Mike Warkentin (00:02):
Welcome to “Run a Profitable Gym.” This episode was recorded live with host John Franklin in Dallas, Texas for a meetup of some of the world’s best gym owners. Some of them are featured in Chris Cooper’s latest book, “Millionaire Gym Owner,” available now at millionairegymowner.com. Now, here’s John Franklin.
John Franklin (00:19):
I have in front of me a legend, if you will—one of one of the first men of the crossfit.com forum, and the former owner of CrossFit Steele Creek and the current owner of Live Active Charlotte, which happened to be the same building. Maybe we’ll talk about that. Maybe we won’t. And he happens to be the owner of that building now, which is why I want to talk with him and get into the nitty gritty of purchasing that, because from what I understand, that’s a multimillion-dollar purchase. So, congratulations on all your new debt—looking forward to hearing about that. It is none other than Brian Strump. How you doing?
Brian Strump (01:00):
Thank you. Awesome. No, I’m excited to be here.
John Franklin (01:03):
Good morning. Good morning. So, I know you from the early days. So, I started in—I started doing it in 2009, 2010, and then I opened up my first affiliate in 2013. And I remember the only way to get business information at the time was to just kind of Google in the CrossFit forum.
Brian Strump (01:24):
Yeah, of course. Yeah.
John Franklin (01:25):
And I think you were like probably one of the most active people on there. I think to this day, you’re still one of the most active people on the Facebook group. So, what type of mental disease do you have that makes you want to just to argue with people on the internet for decades?
Brian Strump (01:43):
I feel like I should have been a lawyer. You know, I feel like I would’ve been a pretty good, a pretty good lawyer given that background of introduction. But, you know, back in 2008 when I was deciding to open the gym, I went around to a bunch of different gyms and somebody told me like, “Hey, there’s this message board that you should go on.” And they were naming like Andy Petranek, Skip Chase, and Doug Chapman—the three that I specifically remember, and I had yellow lawyer pads filled with notes, as you would imagine, of how to potentially operate something circa 2009. And then—
John Franklin (02:21):
It was like, “Make boxes; make rings.”
Brian Strump (02:25):
Yeah. Yeah. And “open gym.” And then since then, I guess it always just stayed. I just felt like I tried to be a voice of reason, as nice as I could do it. Some people might have found it abrasive, but I’d hope that most people found it helpful. And then I think I try to do the same now, like a little bit of sarcasm, but I realize some sarcasm’s pretty difficult to read online, so I just try to stick to the point and answer the question.
John Franklin (02:51):
And you are a doctor, you’re just not a Juris Doctor. You’re a chiropractor. You went the other route.
Brian Strump (02:58):
Yes, I went the other route. Yes. Yes.
John Franklin (02:59):
Yes. That seems somewhat helpful, I guess. So, you were one of the OGs; you were like the $500 affiliate, right?
Brian Strump (03:07):
I think I just missed it. I think we actually paid to be an affiliate in October 2009. I was paying $2,000 up until a couple weeks ago.
John Franklin (03:16):
Oh, you were two grand, huh?
Brian Strump (03:18):
Yeah, I think I may have been one of the first 2,000-ers.
John Franklin (03:23):
Oh, OK. You got the “just missed it.” The end of the price increase. Sounds like you’re no longer affiliated. When did you drop the affiliation?
Brian Strump (03:31):
Actually, so I still am affiliated in two—the way the name changed, which is still confusing. And the very first time when we were thinking about—oh, no, it’s a couple times—we were looking at purchasing something and in 2018 or 19, I was like, “This is going to be it. We’ll get a new building, buy something new, put that Live Active Charlotte name and maybe still do like, you know, ‘home of CrossFit Steele Creek’ or something.” It didn’t work out, but I already went down the rabbit hole of kind of changing everything. And this was pre-COVID, pre-Greg Glassman tweets, Black Box on Facebook, everything. So, I was like, “What am I’m supposed to do now?” So, we just kept it, and I was like, “Eventually, maybe I’ll drop it, and I’ll buy a building, and we’ll do this.” And then now, I bought my space, and now it’s like we’re just all in the same thing. We have an affiliate. We still are an affiliate. There was never a time that we didn’t de-affiliate over 2020. So, like I said, it’s a little bit confusing. If you type in CrossFit Steele Creek, you’ll find us. New people would refer to us as probably Live Active Charlotte, but like my Steele Creek area, they’ll see bumper stickers on cars from a decade ago that’d say CrossFit Steele Creek.
John Franklin (04:46):
Oh, so, you’re still in it. You were still—OK. So, you’re probably one of the oldest standing now.
Brian Strump (04:51):
Yeah, so probably now. Yeah. Yeah.
John Franklin (04:53):
I would guess you’re definitely in the top 100 if not—
Brian Strump (04:56):
Yeah, I think over 2020 we kind of moved up a big chunk.
John Franklin (04:59):
I know Harry at Black Box told us he’s the oldest. He’s the number—
Brian Strump (05:03):
I’m definitely not.
John Franklin (05:04):
Yeah, he’s the number one. And I don’t remember when they started, but it was around that time. Maybe a couple years. Yeah, maybe a year before you guys.
Brian Strump (05:10):
I mean, there’s two more in Charlotte: CrossFit Charlotte and Ultimate CrossFit that were affiliates in 2007. So, they’re still around. CrossFit Wilmington was one that I went to. CrossFit Cleveland, so I know there’s a—
John Franklin (05:22):
The namesake. Yeah. If it’s a city. There’s a good chance it’s ahead of you.
Brian Strump (05:25):
Right. Right. So I’m still there.
