Factor in start-up costs, operating expenses, capital, equipment, and income earning potential when starting your own gym to set yourself up for success. Here are some tips on how to do it from an established private gym owner.
How Much Money Do I Need for Start-Up Costs?
Accumulate at least 3 months of reserves, i.e. your monthly operating budget, before you begin your build out. This means if your operating costs (rent, utilities, employees, etc.) are $20,000 a month, you need $60,000 in the bank.
Your startup costs should also account for the following:
- Build Out Costs – on avg. $150,000 – $300,000
- Legal – $3,000
- Insurance, license and permit fees – $2,000 – $3,000
- Equipment and supplies – 10% of total operating budget
- Advertising and promotion – 10% of total operating budget
- Employee expenses – expect this to be 25% to 50% of your operating budget
- Utilities – approx. $5.00 a square ft. on average
- Technical & office supply expenses – $5,000 – $10,000
- Inventory – depending on what you decided to do 10% – 20% of total budget
*based on the avg. private training gym – not typical for traditional health clubs
Add 20% to the plan:
- If you’ve budgeted $200K in start-up costs, then plan to spend $240K
- If you think it will take you 6 mos. to get 50 members, plan of it to 20% more time
Have someone else look at your plan. Find a good mentor, talk to your local SBA, offer to present your plan at a local networking event in exchange for feedback. Get as much feedback as you can.
Don’t ask your mom, dad or best friend to do this. You need critical, non-biased feedback. And expect feedback. Then go back to your plan and make the changes.
How Do I Raise Capital?
Treat your business like you would buying a house. If you can’t put at least 20% down on your own, you may not be ready. Forcing yourself to come up with the 20% on your own is a good test for whether or not you’re prepared to make this commitment.
There are traditional options like SBA loans and other small business loans. These can be hard to get unless you have good credit and business history.
Some people raise the capital with family help. Please, please don’t ask Dad to liquidate his 401K. He will likely offer, but do the right thing and SAY NO.
If you’re borrowing money from family, you should treat them as you would any investor/loan agency. Agree on a repayment plan and talk about a fair interest rate.
Angel Investors can be good options too, but just keep in mind these kinds of investors expect to get paid, even if you don’t make it. They also will likely expect an ownership stake. This means sharing your profits. While typically a silent partner, they will expect answers from you on business decisions, kind of like a boss would.
How Much Money Do I Spend On Equipment?
Open with want you need and then figure out what you want later. A good rule of thumb is to spend less than 10% of your annual operating costs for equipment purchases. This means that if your operating costs are $500K annual than you shouldn’t spend more than $50K on your initial equipment investment.
If you’re thinking about opening a traditional health club this looks different and you’re probably talking at minimum a $750K start-up investment on equipment alone.
I opened my training studio with virtually no equipment. Approximately $3,000 in assets. I didn’t make a significant investment in my equipment until year three.
Equipment should not be the reason your business is successful. Quality programming that delivers results is what will make you a success. A commitment to your members and community is what will make you successful. You can create the feel of a big gym even if you own a smaller studio.
The reality is – you really don’t know what you need until your business gets going.
Real life mistake: In one of my closets, I have this box of 25 mats. They’ve been sitting there for over a year now. I had one client complain about the hard floor and I panicked and went out and spent over $1,000 on mats…two weeks later I had turf put in, and the mats never got used.
This is needs vs. wants. I wanted to make one client happy. I didn’t need to. Had I thought it through, I would have waited for the flooring change to see if it was a still a problem.
How Much Money Can I Make Owning My Own Training Studio?
You can make as much as you’re willing to put in. The most powerful thing ever told to me, by my mentor, Thomas Plumber, when I started on my journey to ownership, was that 20% of gyms will never turn a profit, 60% will just break even and less than 20% will actually turn a profit.
While these statistics are scary, it’s reality. To be in the top 20% it takes everything you have and even then, the odds are long. However, if you are willing to have the courage and to not let the fear of failure stand in your way, then you can be successful.
How much you will make, then depends on you. Gyms that don’t have systems in place, that don’t understand the value of customer service, that don’t spend at least $3,000 a month on targeted advertising (i.e. social media) and who don’t focus on staff development, will not be successful.
Gyms that do these things well and are consistent with these must-dos, can find themselves in the top 20%, grossing over 1 million dollars annually. Remember though, to be top in the 20% you have to do the work.
You’ve got to spend time and money to earn money. Best of luck! Get in touch if you need support.