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The Last Business I would Ever Want to Be In
Originally Posted 04/18/11

What business are you in? Most owners give the trite response that we are in the fitness business, but in reality few owners actually ever rise to the level where their primary mission is to help the client get what they paid for through their membership.

Most owners are simply in the membership business, which is the last business I would want to be part of during the next five years. Being in the membership business today is sort of like being in the pager business a few years ago. One day your hot, next day you are gone.
The fitness business is changing and your ability to continue as a business that exists almost solely to sell just memberships is coming to an end.

Membership driven businesses are defined as those that generate 75% or more of their gross income from membership sales. This includes receivable base income as well as cash sales and any down payments. The other side of this means that you generate less than 20% of your total income from members already in the system. A sample club here might be one that generates a receivable check each month of $70k but only has another $10k in training coupled with about $5000k in new cash from memberships. This club is in the membership business, not the fitness business, because it does nothing but rent equipment to a bunch of people who get little if any help (defined by the low revenue in training). If sales slow down, the business fails because they are too dependent on new income to survive.

High volume clubs have worked during the last few years, as evidenced by Planet Fitness and their endless imitators but what happens when everyone in the market is chasing the same business plan that is centered on high volume and replaceable members? Does anyone think that 10 clubs in a market all charging $10 or less can survive?

Cycles hit this industry hard every few years but we fail to learn from our past mistakes. Look at the Curves craze and what it did to the market. Just a few years after Curves destroyed the market there were copy circuit clubs everywhere and most mainstream fitness guys were adding 30 minute circuits to their clubs. It was the rage and everyone was crying how unfair if was that these little clubs could damage the mainstream boxes.

Now Curves is a shadow of its former self and the imitators are gone. Another craze that was deemed the next greatest thing was gone. The question is why would anyone think that the low priced model is nothing more but another craze that is doomed to failure as the copyists line up to produce their own versions? Curves was circuits, and easily copied, and the low-priced model is nothing more than a low price and equipment rental that is also easily duplicated, although the market can't generate enough volume to feed too many of these insatiable beasts in most towns.

For example, look at Workout World, who just gave up trying to compete with Planet Fitness and just copied exactly everything they do, including their ad format and price specials. If you can't beat them, then rip them off is their business plan. If I was a Planet Fitness, I would seriously be thinking that what happened to Curves could happen to them; a period of industry domination followed by sudden decline as the industry adjusts and rolls past them. They might also do well to remember Bally's, Living Well, Spa Lady, Cuts, and all the other chains who had a brief glimpse of the sun before sinking back to the depths of competition.

What is next then and how will it affect us? As anyone who reads this regularly, and I thank all three of you deeply, there has to be an evolution even in the Planet Fitness world of low priced players. If everyone is copying your business plan, then you must evolve what you do to another level of play.

The point here is that we have to at some point move beyond renting equipment to people who fail in six weeks and start to create systems where the highest percentage of members can get the most help at a reasonable cost. There is another level of play and we are in the era where we will see a lot of mass failures in the next few years. Every herd gets culled (the weak get eaten or the stupid walk off a cliff) and the next few years should be more than exciting for some of those clubs seeking the magic of a low priced business plan. Failures will come and they will be spectacular.

We need to be in the fitness business, where people stay longer and pay longer because we do the right thing. The day your training revenue passes your membership receivable check congratulate yourself, you have evolved. Darwin would be proud because you have now joined the survival of the fittest, the fastest and the brightest. You can't fix stupid but you can fix a dated business plan.

Original Comments:

Becky-

Hi Thom!

As always, I love your blog. I learn so much from you and you validate so many things for me. What advice do you have for personal trainers to update their business plans? Iíve been trying to move beyond traditional personal training by offering more online services. Itís convenient, effective and affordable for the consumer. Let me know if you are interested in hearing more about it and Iíll send you a link. Otherwise, Iím curious what your thoughts on regarding online personal training.

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Thomas Plummer-

Hello Becky,

Thanks for writing. I have a number of training clients who are getting into online help and it seems to be paying. Like most things, we probably over thought this for years and it turns out that simple works.

