Many new businesses barely get through the first five years of operations, and gyms are no exception. Around 50% of new businesses in the U.S. are bound to fail within this window. And much of it stems from having no prior business experience.
Why do gyms fail?
Gyms fail for a variety of reasons. The three most common reasons are: not enough sales revenue, poor financial decisions by the owner(s), and improper servicing of the customers.
But what does it take to build a thriving fitness business?
Let’s look at a few reasons why many gym businesses fail and how to avoid them.
1. Not deciding upon your Customer Value Proposition
The best businesses clearly choose a customer value proposition, and gyms are no different. Research shows there are 3 fundamental business models, they are 1) Customer Intimacy customer value proposition, 2) Operational Excellence customer value proposition, and 3) Product Leadership customer value proposition.
Not to be confused with the Unique Selling Proposition (USP), the customer value proposition is the clear value that is being delivered to the customer and is deeply ingrained with all the company operations. Anytime Fitness is a great example of a company that delivers operational excellence to their customer with low staffing needs, low/moderate cost structure (to the customer), and 24 hour convenience. On the other hand, Orange Theory is an excellent example of a product leadership customer value proposition in that they deliver a high quality product, they make decisions quickly, and have a lean corporate structure with minimal bureaucracy. Additionally, Fitness Together private one on one personal training facilities provide an excellent example as a customer intimacy customer value proposition as the customer experience is tailored to each customer.
2. Poor financial decisions
Poor financial planning along with insufficient capital is among the biggest gym killers. Like every other business, you’re running a game of numbers, and knowing how to balance the books keeps you in the game for much longer. If you don’t, you could be spending money that your business can’t afford, or you could be carting away funds that could have helped with expansion.
To have a tighter grip on your finances, ensure that you track everything from memberships, revenues, expenses, and sales projections. And if you’re not great with the numbers, you can always outsource to a financial specialist.
3. Wrong location
Location is a key determinant when setting up a gym business, and here’s why:
- It determines how much you charge for membership. As always, high-end locations will attract higher rates.
- It needs to be close to your target market. Convenience is a critical factor for many gym subscribers, and many prefer proximity to their home or the office.
- The location also determines your capital requirements. Premium locations will demand more investment.
You want to make sure that your gym is visible, easily accessible and, it has ample space and amenities to attract more customers. Some of the most strategic places include proximity to shopping malls, business districts, health clubs, and physiotherapy clinics.
4. Competition
Competition has a massive impact on your business decisions. For instance, a new gym opens around the corner and starts offering a cheaper subscription. It will force you to cut your rates to keep up, even though the numbers aren’t making any business sense. Besides, you’ll lose customers if you charge a higher price for the same service.
But competition also offers an opportunity to improve your services through innovation. For example, you may respond by upgrading equipment and improving services when the competitor tries to force your hand with extremely low pricing. After all, it’s easy to lock in your customers when they’re sure that they won’t get the same level of service for the price offered by the competitor.
5. Lackluster marketing
Marketing is the lifeblood of any business, and gyms are no exception. Relying on word of mouth may get you neighborhood referrals, but it may not be enough to drive revenues that sustain the business. Find more creative ways of getting the word out about your business with a compelling message that can pull sign-ups from your competitors.
Luckily, the internet levels the playing field for everyone regardless of budget, and the only limiting thing could be your imagination. You need a strong web presence, which includes a website and social media handles, where you let people know about your services and special offers. And you don’t have to be a marketing expert as you could learn the ropes or hire someone good at it.
6. Branding
Poor branding strategies could be hurting your business in many ways, such as:
- You’re attracting the wrong kind of customers.
- People find it hard to explain what it is that you do.
- Your gym is regularly being confused with other unrelated businesses.
- You have trouble connecting with your target audience despite concerted marketing efforts.
- You lack consistent messaging across the different operational units.
Branding strategies are often bundled with marketing goals. And that’s the only part that gets done, yet there’s a lot more to branding than just doing a logo and placing it on banners and social handles. Building a solid brand takes years, and it has to be reflected in your signage, gym design, messaging, and organizational culture.
7. Getting into a comfort zone
Have you got a good thing going, and you feel like you shouldn’t change anything? We usually get complacent, we get it right in business, willfully optimistic that the good run will continue for years. But business dynamics are ever-changing, and you risk falling behind the competition if you don’t anticipate challenges and act on them before they happen.
For instance, we hardly ever anticipated a global shutdown. And when it happened, it kept everyone away from the gym for months, and many businesses struggled to stay afloat after just a few weeks. As of 2021, the Community Gyms Coalition had estimated that only about 36% of independent gyms and studios would survive the closures and restrictions brought about by recent events.
But sometimes, it simply calls for quick adaptation to changing circumstances, like offering video workout sessions, in-home training, and equipment rentals during a pandemic lock down.
The Bottom Line
When starting a gym, many fitness pros go for the hype instead of the tried and true methods of growing a business. But as the market becomes more crowded coupled with the unexpected business disruptions, learning the pitfalls and how to avoid them will separate the winners. Luckily, there’s hope, and incorporating the above ideas will make them more international about growing the business and making meaningful connections with customers.