The Guy Who Bought 4 Gyms in 6 Months

Tyler Welch

Mike (00:02):

Tyler Welch owns six gyms and he’s purchased four of them in the last six months. I’m Mike Warkentin. I’m gonna dig into the why and how of gym buying in this episode of Two-Brain Radio, please don’t forget to subscribe to this podcast. And if you happen to be listening or watching on YouTube, please hit subscribe, hit like and ring the notifications bell so you don’t miss a thing. Now, RXFit That is Tyler Welch’s brand. It’s based in Utah. Over the last six months Tyler has the group from two gyms to six. Tyler. Welcome to Two-Brain Radio. Are you ready for a host of questions?

Tyler (00:31):

Ready.

Mike (00:31):

All right. I’m gonna ask you a big one first. Why buy a gym instead of start one. That’s a huge question.

Tyler (00:39):

Yeah, and it’s my preference. I know Cooper would rather start it from scratch, but you’re buying an audience and depending on how organized the previous gym owner is, or was, you have plus or minus a thousand contacts to immediately start having conversations with, and the best part about the purchase price is it’s not factored into the purchase price. That audience is invaluable and it’s $0.

Mike (01:05):

That’s a really interesting response because Chris has talked about that. He said he would buy it for an audience. That’s what he would do because often when you buy a gym, it comes with all sorts of other issues. We’ll get into that a little bit later in the show. Yeah. But the thing that you said there is kind of neatly stated where audience isn’t one of those intangibles where it doesn’t show up in a balance sheet, right? Yeah, yeah, yeah. So that’s an interesting one, because again, tell me, first of all, RxFit, are you looking at like functional fitness kinda model CrossFit model? Or what kinda stuff do you do there?

Tyler (01:35):

Yeah, so we’re unaffiliated, well, one of the six gyms is affiliated. And there’s a few advantages to that, but the other five aren’t. We don’t market CrossFit. Right. But we require that our group class coaches are certified through CrossFit, at least their level one. And in most staff development meetings, the CrossFit level one level two methodology is taught and retaught and retaught. So for all intents and purposes, we are a CrossFit gym without marketing the word CrossFit.

Mike (02:07):

The reason I ask is to give people perspective on what you would, you know, the price of starting a gym, like a CrossFit gym would be very different in terms of price to start as opposed to like a globo gym where you’ve got 7,000 machines that are all $10,000 a piece and so forth. So yeah, that’s interesting. I’m gonna give people perspective on that. So I’m gonna ask you the second question now is you buy one gym. I know why. Why buy three more? Is it the same answer or something else?

Tyler (02:31):

I hit this point last year where my motive is I feel an immense pressure on my shoulders to provide meaningful careers for my staff members. And I hit this point where I thought, you know, I’ve grown one gym and now two gyms, and I’ve provided two additional careers for people I really care about. But these other part-time coaches, there’s no ascension. And even for those head coaches or GMs, depending on what you would call ’em, there’s no ascension after that, I’m in their way. And so I started thinking, how do I create this fitness career where there’s no ceiling for my staff? And I started thinking, OK, they need to fill my position. And I need to send myself up the ladder. And I didn’t wanna remove myself. Most of the tinkerers I know a lot of the tinkerers kind of have their gyms on autopilot, but I am so just in love with fitness and the gym industry and gym management that I wanted to be involved with it 60, 70 hours a week.

Mike (03:36):

And that makes sense. Like, I don’t for sure, but I don’t think there’s another tinker that owns six gyms. I think some of them have like one thing and maybe they branched out into a second thing and it might be a gym where it might be a different thing completely like real estate or something. But I dunno of another tinker maybe you do who owns six.

Tyler (03:51):

I dunno. But maybe there is, yeah.

Mike (03:56):

Tell me a little bit about the staffing situation, you’ve created careers for people. So do you operate kinda as the CEO of all six gyms and then delegate like management positions to each one? How do you do that?

Tyler (04:08):

Yeah, so yes and no. I’m trying to fill that CEO position. OK. But I’m also the GM of one location. OK. And there’s a few reasons for that. One of the reasons is at this point, right now, we’ve grown so fast in such a short period of time. I need to lead, I at least feel the need to lead by example. So that’s in NSI, booked sales, closed, goal reviews. And I even coach my classes at that location. Which requires, I mean, a lot of hours, but I’m trying to be like, this is the model GM I’m gonna demonstrate for you. So it’s longer hours right now, but you know, I’m under the age of 30 and I’m just full of energy. And I think I’ll continue to run hard like this for a couple more years before I really start to slow down.