There seems to be two approaches to this system. The first is that clients actually belong to the club but never appear. These folks get a monthly program geared somewhat towards them (template driven but no one-on-one personalization except for profiting). The member/client can stop by once a month and get the program or he can just access his information on line and never set foot in the club. You could charge about $20 more per month for this client than you would a basic membership. This member could actually use the club if he wanted. The second client type is all online. Clubs that have good local reps but are not convenient for people who are extremely busy or who live outside the easy drive time go to the club[s website, fill out a profile and then the club generates a program monthly. The key here is do this more cheaply than you think to build a broader base. You are still using a template driven system so once you build a series of workouts for a middle aged triathlon guy for example, you just take him through the series adjusting as needed. You could charge somewhere between $49-99 a month for this service depending on the market.

There is a third choice if you are a specialist. The Titleist Performance Institute (mytpi.com) has an extremely quality site if you are certified with them. This site allows you to build a program by video clips for your individual client and then grant the client access to the site. Most of the exercises are beyond golf and have a wider range of application. Gray Cook and Lee Burton are also heading that way with the FMS site, which should be up very soon.

I think there is a great need for this and it will be hot during the next few years. Rick Mayo, the guy in Atlanta doing great numbers in 6,000 square feet, is getting into online and is having solid initial success. Please post your link and let everyone know. What you are doing with your site so the rest of us can learn.

Thank you for the kind comments.

Thom.

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Rcreech-

Thom

As in most cases, I think that you are right on the money again. Thanks for all of the knowledge over the years. See you soon.

RC

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Frankkole-

From 2009 to 2010 with changing this gym into a training center. Training went up 45% We are at month 4 into this year and its up to 60%. Memberships sales still to be even month to month with a lot of people moving out of San Diego in 2009 and 2010. 2011 has a lot of new and young faces moving into town. We now have 5 low priced clubs in a 3 mile range that were not there when we opened ten years ago. We have less members now than 4 years ago. I have less trainers on staff because with the training system you know where everyone is at and if need be trainers are easily replaced now, not like before. When the trainers did what they wanted. You cant fix stupid but you can fix a dated business plan! Thatís for sure! Everything we do with this club from now on is for Beginners and Training. Oops Coaching!

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Jerrynapp-

Hi Ton,

I am one of the three people what read your BlogÖ

Always interesting.

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Thomas Plummer-

Jerry,

Where have you been? You are missed on the tour. Thank you for the support. All three of you make my day. See you soon, maybe in Florida.

T

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Matt-

You are 100% right, man cannot live on membership alone!

As we prepare our expansion we are evolving right along the linesÖ50% is around the corner.

Current revenue;

Membership EFT; 49%

PT & group PT: 30%

Cash sales/downpayments; 21%

PT and group are growing much faster then memberships. Membership is slow growth, but lifetime revenue per member is on track to be up 100% year over year!

I could no t agree more with your post Tom. Chasing memberships is like being stuck in neutral. Itís tough advice to follow but Iím sure itís the right thing to do. It feels great not chasing memberships but rather guaranteeing results and delivering the fitness leadership our clients are seeking!

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Thomas Plummer-

Good job my friend. Numbers like that will make you bullet proof and best of all, if you can master it there you can open a lot more just like it not dependent on just membership.

Thank you for writing. It is appreciated.

Thom

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Mike-

Hi Matt, we run a small private gym in England with 500 members. Can u tell us what sort of deal your PTís are on and how you promote in-house?

Mike

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Rick-

Jo Mike, Definitely get to the NFBA workshop. Thom and the crew will layout exactly what it should like. Invaluable!

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Thomas Plummer-

Hi Mike,

We teach a complete multi level training system based upon a combination of group personal training, semi-privates and unlimited one-on-one as part of this yearís workshops. We have a number of small clubs with about 300 members doing $100,000 per month or better based upon this system. Matt is a very good operator who does membership and training with the goal of getting the training numbers higher than memberships, which he will most likely do very soon. Look at our schedule and come see us for a workshop. We will be on the east coast soon.

Thank you for writing and I am sure Matt will answer as well

Thom

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Matt-

 

Exactly what Thom said, still refining the system in our 3200 sq. foot cub and 700 members (not a typo). Our new space is exactly double so we expect our training to grow as we finally bust out of our tiny box.

Our growth formula is following Tomís basic outline, plus;

Adopting a world classís training program that coaches deliver (after 100 hours in house training)

Guaranteed Results

Free Quarterly Personal Training for all Members

On ramping everyone via a group orientation system with unlimited coaching (within the Fundamentals program)

Vetting out issues with fellow owner operators in a MasterMind group.

Itís been tough learning, but the last year we hit our stride. Iím looking forward to sharpening our saw in Thomís workshop in CA later this year.

Feel free to drop me a note.

Commit2fit@sbcglobal.net

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