John Franklin (05:28):
So let’s talk about—so, you run your business. How would it differ from the average CrossFit gym if you walked in so people could have that context before we get into the—
Brian Strump (05:38):
So, from the space perspective, probably, right? We have—we occupy 11,775 square feet. It’s in a light industrial space. The front’s a doctor’s office. I’ve been a chiropractor since 2003. So, the front is a doctor’s office, about 1,800 square feet—myself, another chiropractor and an assistant. And then the back is the rest of that 10,000 square feet of the building. Most people for the gym would kind of enter around the back. Most people for the doctor’s office would enter in the front. And I think from the outside looking in, the size and maybe just the amount of equipment and stuff is the first thing when people come in like, “Oh, this is, this is larger than something, or this is more well equipped than something,” but I don’t, you know. And then obviously a lot of differences. I know on the inner workings, I would imagine that from mistakes that we’ve learned over the last 13, 14 years is different.
John Franklin (06:29):
What do you mean primarily? I’m looking more ops model.
Brian Strump (06:33):
Yeah, yeah.
John Franklin (06:33):
For 12,000 square feet. But you walk in, it’s just going to look like a large CrossFit gym.
Brian Strump (06:37):
Yeah. So, from an operations model, like I am the—I work on doing some sales and creating content, like written content. I prefer to write; I’m very rarely like in front of a camera like this. Because I don’t love it. And then I have a couple of key staff that either work on, like, using Kilo and GLM to kind of run that. So, I think our strongest points are our follow up and continuing to kind of touch base with leads and follow with people who cancel and keeping track with the current people who are in the gym from like a culture, “caring about” standpoint, which I think that we do remarkably well. I think one of the biggest things that I look at when a new member comes in is how long they’ve been in our sphere of system or how long ago did they click to get more information.
Brian Strump (07:35):
And some of those, I enjoy seeing it’s like 7, 8, 2 years, and they maybe respond to an email, or they just have been still thinking about us for something. It makes me feel like the work of the emails that I write are valuable. And I think that’s where a lot of people miss the boat from the follow-up perspective. So, I think we do that really, really well. So, I think from an operations perspective like that and the sales funnel—not so much like paid Facebook funnel stuff, but just like once they come into our system—I think we do a good job.
John Franklin (08:10):
Yeah. We do origin tracking for everybody who comes into Two-Brain, and they tend to fall into one to two camps. It’s like they saw it, they fell into the funnel. They bought in the first 90 days that they interacted with us, or they’ve been in there for like five years. And there’s like no middle ground, and that long tail, there’s a lot of value in just kind of hitting those people over and over and over again. So, if you’ve been consistent with the writing and consistent with the follow up, that makes a pretty meaningful difference over a long period of time.
Brian Strump (08:39):
Yeah, and when those people come in, it’s just like if you clicked the link, logged in, and three days ago, you booked your appointment, I’ve got some ammo in a sales conversation. But, if you’ve been in our thing for two years, like there’s very little chance that you’re leaving and not getting started.
John Franklin (08:56):
Right. Because you’ve just been consuming content.
Brian Strump (08:58):
Yeah. Like what else are you waiting for?
John Franklin (08:59):
You know it, now. Yeah, yeah. You pulled the trigger. So, you talked about you’re a writer; you’re a content creator. You’ve got somebody who manages your pipeline. So, the follow-up is pretty good. In terms of other staff, what do you have in order to run the ship?
Brian Strump (09:14):
I’ve got me, and my admin or assistant’s been with me for seven years. Kristen, who kind of takes care of everything. She’s kind of like my filter, so to speak, of messaging coming in that allows me to have a little bit of freedom to create and take care of bigger problems. And then we’ve got two other coaches who run the nutrition program, which we sell a lot of that in terms of nutrition. And then maybe nine other coaches—I think like four or five; let’s call them like full-time, full focus. This is their only job; their only source of income. And then a couple that maybe coach anywhere from 20 to 25 hours a month to like four or six. Some of the ones who are coaching four and six have been with us for a decade plus now. And maybe they’ve kind of moved up and have another job, and they just still want to be a part of coaching every now and then.
John Franklin (10:08):
So, you, Kristen, five coaches, and then are the nutrition people full-time, full income from the gym?
Brian Strump (10:14):
Yeah, those two. Yeah. Yeah.
John Franklin (10:15):
So, you do about seven people; you’ve got seven careers in fitness you’re responsible for.
Brian Strump (10:20):
Yeah, I’d say that’s fair.
John Franklin (10:22):
OK. And what does membership and top line look like to support all that?
Brian Strump (10:27):
Probably averaging a little bit over, between 52 and 57,000. So, what’s that, like, 650 for the year? Is that what you meant? 650,000.
John Franklin (10:40):
Oh, you’re trying to multiply it 50 by 52 over by 12?
Brian Strump (10:41):
Yeah, yeah, yeah.
John Franklin (10:44):
We don’t do math before 10 a.m. on the show. Don’t worry. You just do the monthly numbers.
Brian Strump (10:48):
Yeah. So yeah, I would say between—it’s been a while since we’ve been under 50. Yeah. So, and I feel like that’s a good spot. I’d like to—at this point now, I want to grow so I continue to get staff what they need. Like I’ll get a little bit more, but I want to be able to create a bigger pie for everybody, you know?
John Franklin (11:10):
And Charlotte’s pretty low cost of living. Right? So, I had Dan on here yesterday; I think Dan Purington.
Brian Strump (11:16):
OK. Yeah. Yeah.
John Franklin (11:17):
He’s on, like—he’s in Portland, which I think you need like a hundred grand a year to just survive in Portland. Can you live on, like, a $30,000 a year salary in Charlotte?
Brian Strump (11:29):
I don’t think you could live on a $30,000 a year salary. I mean, I don’t know. I mean, I’m sure it’s being done, but I would say probably that 55 to 60 would be my guess—that you could probably live and be somewhat frugal and not be spending on the finest things and take a vacation and do some stuff, but there is a lot of kind of big business and commerce there. So, that probably drives the average up, but I would think like between 50 and 60 you could probably—pretty similar to the average U.S.
John Franklin (12:04):
Yeah. And so, are you able to provide that for some of the staff?
Brian Strump (12:08):
Yeah, yeah, yeah. For some of those—of those five, I’d say three or four of them would be within that number.
