Ready to own two gyms?
In the first post in this series, I shared the questions you should ask yourself before buying out another local gym.
If you have a working gym and want to duplicate your model over and over, you must ask yourself a series of questions before opening a second location.
Can my gym run without me for two weeks?
A second location will quadruple your workload, not double it. If your current workload is only a few hours a week, go ahead and open a second gym. But if your gym can’t survive without your presence, you’ll kill the golden goose when you try to expand.
Run this test: Take a week away and have no contact with the gym at all. Tell only your staff that you’re going. Don’t check email, and have them call you in an emergency.
When you return, do an audit: Were sales meetings conducted effectively? Were new clients onboarded properly? Were members billed on time? Did staff show up and deliver well? Did you miss a paycheck while you were away? Did the gym run out of toilet paper? Did you get emergency phone calls?
If your gym didn’t run as well without you, take heart: The exercise still has value. Fix the issues and test again in a month or two. Long term, you’re getting yourself ready to own a second location; you’re just not ready now.
If I were hit by a bus tonight, would the gym survive?
Could my staff walk into the gym tomorrow and run my gym according to written instructions?
You need a staff playbook so you’re not called in to “handle” situations with clients, staff or facilities.
This is an extension of the two-week test described above. If your gym can survive two weeks without you, can it survive two months or more?
Do I have the cash flow to weather three months of losses at the new location?
Many gym owners rely on their first location to cover the losses incurred at their second location, but they don’t actually have a buffer. So they sacrifice their own pay or put their first location into a cash crisis while the second location struggles for traction. (I did this.)
Am I still dabbling and trying new stuff every month?
If your first gym is still changing its systems, fooling with its class structure, “figuring out” its marketing, changing software and so on, don’t expand yet.
Get these things set in stone. Before you can replicate your first gym, you must have clear systems for:
- Marketing and lead nurture.
- Staff training and evaluation.
Am I hitting the metrics that prove I have a system worth copying?
- Your first gym should pay you close to $100,000 net owner benefit (NOB) per year.
- Your clients should be worth close to $200 each (average revenue per member per month, or ARM).
- Your length of engagement (LEG) should be at least 13 months.
- Your payroll should be at (or below) 44 percent of gross revenue.
- Your expenses should be under 25 percent of gross revenue.
If these metrics don’t line up, don’t stress—your model isn’t ready for mass production yet, that’s all.
Benefits of Replication
Now, if you’re ready, a second location can create efficiencies across your organization—called “economies of scale.” This is a big opportunity.
1. You can share some costs across two gyms.
2. You can share staff across two gyms—you can move coaches from one location to another, creating larger opportunities for them and plugging holes. You can have one really great salesperson do free consultations for both locations, one client success manager talk with members at two gyms, one marketing expert run campaigns for both locations, etc.
3. You can decrease your tax burden by shifting profits back and forth between the two locations. Talk to your accountant.
4. You can share programming across two gyms.
5. You can share staff training across two gyms.
6. You can split mentorship investment across two gyms.
Economies of scale are possible and attractive. But to get there, you have to have systems that are actually scalable.
Running a second location shouldn’t be the same as running two businesses because the second should be a copy of a very strong first effort that’s free of rookie mistakes and large, costly errors. But if you’re copying a disaster in progress, you’ll soon have a world of problems.
A final rule: Simplicity scales faster. The easier your processes are to follow, the easier your business can be duplicated.
If you’re interested in building the systems that will allow you to replicate your gym, book a call to talk about mentorship.