100% of the entrepreneurs out there wish for days to have more than 24 hours, and a as many reasons as for why that is not an option.
Marketing and Branding
Invest in marketing and branding efforts to create awareness and attract customers. Develop a strong brand identity that aligns with your target audience and differentiates you from competitors. Utilize digital marketing strategies, social media, and partnerships with local businesses to amplify your reach and generate leads.
Financially Fit tip: You may not know this, but we at Financially Fit are FANATIC about marketing and branding. There is only so much a fitness brand (or any brand in any industry), can do for differentiation and to position itself as a superior option. This is were Marketing comes in. Think about it, the entire luxury industry is predicated on superior marketing and brand positioning, if it works for them, it will work for you.
Our advise, if you are getting started, allocate at least 20% of your revenues (yes twenty percent of your total revenues… not margin; REVENUES) to marketing and branding, we would even go as far to say 25%, but 20% should be your baseline. Once your business is stable and you have secured sustainable recurring revenues, you can lower that investment to a number that is consistent with your growth ambitions. We suggest you consider 1.5x your growth target for the next 12 months, or for example, if you expect your business to grow 10% in the next year, you should allocate 15% of your revenues to this effort (10% x 1.5 = 15%)
Financial Management and Reporting
Implement robust financial management practices to track and analyze your business’s performance. Regularly review financial reports, including income statements, cash flow statements, and balance sheets. This will help you identify areas of improvement, make data-driven decisions, and ensure the financial health of your fitness venture.
Financially Fit Tip: With this we mean business! We know that finance may not be one of the first things that comes to mind when we talk about a fitness business, but if you follow us regularly you have probably heard us say: Finance is the language of business, and if you want to succeed you need to be fluent in this language.
Seriously, this will make or break your success in this or any other industry, so don´t let it slip. If this is completely new to you, we encourage you to seek a course on finance and accounting at a local university or reputable business school, you can also do these on-line, the advantage of doing this locally and in person is that you will learn subjects that are specific and relevant to were you plan to operate, with the added benefit that you will build a strong network and a group of potential customers for your fitness business.
We encourage you to outsource this activity to a 3rd party, although they will be doing all the boring yet important stuff, you will still have a firm handle on your business, by becoming familiar with this key area of your business.
Scalability and Future Growth
Consider the scalability and potential for future growth when designing your fitness location. Plan for expansion and explore opportunities for additional revenue streams or franchise possibilities. Building a solid foundation with scalability in mind will position you for long-term success.
Financially Fit tip: Make sure that you can grow your business, a lot of people downplay this, however it is extremely important, both fo you and the success of your business. Think about this as a job that you are committed to for the foreseeable future, now consider being in a job for an indefinite period, and not getting a raise… As an entrepreneur, your business growth is that raise.
Pay attention to your tax frameworks, as you could increase your margins (and in turn your growth) by becoming more tax efficient. In many jurisdictions, tax frameworks consider fitness as a health related business, enjoying added tax benefits.
Congratulations on taking the exciting journey of opening or expanding a fitness location! By considering these financial factors, you’ll be equipped to make informed decisions and navigate the dynamic world of the fitness industry successfully.
Remember, the Financially Fit Newsletter is here to support you with valuable insights and advice as you strive for remarkable success in the business of fitness. Embrace the financial side of your passion, and let it propel you towards building a thriving fitness empire. Get ready to conquer new heights in the dynamic world of fitness!