John Franklin (12:16):
OK. Yeah. Because that’s more than the average affiliate owner reports taking home. So, a lot of people think there’s always more money in starting an affiliate. Having mentored hundreds, we both know that that’s not always the case. And a lot of times it is—opening up a gym if you’re not ready and prepared can incinerate your net worth very quickly. So, yeah, a lot of people poop on this idea of working for a gym owner, but in a lot of instances, you can make a lot more money than you would opening your own gym, and it’s risk free. So.
Brian Strump (12:48):
Yeah, I think I was just hearing about—and maybe, I think it was actually Chris’s little podcast in that meta about explaining 4/9ths, and he talked about how it works, and he is like, “Sometimes that coach is going to go and think that they could take it all, and they go there, and they end up making less than they were making when they were working for said gym before they went to open up their own.”
John Franklin (13:07):
Some of the best coaches that we hear about in the Two-Brain system are failed affiliate owners. And they come back and say, “Hey, I just want to coach. I want to write the programming. I don’t want to do the business stuff.” And yeah, if you have a sound business and you can create these opportunities for people like that.
Brian Strump (13:24):
Yeah. So, the outcome now of growing is like, I don’t have any, “Oh, it needs to be a million dollars.” Like, it’s more how everybody else—if I could get 10, 20% more for some of those people or bring in another full-time staff that could kind of hit that number that they want, whatever that might be, is kind more of the goal. Getting the building, which maybe we’ll get to is just like—
John Franklin (13:47):
We’re going to get there. That’s going to be the—that’s the purpose of the show.
Brian Strump (13:49):
That was kind of my way of long-term taking care of myself. At least that’s my theory. So, if the gym grows, I don’t need all of the profit. I could kind of share it.
John Franklin (14:01):
And so, 12,000 square feet is huge. That sounds like—that’s like a massive gym space for someone like me who operated out of New York. That’s just inconceivably large. How many members do you train on that space? Like what do you keep membership at?
Brian Strump (14:19):
Probably like 220 to 240.
John Franklin (14:21):
So, everybody just has their own gym. Like every single member has a private gym.
Brian Strump (14:24):
They have their own barbell. Not everybody has their own rope. Some people would want their own Rogue GHD, but they don’t—
John Franklin (14:35):
You got to pay extra for that. Yeah.
Brian Strump (14:36):
That’s a little extra rent.
John Franklin (14:37):
So, if you would do it again, would you go as large? You know, we’ve been profiling a lot of people who are having a lot of success with much smaller footprints. And we’ve talked to a lot of people who started in your era who have since downsized. And that’s been a lot better for their mental health. Yeah, like if you were redoing it, would you do the exact same thing?
Brian Strump (14:58):
No. No. And I guess, if I kind of started with the story of, like, when we first started, we were in 3,200 square feet of my doctor’s office in the gym, and that was 2009, 10, 11. We were about to get kicked out. So, we had to find a space quickly, so there wasn’t a lot around. So, this was one of the few spots that was—the hard part about the gym and moving it is the locale. I didn’t want to lose a lot of people. So, we moved into this space that was almost, let’s say, three and a half to four times the size, two times the rent. So, from an economic standpoint, it was not a wise decision, but I was like, “OK, maybe I,”—I also didn’t have many decisions. So, we moved in there, and when you go from—the gym space at that time was a 40 by 40 square foot box, so maybe what you’d be more familiar with. So, then you go into this 10,000 square feet and you’re just tossing stuff everywhere, building walls because it’s like: We’re never going to run out of space.
John Franklin (15:52):
I remember I would see the pictures on the affiliate owners’ group where they would rent the space, but they couldn’t afford the flooring. So, there’s like a rig and then just like an empty warehouse, like just concrete surrounding it. Yeah.
Brian Strump (16:03):
So, to answer your question, no, I would’ve moved in smaller. It just wasn’t an option. And then once we moved in there, the best part about the space is the location’s probably—from a real estate, probably like a building from like a light industrial, but like on a location on like a heavily traveled, big artery in the largest county in the state of North Carolina. So that’s kind of why we stayed. And it just—people just started kind of moving and growing in that area. So that’s—and then at that point, downsizing, we certainly could have done it, but there just wasn’t a lot of available space that would’ve been much smaller. And even in this most recent purchase, there was nothing smaller. I would’ve bought smaller a little bit if I could have, but the only option to buy was like massive structures.
John Franklin (16:56):
And so let, let’s get into that because we talked to quite a few successful gym owners. One of the most proven paths to increasing your net worth is owning your building. Like on the mentorship staff, I can think of Andrea Savard who made I think a little over $5 million on a flip in COVID for her gym. Peter Brassovan, and Jared Byczko are another pair that I can think of that—I think they were at three. They pocketed $2 to $3 million from their building. And they got a completely new gym built out for them and two years of free rent. Chris Cooper, if you’ve heard of him—
Brian Strump (17:38):
He sounds familiar. Yeah.
John Franklin (17:39):
I don’t know what his is worth He’s never selling; it doesn’t, it doesn’t matter what it is because his hold period is forever. But it’s a very proven model while you’re continuing to operate, especially if you’re operating over a long-term time horizon like you’ve been. So, tell me a little bit about your thought process and what you did to kind of get ready to gear up for this building.
Brian Strump (18:01):
Yeah, I think it started—I’ve been looking since 2016. There was a time that we bought land and we had to back out because the environmentals of the—and that would’ve been a ground-up construction.
John Franklin (18:12):
Terrible idea.
Brian Strump (18:12):
Yeah. And when I’m just thinking numbers, this purchase was $1.8 million; 2016 was going to be like 1.3. And I didn’t have nearly the funding for myself or the smarts to be able to take that on. So, it was probably better off that it ended up that way. So, really, the thing that got me pushing in this direction was I’ve been on the same lease since 2012 at like 3% increases renewals. And in my last one in 2021, my landlord’s like, “I’d like you to sign a five-year lease, but at the end we’ve got to at some point figure out the new rental rates.”
