It’s the question every fitness start-up asks as soon as they realize that their idea is working: when should we expand?
And it’s an important one not to be taken lightly. Additional facilities, especially the first one, place an entirely different set of strains on the management by effectively doubling previous requirements – are you ready for that? It can put any business in a precarious position if they’re not ready. But success in this business isn’t for the faint of heart. Getting your first added location right means that subsequent additions won’t be as taxing. It can put you on the path to success of dreams for you, your staff and importantly, your members.
But how will you know? Using just a gross number of members isn’t reliable. For example, some business models with a $500 plus dollar per service contract ticket price might be profitable at 50 members. Other models with a larger footprint and higher overhead might need closer to 1000 members to warrant expansion.
Similarly, dollar revenue marks and space utilization would be mostly irrelevant. Fluctuations in overhead and strategy, along with market factors such as rent, pricing, etc. prevent an apples to apples comparison with other studios. However, all is not lost. If your club meets all of the four following criteria it could be time to expand.
1 – Is Your Monthly Draft Trending in a Positive Direction?
This is the big one. Obviously, if your draft isn’t going up, expansion is a non-starter. You need to put in more effort to understand why and validate your business model. Check your reports and account for any seasonality. Do you know enough to spot seasonal and annual trends? What events could have impacted your draft?
2 – Are Classes in Primetime at Capacity or Close to Capacity?
You want to maximize what you have before taking that next step for a couple of key reasons. First, if you’re not using the space you have, adding more overhead and cost isn’t the path to success. Secondly, full classes have a positive great energy that keeps members coming back. Splitting that energy across additional locations with ½ full classes won’t have the same successful vibe that members are looking for. Another location in that instance could cannibalize members from the other, resulting in the failure of both. Use member engagement tools and referral programs to build up your primetime classes.
3 – Do You Have a Tight Grip on Your Business Model and In-Club Processes – So Much so That they Can Be Replicated?
In other words, do you have a unique business model or are you and your current super-star staff just killing it on a personal level? It’s a personal business, but being able to communicate and recreate an experience from one studio to the next is the key to successful expansion. From recruitment to scheduling to check in and retention do you have proven processes that can be replicated anywhere. This becomes even more critical if your vision is to scale past a handful of studios. Remember, your time doesn’t scale beyond 24 hours a day. You’ll need processes and technology designed to fill in those gaps.
4 – Are You Positive This Model Is at Break-Even and Trending Toward Profitability?
Heavily influenced by your draft, this is another critical point. Helping more people reach their fitness goals is great. Doing that while keeping a roof over your own head is even better. Getting accurate reports and information is of the utmost importance to make this determination and can be one of the most challenging aspects for studio owners and managers. Any number of things can siphon off revenue and prevent an otherwise successful operation from becoming profitable. Make sure that you have accurate records and look closely at the details to understand your actual costs, revenue, and profit potential.
If all four are true, then it might be time to think about expansion. If you don’t know or can’t readily answer these questions, it’s time to start thinking critically about each one. Evaluate your current technology and determine if you’re getting the information you need, using the technology to it’s capabilities, and if it is really helping to grow your business. With the right systems in place, you can put many functions of your business on autopilot while you address the most critical items necessary for expansion. This ebook, The Fitness Owner’s Success Kit, can serve as a playbook to help you make the transition.
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