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:
“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: antifragility. Nassim Taleb’s book, Antifragile: Things That Gain From Disorder 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 anti fragile policies
Financial planners (ironically, with fixed fees, they’re among the safest; they make their 3% even if you lose money)
Doctors, lawyers and professionals.
In other words, generalists.
Who is MOST affected?
Salaried workers in collapsable positions (including steelworkers, unfortunately)
In other words, skilled specialists.
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 paperworkers 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 of 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, cancel their memberships and the gyms suffer. But that’s not our model.
CrossFit is a premium service.
The population of our city has dropped by over 25% 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 globogyms. But they’re not bad news for agile entrepreneurs.