John Franklin (18:47):
Because Charlotte’s boomed, basically.
Brian Strump (18:48):
Yeah. Like, I’d be—like my rent would’ve been triple.
John Franklin (18:51):
Like, what are you paying, or what were you paying going into it?
Brian Strump (18:54):
I was probably paying like $4,500 on like—
John Franklin (18:58):
For 13,000 square feet?
Brian Strump (18:58):
13,000 square feet, you know, let’s say. And now I’m paying maybe like 5,000 to 5,500, let’s say. You know, give or take. It was a long time ago. And then, now my rent was 8,300.
John Franklin (19:15):
And are you paying that? Like did you form a separate entity?
Brian Strump (19:17):
No, no. That was rent.
John Franklin (19:19):
So, you started at 45? It was 83 before you started to buy?
Brian Strump (19:23):
Yeah. And then in 2026, it was probably going to—I know what other tenants are paying in this building, so it’s probably going to be, at the end, I was probably going to be paying like $14,000 to $16,000 in rent. So, when I’m looking at that 8,300 in 2021, I was like, “OK, in 2026, I’ve got to either get out of here or buy something.” And so that’s kind of what started it—just like that number. So, I started talking with my landlord and looking at pricing, and we started this process at the worst time to buy from an interest standpoint. When I first started this process, I was at a 5.7 rate. We ended up buying an SBA loan. SBA hasn’t closed yet, but my rate with the bank is 7. So, 1.8, that’s like $1,300 more a month. Let’s call it $15,000 for the year.
John Franklin (20:12):
You could have done worse though.
Brian Strump (20:13):
Oh, yeah, yeah. I definitely could have done worse. But either way, watching that tick up. So that was kind of the thing that made me realize that I had that five-year horizon. So, then I was like, “OK, the next two years from 2021 to 2023, I’m just going to focus on the gym and kind of get it to continue to grow.” Where, when I try to get this loan, I maybe I could’ve gotten it in 2021, but I wanted to make sure, financially, I had enough liquidity to be able to do it. I really didn’t want to have a partner in the purchase of the real estate for my space unless it was going to be a big, big one. If I was able to do it myself, I was going to try to risk it to do it by myself.
Brian Strump (20:50):
I wasn’t always like that, but I’m in part of these groups like this, like the Tinker group that’s here and some other ones, and watching some of these people do some things with money that like scare the crap out. Like, I’m usually pretty conservative. So, watching some of these people do it and not go bankrupt and live under a bridge was like, “OK, yeah, yeah. Like, I’m going to try to do this.” So that was kind of the piece was like, “I need to have a plan by 2026.” And it just all kind of fell into place at like—over this 2023 year. And then we closed December 15th.
John Franklin (21:24):
So, but it’s your existing building, right?
Brian Strump (21:26):
Yes. Well, my—it’s four units, right? The entire building is 38,000 square feet. They were condos, so I was trying to buy more than one. The entire building was $5.3 million. But since it wasn’t going to be owner occupied, I would’ve had to have raised 35%. So, I tried—I talked to a couple of people, and I had a couple of people in mind who were like, “Yeah, maybe. Yeah, maybe. Yeah, maybe.” And maybe, and that kind of—but I didn’t want to—after talking with my broker and a couple other people, I didn’t want to risk losing out on—the golden goose was my space. I didn’t want to risk out losing maybe a bigger buyout, but maybe risk out somebody else coming in and buying that whole space or something. So, then I tried to buy half the building, and we were pretty close to that with an investor who fell through because of, say like the seller maybe got a little bit greedy and found another buyer for the other unit. So, then I’m like, “All right, I’m starting to run out of time. I just want to get my unit and be done.” So, the building was condo-ed and my unit, I bought that 11,775 square feet. That’s 31% of the entire building for that $1.8 million. Now it’s four condos for individual businesses in that building.
John Franklin (22:41):
But you occupy one.
Brian Strump (22:42):
I occupy my—yeah, yeah.
John Franklin (22:44):
Yeah. And so, what did you end up having to put down?
Brian Strump (22:46):
$180,000.
John Franklin (22:48):
What? Yeah, so to buy the whole thing, you had to put down 35%. So that was going to be like 1.80—
Brian Strump (22:52):
1.7 million or something.
John Franklin (22:54):
Yeah, that sounds about right. And then I’m assuming—were you able to get the half for the smaller SBA rate?
Brian Strump (23:01):
Yeah, yeah. So then—originally, we were going to do a conventional loan, and I was going to get 10%. And then as we started moving along, and I think just all the news with like banks tightening up lending and stuff like that, my bank who—a bank that I’m switching with now, First National Bank, I think like a regional bank, they’re like, “Hey, I’ve got an idea,” which kind of made me a little nervous, and “maybe we’ll go this SBA route.” And I was, I was like, “I heard it’s longer, a lot of crap to deal with.” And it was really very easy for me. We closed on the SBA in 11 days. Some guy, this guy—so I guess there’s a program in the SBA. If you’re in north of South Carolina, you send John a message, he’ll get it to me since I don’t go on Instagram to give you my—
John Franklin (23:43):
Send it to Kristen.
Brian Strump (23:44):
And put my stuff. Yeah. And then it’ll get to me. I have this guy in this is a grant program for the SBA, and I paid $7,200 and gave him all my stuff. And in like 10 days—
John Franklin (23:57):
Sounds like these people who like message you and be like, “I need personal training. I will Uber my son. I will pay 200% your rate.”
Brian Strump (24:03):
Yeah. And I was introduced to him through the bank, so it seemed legit. And so, I paid him $7,200. They did every—they took all my personal financial statements and returns and everything that they needed that the bank already had, took it. And they were in a rush. He really wanted to get it closed before the potential shutdown, whatever that date was, a couple months ago. And once the SBA loan closes, the SBA will reimburse him and then they’ll send me back the $7,200. Because they’ll get paid from the SBA for their work. Back to that. The SBA was the—First National Bank was like, “Hey, I have an idea. Maybe we’ll go to the SBA route. This 504, it’s potentially a lower rate, but you could also add in some closing costs if you want.” And it could be locked in for 25 years, which like may or may not be a good idea, but definitely the fact that you could always change it is a little bit safer versus the bank. I think I have like a 10-year balloon or something like that.
