When I was a personal trainer, I worked with a lot of financial planners and wealth managers.
Our first “gym” was in the financial district in town—three banks and a couple of financial offices. I didn’t get much free advice, but I heard a lot of gloom and doom.
In 2007, as the stock market was on the brink of disaster, we were all still blissfully unaware. But I remember one of my clients telling me this:
“You’re selling a luxury, buddy. If the steel mill goes down in this town, you’re done.”
“You should be paying close attention to the market because when people start losing money, you’ll be the first thing they cut.”
Obviously, they were wrong: My stock portfolio—basically, my shares in other people’s companies—took a vicious beating in 2008. But Catalyst started to grow. I’ll share the reason why in one moment.
First, though, a quick definition of antifragility from Wikipedia: “A property of systems in which they increase in capability to thrive as a result of stressors, shocks, volatility, noise, mistakes, faults, attacks, or failures. The concept was developed by Nassim Nicholas Taleb in his book ‘Antifragile: Things That Gain From Disorder’ and in technical papers.”
Taleb’s book is a fantastic lesson on building a resilient business. The key takeaway for the service industry: Hold tightly to your values but loosely to their delivery. In other words, be plastic: Change the service, not the price, and recruit clients who are also immune to market forces.
In a stock market crisis, who is least affected?
- Government workers, like teachers (in Canada, at least, they can’t be downsized).
- Entrepreneurs with the same antifragile policies.
- Financial planners (ironically, with fixed fees, they’re among the safest; they make their 3 percent even if you lose money).
- Doctors, lawyers and professionals.
- Cab drivers.
In other words, generalists are least affected by a stock-market crisis.
Who is most affected?
- Middle managers.
- Salaried workers in collapsable positions (including steelworkers, unfortunately).
In other words, skilled specialists are most affected by market crises.
Recessions and Premium Services
The market did collapse in 2008, of course. And our city’s major industries—pulp, paper and steel—took a massive beating. One of the top three employers went bankrupt; another is now only a third of its size a decade ago.
When the steelworkers and paper workers had to leave town, it was depressing. But the doctors, lawyers and financial planners are still here.
This is why I write that the average per capita income in your area doesn’t really matter—because we sell a premium service. High-volume, access-based fitness centers suffer in times of financial crisis because people cancel unnecessary (unused) expenses. But that’s not our model.
Chain gyms suffer in a recession because they sell on volume and try to appeal to budget seekers (who are most affected by a financial crisis). Their clients lose their jobs, they cancel their memberships, and the gyms suffer. But that’s not our model.
Coaching is a premium service.
The population of our city has dropped by over 25 percent since I opened my gym. Average household income is lower now than it was. But we’re thriving because the doctors, lawyers and entrepreneurs are still here.
Do we have waitresses who pick up extra shifts to pay for their memberships? Of course.
Are there people at Catalyst who will suffer in a recession? Sadly, yes—but at least their gym family will be there for them.
Recessions happen. And they’re bad news for commodities, like beef and cars and globo gyms. But they’re not bad news for agile entrepreneurs.
In the next post in this series, I’ll tell you what to cut in a crisis. And after that I’ll tell you how to prepare your clients for a recession so they don’t cut the wrong thing if it comes.