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The Top 20% Will Thrive and The Rest Will Struggle
Originally Posted 08/03/10

The numbers you see in the fitness business are all misleading about success in this business. Look at the national magazines and other blogs and people are ranting about how so many clubs just arenít making money.

Really? In what industry do all the businesses that comprise that industry make money? Are we special in that we are entitled to be profitable because we are in the fitness business? If there are a 1000 drycleaners in Chicago, are they all entitled to make money and be top performers? As in any field, talent and hard work separates the weak from the strong and our industry is no exception.

In life and business, the best rise to the top of their fields and everyone else settles lower on the scale. For example:

ē About 20% of any category of small businesses exceeds the average profit and this profit is what separates this group from the other 80%
ē About 60% hit the average for that type of business
ē About 20% fall into the lowest performers for that group

This is true of almost any small business concept you can identify. Look at pizza places, small retail stores, drycleaners, restaurants and most any other business concept and you can break them down into these groupings. The best make money, most people do just enough to stay in business and the bottom 20% are wasting money when they should have jobs working for the city and leaning on a shovel.

This group would go broke in a year or two no matter how much money they started with and no matter where they opened. They are in the bottom 20% because they deserve to be there, no because they are unlucky or surrounded by gifted competitors.

Fitness businesses fall into this same breakdown. For example, if half the clubs in a survey reported flat sales from last year, or declining numbers, is this really unusual or is this report just a verification that the averages are holding. The top 20% will make money in good and bad times and the rest will fall into their respective categories.

Opening a fitness business does not entitle you to make money. This is a fallacy that most new owners have beaten out of them quickly. "I have my life in this club and it is unfair that a new club is moving in and taking my business.Ē

Putting up the money to open got you into the game, much like an ante into a poker game. It does not, however, entitle you to make money or even survive. That will be up to how hard and smart you work.

The same is also true of individuals. Only 5% of the population in this company makes over $205,000 a year. It is a very sharp point at the top and gets sharper faster when you move up in salaries beyond this number. The best excel and everyone else works for someone else. You are seldom in that group due to luck and you survive there because of many other skills in your life.

The best may get slapped around for a few moments but they always rise again. The talented few that reach the top 5% are hard to kill no matter what they are doing or selling. Your goal, of course, is to prepare your self to be one of the talented folks who figure out money and how to make it in almost any economy or business.

There is a lot of discussion this year on the economy and how it has affected clubs but the theory holds true. The owners who adapted to change, broke away from the 1995 business model and fought back hard by working their collective asses off made money. And lots of money. The good players had a great year.

The middle 60% took a harsh beating and many failed. But the capitalistic system is hard. Adapt, change, grow or die and the market will bear out your decisions. Failure is an option if you refuse to change how you operate because the universe will correct bad business decisions quickly and painfully.

If you set on your ass failing to react to everything and wasting your life and business by complaining about the cheap competitor down the street, you probably didnít make much last year. You could have beaten him if you would have just shut up and gone to work. He didnít take your business; you gave it to him by not being aggressive in your own business.

The bottom 20% disappeared in the club market to be replaced by another generation that feels they are guaranteed success because they are great trainers or passionate people who will change the world. Only the market will tell if they have the passion, and the knowledge and work ethic, to succeed.

This is an extremely difficult business to be in, especially now, but you can make money if you are willing to let go of what worked in the 90ís and embrace new ideas. The smaller clubs, which are more agile and more able to change, will lead this charge of new prosperity while the chains will slowly fail because they are not willing to admit that their business models are 30 years or more out of date.

Build the big boxes and stock them full of 1995 circuit stuff and the market will judge you brutally, as it has most of those chains during the last several years. You simply donít want to be the last guy trying to sell a product that is 20 years out of date. They sell just enough to give themselves hope but the overall picture is grim and getting darker for the membership mills.

So who made money last year and this year? Most of the same people who made money in the good times; they just have to work harder to get it done. Good owners are good owners and will adjust, as needed, buying the tools and education needed to keep moving and growing.

Who got kicked last year? The marginal owners who rode the good times but never really learned how to make money. There are a lot of owners who have been lucky rather than good and the economy and full onslaught of new clubs saturating the market have edited this group down in size. Weak owners are weak owners and while they complain that their numbers are down are we surprised?

Be the best and work it like you never had before and there is still money to be made in this industry.

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