John Franklin (24:57):
So, gym owners, if your eyes are glazing over right now because we’re going into all this technical jargon, my advice is pay attention, sharpen the pencil because we are out here in Dallas with a group of 70-something gym owners. This is the conversation. This is where a lot of people are going. And I know sometimes if you’re early on in your career or if your gym is in a great place, your mind kind of shuts off to some of this stuff. And it sounds like Brian went through a little bit of that as well. And then also some risk aversion. But like as you’ll learn, you’re probably a lot closer to being able to pull something like this off than you think because of these programs. So, the SBA really is a cheat code if you want to get your hand on some real estate, especially for your gym.
Brian Strump (25:41):
Yeah, I think it gets a bad rap, and I’m sure there’s some reasons, but it certainly gives you, like you said, a cheat code of wanting to help, especially owner-occupied buildings, with the rates. And they have like the 7A and the 504, which you don’t know if you get into, you kind of research that stuff. Those are just kind of the two programs. And we ended up going with the 504, which is like just real estate. It’s cheaper money. Pretty significant, recently, cheaper money for us.
John Franklin (26:12):
Yeah. And so, I’ve written about both of these, and I have an interview with the head of the largest SBA leader who Brian talked with as well. But again, you don’t, as a gym owner, you’re not expected to be an expert on these things. What was your first step? I know you talked to some people here and watched people do it, so you’re kind of following a proven path, but if you’re a gym owner, you’re like, “I want to own my building. One day” Like what are you advising them to do?
Brian Strump (26:36):
I think the first step is like, especially if you’re like—number one: I think the first step is trying to find an existing building. It’s like you said, building from the ground up has, for me, way too many unknown costs. And a lot of time that usually takes a lot more time and a lot more money. So, finding a building or finding something would be even another cheat code just because it’s—you can negotiate more, and you already know what you’re getting. I think just kind of starting to play around with calculators, even if you just talk to your own bank, even if you don’t have—you’re not making enough money that you want, just go into the bank just to try to get an idea of like, how much is a million, how much is a $600,000 mortgage?
Brian Strump (27:19):
How much is a million-dollar mortgage? How much is a $2-million mortgage? And just to try to get some ideas of mortgages, taxes, and insurance, just to kind of see where you are, right? And how far away you are from some of these things. Like right now we’re doing like the annual planning with all these gyms, right? And it’s really good to see like, “Oh, I’m not as far away as I thought I was because I only need 36 new members this year to stay.” Like three a month is a much easier number to kind of look at than just a bigger picture of dollars or something else. I think just educating yourself on that. I think if you go to your local bank and tell them what your three-year plan is, they’ll talk to you because they can look at you as like, more business to loan you the money. So, I think it’s just getting an idea of where you are and what you could do. And even just getting an idea of like, this wouldn’t—I wouldn’t be able to own something like this in some, like if I was in New York City, right? Or in some place—or maybe just getting an idea of like what your locale is to figure out size and dollars just to get started. It would be kind of the first steps.
John Franklin (28:28):
And if your bank isn’t an SBA bank, you can find one. Like there is one in your town that is—and because the difference is if you’re doing a traditional loan on a space, you probably would’ve had to put down what 30, 35%?
Brian Strump (28:41):
Uh, yes.
John Franklin (28:42):
Right. So, on a $1.8 million building, that’s—
Brian Strump (28:45):
Probably like too much.
John Franklin (28:46):
550 you have to have.
Brian Strump (28:49):
So yeah. So, for something like that, right, I would’ve needed—I would’ve strongly considered an investor, but I’ve been doing it the whole time by myself. I don’t have a problem with investors, but I wanted to try to make it as clean—and me be able to make the calls—as possible.
John Franklin (29:05):
If it’s a good deal, it’s a good deal, and you want to own as much of it as you can, especially if it’s your business operating out it. So, right.
Brian Strump (29:11):
That was the biggest reason. If it wasn’t my business, I’d be more willing, but the fact it was my business was going to be the one signing the 20-whatever-long lease that the SBA requires. So, it’s like, I want to be the one.
John Franklin (29:23):
I could see value in if you were buying the whole space and you had somebody with a lot of expertise or maybe could lease out some of the other spaces. And so, there’s a value at play there. Like, I see that, but yeah, what you did, you want to own that.
Brian Strump (29:37):
Yeah. At the end of the day, I wasn’t willing to risk—like I sat down, I was like, “Man, this would be really great to own this whole thing.” And my landlord was willing to sell it, but I just wasn’t willing to risk not getting it. And something financially changed in my life that I wouldn’t be able to then go back to the bank and get it.
John Franklin (29:55):
And so you went through that process. What are they—you know, 11 days is insane. That’s the fastest I’ve ever heard it getting done in.
Brian Strump (30:04):
It still has to close, right? But like I got my approval in 11 days because he’s like, “I want to get your approval before the shutdown because if they shut down and you already have your approval, you’ll be able to close when they—”
John Franklin (30:18):
Who shuts down?
Brian Strump (30:19):
The U.S. government. It was like two or three months ago, like right before they had the [potential] government shut down. So, he is like, “I’m a little nervous. I’d like to see if we can get you—if we could get this close done then, because if there is a shutdown for a little bit, all those loans are just going to kind of back up, and I don’t want you to be able to have to be delayed.” So, I think we close in either—I don’t really know how it works—like January 11th or March 11th, whenever they kind of package and sell these loans.
John Franklin (30:45):
OK. And to get ready you had to do like personal tax returns.
Brian Strump (30:49):
Yeah. It wasn’t as business statements. Yeah.
John Franklin (30:50):
Bank statements.
Brian Strump (30:52):
It wasn’t as bad as I had imagined. Right. Like my last three years tax returns, a personal financial statement and then every so often, just like your year-to-date, profit loss and balance sheet. So, it’s like I have a bookkeeper, and that keeps up to date. So, it was clean. So yeah, so it was clean and easy. And I guess part of the benefit of me being pretty conservative was like, it looked like a business that could take on the debt, whereas other businesses that funnel their entire life through the business, which is—I mean, I would do that too, but you don’t look as strong as you would go into the bank. So, in preparation for this, since 2021, I just kind of made sure that I was a little wiser with like, it looked like I was a good lendable steward of money.
John Franklin (31:34):
So you’re not running your yacht through the business.
Brian Strump (31:36):
Right? No, no, no. My accountant said definitely not.
John Franklin (31:39):
OK, cool. And the Lambos are a different entity. Yeah, yeah.
Brian Strump (31:42):
Different, yeah, yeah, for sure.
John Franklin (31:43):
Got it, got it, got it. And so, how has your payment changed? You said you were paying about 8,400 in rent. And then you were looking at a $16,000 payment or something if the lease would’ve expired. So, where are you now?
Brian Strump (31:58):
So I think my mortgage payment will be roughly 11,300. And then I have the doctor’s office, so I have the doctor’s office in the building, right? The doctor’s office. Like I have it set up so it breaks even. So that takes off some of the lease, but that’s going to pay, you know, $2,500, $3,000. And then the mortgage payments 11,300. CAM, for like the common area stuff is probably like 900. Taxes are $10,000 for the year. So, that was 900 a month. Let’s call that like 10,000 for the year for common area, $10,000 for the year for taxes and a little bit more for insurance. I’m going to probably pay like 15.5.
John Franklin (32:45):
So you’re just—you’re getting up there; you’re what you would’ve been paying anyway, but—
Brian Strump (32:48):
Yeah, yeah, yeah. But now, right, right. So, exact—so I’ll probably be like 10% less by that time, maybe 5% less. But now the way that I looked at it was not so much from that cash flow perspective. Like I’ll still be paying that, but now, let’s say 2,500 of that’s going to be cash flow to that new entity, that entity that bought it. Right? So, if I’m paying 15, but my mortgage plus CAM and taxes is 12.5, right? 13 maybe. So, like 2,000.
John Franklin (33:20):
So, you bought the—let’s take a step back so people understand. So, you bought the building and created a different entity that was in your gym. And now your gym pays the entity that owns the building rent. And you are the owner of that entity?
Brian Strump (33:35):
Correct.
John Franklin (33:36):
So, you pocket a little bit off of that?
Brian Strump (33:38):
So, like $2,000. It’s still hard for me to understand—to like wrap my head around—but I understand now it’s like essentially, you know, I’m taking money from my right pocket, moving it to my left pocket. It goes into this entity. So, to kind of make it easy, right, let’s just say the math—let’s just say the all-in was $12,000 a month, and I’m paying 15. That new business that purchased is going to be plus $3,000 a month. That’s still mine. Just like not in the gym. So, the other benefit that I liked was that it’s also going to be lowering my profitable income on this side. So, if I look at now, I don’t need this gym for a couple of years to show that it’s making a ton of profit because I’ve gotten this loan now, it’s going to lower—I’ll be paying less taxes also. And then I have the interest on the building. So, I think in the end, I’ll still be greater in terms of cash flow. It just might flow out a little bit differently from like taxes and stuff.
John Franklin (34:32):
Yeah. So, what you’re saying is the actual building itself, you can depreciate it over its useful life. And even though the building isn’t depreciating—it’s an appreciating asset—over time, the building gets worth more, you can actually deduct that from your taxable income. So, a percentage of the purchase price essentially becomes a tax shield every year.
Brian Strump (34:53):
Right. Whereas like if I was just paying that $15,000 in rent, where I’m just like, there’s no interest running off, there’s no appreciation. I was just losing that. And I didn’t want to be there. I would’ve been frustrated if I was there, if I had this opportunity to be able to take it and—
John Franklin (35:10):
What’s your biggest fear? That’s a big chunk of risk.
Brian Strump (35:13):
Yeah. Yeah. My biggest fear is not paying it. I mean, I didn’t tell a lot of people, and I didn’t—I mean, I publicly put it on Facebook so people could see this was a possibility, and I got a lot of good feedback, but like members, I didn’t share it in there. Like, “Hey guys, guess what? I own this now.” Because one, like that’s—if they find out, they find out. But I think my biggest fear was it still makes me uncomfortable. The people who didn’t know it, how do you feel now? I was like, there were times when I was talking to the broker and their banker, I was like, “I almost hope you called, and you were going to say, ‘Hey Brian, sorry, like, we can’t give you the money’ anymore.” And they would be like, “Ah.”
Brian Strump (35:51):
You know? And then when I sat down at the lawyer’s table, he is like, “How do you feel to close? Like how do you feel?” It’s a little bit surreal. It’s risk, but I feel like I take pretty calculated risks, and I’m pretty smart with my money. I feel like worst case scenario, I would sell it. Like if hit the fan, like what’s the worst that could happen? I’d sell it, and I’d start renting from who? Whoever bought it from me, you know? But I really looked at it as like, I’m pretty terrible at looking at visions three years, 10 years down the line. But I looked at it like, I’m 45; when I’m 55, what can that be like? And I love the gym. I love being there, the people that I work with, the people that come in there. So, I’m not like looking for it to be something else. I wanted to get something down that I felt comfortable with that in 10 years it’s going to be—I’ll look back and be like, “I probably should have tried to have done it sooner.”
John Franklin (36:42):
And you probably are going to kick yourself for not buying the whole thing.
Brian Strump (36:44):
Yeah, yeah. 100%. But I could sleep well now with what I’m dealing with. Based on all I do in my math in my head is like, if we went to zero, how long can I pay for this thing? And if it was $5.3 million and it was like, if it went to zero, I’d be like, I’m not sleeping for a while.
John Franklin (37:01):
Not very long.
Brian Strump (37:02):
Yeah. So, like now I wanted to make a purchase that I could sleep with and feel comfortable with and really be able to pay attention to, like growing the gym and the business within it. But yeah, like I am my biggest—I don’t know if weaknesses is the word—but me getting comfortable is the biggest thing that I’m kind of scared of. Like being complacent. So, this was probably the first time in the last, since 2020, that I’m not—like, since 2020, the business was, has been doing really, really well. And this was the next thing that I kind of needed to be like, you got to figure out again. Kind of like I felt in 2020 when things shut down. So, I feel like I do well under stress and pressure, so I feel like this was a good test, if you may, for me to be able to get back a little bit of uncomfortableness in my life of like paying attention.
John Franklin (37:52):
And the business has been going for 15 years now. So, I’d imagine the chance of it going to zero is probably pretty, pretty small.
Brian Strump (38:00):
Yeah. But, I’d like to always think, you know—I shared a meme that somebody posted yesterday, it’s like, “You’re not entrepreneuring hard enough if every month you don’t feel like burning it all down or going to work at McDonald’s” or something. So, it’s like, that’s true. And maybe the logical part of my brain would be like, that’s true, but I still worry about it—not to, again, not to the point that I’m like waking up at night, and I’m getting better at all those little problems that used to derail the gym owner. You know, it was like one member left or this happened or that happened, but it’s still a concern. And if anybody on here knows how to stop that from creeping in, message John, he’ll message Kristen and then I’ll get the message.
John Franklin (38:43):
You just make a lot more money. That’s right.
Brian Strump (38:45):
Right, right. Yeah, so exactly. So, I feel like that’s like giving my—the same way I said like, “How many months do I have if I can’t pay this thing?” It’s like, if I could just increase that timeframe of how many months do I have till I can’t pay that thing, and it goes from zero to six to 12 to 24 to a decade, then I think you start sleeping a little bit easier.
John Franklin (39:06):
So for those unfamiliar with Brian, his risk tolerance—his box spring is actually hundred-dollar bills. So, I think he’s got like $300,000 cash that he rests his mattress on.
Brian Strump (39:17):
Not anymore because—
John Franklin (39:18):
Now, one side of it; his wife sleeps on cash, and he’s on the ground. He wants to build it back up. So, I’m sure people are approaching you saying, “Hey, how do I do this?” How, and some of your mentees are probably talking to you about it. When is someone ready?
Brian Strump (39:32):
I think you could be ready sooner than you think if you’re willing to—like, you have to figure out the price first, right? Because I wasn’t going to be ready to take on this debt back then. But I have some people in some of these small areas, in some of these more affordable areas, or they’ve got a 3,000- or 4,000-square-foot space that they want to buy. And if I had to do it all over again, the reason why I wanted to buy the building was to like lower my risk and have other people help pay the mortgage. In my case, I have the doctor’s office to help offset some. But I would say, if you want to start looking at this, take your space and maybe look for an extra $1,500 to $3,000, 3000 square feet to have other units that you could rent and be the landlord to take off some of that.
Brian Strump (40:20):
There’s SBA things that you kind of want to check on if you want to go that route. But I think that’s one thing to look at. And then I think just look at how much money you are bringing in, how much profit you have, and then base it on like those numbers, I wouldn’t base it on like what you think you might do, and just go to the bank. Like it doesn’t hurt to go to the bank and say like, “If I’m looking at getting a loan from a commercial bank, can I get one?” And they’ll say like, “Yeah, we’ll approve you for $200,000.” “OK, well I need eight.” Or they’re like, “Yeah, we would approve you, and then you just got to work backwards from the math. For some people, you could pay the same maybe minus taxes and insurance.
Brian Strump (41:01):
You’re just going to have to do the math and know your numbers. That’s where I think I do some of my best work is—just the math’s not going to lie to me. I’m not going to let my emotions get the best of me or get me too excited. So, I think go—the first step is just like going to the bank and asking them some questions and looking around at real estate in your area and trying to figure it out. And then if the bank says no, ask them for some help or somebody at the SBA or something who could, like—what are you looking for that I’d become more lendable? And for some people it’s like your personal, right? Like if you’ve got under a 650 credit score, it doesn’t matter how much money your business is making.
Brian Strump (41:42):
So I think like those are things that if you know now and you give yourself three years to start to fix it, that’s a better option than saying, “My business is crushing it.” And you go in there, and you’re just not very good with your money, or you have a bankruptcy or something on the back that you’re—something bad going on there. I think just kind of starting to ask those questions and then that’s where you’ll start to realize: How far away am I really? I definitely think that people are closer to it than they think. It’s just taking on that added risk of that debt. And versus like, if something goes wrong, I can’t just end my debt, give my landlord the finger and say, “Come after me for nothing.” You know?
John Franklin (42:23):
Right. And you hear 1.8 million—like we have people in Two-Brain who they started with like a $200,000 building, and they just kept trading up. They just sold their car to get the down payment to buy their space, right? And so, like Brian said, if you’re in New York, LA, forget about it, right? Like you need to have some cash. But for anybody who’s not in a super expensive market, high cost of living area, it’s a lot more doable and accessible that you think with these SBA programs.
Brian Strump (42:52):
I think the one thing that you said on a podcast in the past—it might’ve been the one with Angelo, which is I think good here. You said something like, “Small business boutique gym owners have one of the most powerful Rolodexes in their city,” right? And so, when it comes to that, there are lot of people in your gym who have money that they need to put somewhere that you are unaware of. They come across you, you might think it’s their average Joe, but they’ve got a ton of money; they need to figure out something to do. So, I wouldn’t be afraid. And Jeff Smith told me this in 2016. He’s like, “Just ask people.” So, when originally I was going to buy that land in 2016, I had two members that we agreed to terms for each loaning me $125,000 to come up with 20%.
Brian Strump (43:38):
And, but I just put out there, and I would put some caveats to it. Like, you’ll get everybody saying, “Oh, I’d love to help you with the real estate. I’ve got like $7,500.” So, I would give it like a minimum number if you’re going to ask some people. But there’s certainly people if the down payment or some of the funding or ask some questions of some people in your gym, using that Rolodex of people in your gym could be super valuable and a much more trustworthy group of people than just like the internet.
John Franklin (44:08):
It’s always the quiet guy in the 6 a.m. class. Yeah. He’s the rich one.
Brian Strump (44:11):
Right, right.
John Franklin (44:12):
So, if you got a quiet guy who shows up consistently to your 6 a.m. class—
Brian Strump (44:16):
Driving a Corolla.
John Franklin (44:17):
Yeah. Like a beat up 10-year-old RAV4, that’s your guy. He’s sitting on a—he’s got the box spring of cash. And then one of the things Brian brought up that is a good point is if you go to one of these lenders and you just give them your information, they’ll tell if you’re financeable. They’ll tell you, “Hey, you can bite off a $2 million building based off of this.” And if you say, “I need a 3 million, what do you need to see?” And they’ll literally tell you. So, that’s a great starting point. If you’re not there yet, you can go and like Google “SBA loan calculator,” and you can figure out how much cash flow you need to spit off to afford a certain size mortgage. And there’s—
Brian Strump (44:52):
There was one thing that I was unaware of, and I think the mortgage is one thing, but paying attention to your taxes is another, in some of these places, I mean, I wasn’t unaware of taxes, but when I first went in years ago, you just kind of type into that calculating, like, “All right, pretty close.” And then you’re like, “Oh, insurance and taxes.”
John Franklin (45:12):
Insurance and taxes, CAM.
Brian Strump (45:13):
Yeah, and you know, taxes on any commercial building is going to be substantial. Insurance is going to be more substantial than you’re used to on a home. And then, some banks also require you to pay—like my bank’s requirement was, uh, 1.25% higher than my mortgage into the new company. So, for example, for every dollar that, that, that my mortgage was worth, I need to put in $1.25 to create a buffer I would imagine.
John Franklin (45:44):
So, that’s 15,000 versus the 2,500 we were talking—
Brian Strump (45:47):
Right, right. Exactly. So, and that buffer is still to me, but I’m guessing that it gives the bank—it shows them that I’m able to kind of build up a buffer of liquidity if something goes wrong. So like, those are things—like, just because you could, just because the mortgage shows 5,000, the bank might require you to be paying 6,500 in there. So, that was kind of a new one that it’s still your money, but for me it’s still kind of hard to understand that, like, it’s just moving to a different account.
John Franklin (46:17):
Right. And another point that you brought up that I think it’s worth reiterating is if you’re going through the SBA, there’s a couple other advantages. One is you can get up to a 25-year term on the loan. So, most commercial mortgages will be for—the term will be fixed for like five years, and then you have to refinance and refinance and refinance. With the SBA, you can lock it down for a very long period of time. The second thing worth noting is that you can buy more space than you need. So, if you—let’s say Brian only needed 10,000 square feet, he could buy—he could have bought the next door unit if that unit was 9,900 square feet because your area only needs to occupy 51%. And so, we’ve seen a lot of cases where you buy a whole thing and then someone wants to use the entire thing, and they make offers that generate more cash flow than just operating the gym. So, a lot of people who we’ve talked to successfully—I don’t think we’ve talked to anybody who’s gone bankrupt doing this—and said the most common thing we hear is—you may be the first.
Brian Strump (47:27):
I’ll be back in a couple years.
John Franklin (47:28):
The 2026 Tinker podcast. Yeah. So, one of the most common things we hear is, “I wish I would’ve bought more.”
Brian Strump (47:35):
Yeah, yeah, for sure.
John Franklin (47:36):
And so—
Brian Strump (47:37):
And that—you know, in 2019, 2018 when I was looking, I could have. That building was 3.5 when I first asked.
John Franklin (47:48):
Should’ve, could’ve, would’ve.
Brian Strump (47:48):
Yeah, yeah.
John Franklin (47:50):
$2 million. That’s a much higher box spring.
Brian Strump (47:53):
And that’s the reason why now it’s like—know what? I just hate seeing that money leave, but knowing that it’s kind of inequity somewhere else. And if everything continues as we expect, it seemed like the right time. I just didn’t want to five more years from now, not have done it. So yeah, I think buying sooner and buying more is—that that will come, and I could just kind of do it again, but at least, I wanted to get this first piece under my belt. You know.
John Franklin (48:19):
Yeah. So, Brian, we’re running out of time. We’ve got to go downstairs and soak in some knowledge. I would ask where should people find you, but I know the answer.,
Brian Strump (48:29):
Crossfit.com, 2009, 2010. You can Google me.
John Franklin (48:32):
All you need to do is go to gymownersunited.com, join the group, make some controversial hot take, and Brian will be there. He’ll be there to correct you with a slight hint of sarcasm. So, yeah, just say something that Brian doesn’t agree with in any affiliate-owner group. And he’s right there.
Brian Strump (48:51):
Yeah. I’m not allowed out to be on Instagram or Twitter per my work orders. Yeah. So.
John Franklin (48:56):
The bank, it’s too much of a liability. It’s on your insurance policy. Thanks for taking the time to do this, separating from the group for a little bit. I appreciate it. I think it’s going to help gym owners, man.
Brian Strump (49:06):
Thank you.
Mike Warkentin (49:07):
For listening to “Run a Profitable Gym.” Please subscribe for more episodes. Now, here’s Chris Cooper with a final message.
Chris Cooper (49:13):
Hey, it’s Two-Brain founder Chris Cooper with a quick note. We created the Gym Owners United Facebook group to help you run a profitable gym. Thousands of gym owners, just like you have already joined. In the group, we share sound advice about the business of fitness every day. I answer questions, I run free webinars and I give away all kinds of great resources to help you grow your gym. I’d love to have you in that group. It’s Gym Owners United on Facebook, or go to gymownersunited.com to join. Do it today.