Mike (04:59):

I can see that you have a plan, right? Like I see that your plan is not to do this forever. Your plan is clearly to do something where you’re setting an ideal example and then you’re going to offload some stuff. And you may always keep your hand on the tiller to some degree, and maybe even more than some gym owners would, but you’re clearly, you know, you are setting an example with the idea of follow what we call, you know, climbing the value ladder and offloading some stuff.

Tyler (05:21):

Yeah. Yeah.

Mike (05:22):

  1. Do you mind telling me, like in the compensation structure, whatever, how do your gym owners operate? Do they get a full package kind of thing as their, as they run their show? How does that work?

Tyler (05:34):

Yeah, so I learned quickly I can’t salary the GMs. OK. Complacency sets in some areas. Yeah. So we follow the four ninths model. Well, almost. It’s 40%. And the GM for each location is the gym owner without ownership. And they manage, I only say that because some GMs don’t do certain things. But the GM is responsible for 40% of the gross revenue. If they wanna delegate the cleaning that comes out of their paycheck, if they wanna delegate the coaching that comes out of their paycheck, but they have to run their location as if they’re the gym owner and they take 40%. So as their gym grosses more, they can kind of climb their own value ladder within their gym and hire additional staff.

Mike (06:18):

So do you have five of these people now, or is it you plus some number or what’s the number of full-time people?

Tyler (06:24):

Yeah, we have five there’s five of us. One of the GMs is doing two gyms at one time right now.

Mike (06:34):

How did you up with this model?

Tyler (06:37):

The thing that really saved my life was John Briggs book Profit First for Microgyms.

Mike (06:41):

JAnd he’s a Utah guy, if I’m not mistaken, correct. Yeah.

Tyler (06:44):

Yeah. And, so I actually bought his gym. OK. And I try to work out there regularly with him at the 7:30 class, just to pick his brain,

Mike (06:52):

Say hi to him for me.

Tyler (06:54):

I will. But, yeah, he has a unique perspective where he has hundreds of other gyms that work with Incite Tax and he’s kind of helpe mentor me in a way to kind of realize like I can’t exceed this salary cap in order for all margins to be protected.

Mike (07:12):

  1. So you’re yeah. So you’ve got a, obviously with you, you know, buying a gym from an accountant who works with, you know, many other fitness facilities. You’ve got your hand into the accounting to a high degree, especially as you scale up, it would be a mistake to do that without having a clue about balance sheets and all that. So I would guess that you’re focused on some financial metrics.

Tyler (07:32):

Yeah. Hyper focused.

Mike (07:34):

  1. That’s interesting. Cuz like again, when I started running a gym 10 years ago, I made the mistake of following me if you build it, they’ll come. And I wasn’t hyper focused on financial metrics. That got me into trouble. Two-Brain got me out, but you can see how that middle part of that story goes. Along those lines, I struggled to run one gym. Like I found it very overwhelming, all the different aspects of stuff. So how did you scale up to six so quickly? Like I was overwhelmed. You’ve got six. So tell me about that.

Tyler (08:01):

Well there’s an opportunity with COVID and its shed light on the industry, especially around in Utah where these part-time gym owners or hobbyists have made this decision. Like, do I really want this part-time hobby or do I wanna sell it? And so I’ve started cold calling for the past year and cold emailing, just like, Hey, I don’t wanna step on your toes, but I’m interested in buying a gym or starting a gym in area.

Mike (08:29):

That’s interesting.

Tyler (08:30):

So I’ve been very assertive. I’ve been careful not to be, I don’t think I am, but maybe sometimes I am. I try to be as humble as I can, but assertive and we can dive into this too, but I’d rather buy an unprofitable gym than a profitable gym. There’s a few reasons for that.

Mike (08:46):

So I got two questions right off the bat. I gotta just jump in and ask. I can’t even hold myself back here, but did you just start, like calling the phone book or did you target specific gyms like or how did you decide who you’re gonna call to talk about potential buyouts?

Tyler (09:00):

So within the next year, I there’s a city from Spanish fork to salt lake city. Those are cities in Utah about maybe an hour, 15 hour and a half from each other. And my, my vision for this next 18 months is to have a gym in each location within 15 minutes of each other, because my first gym is in a college town. And what I started to realize, as I thought, all my cancellations are graduates, well, not all of them, but a high percentage of them are graduating students, but they’re moving to these other cities within that area. And so I started thinking, man, wouldn’t it be nice if these people that come to Utah to school, I get ’em when they come. And then I keep ’em when they graduate, because I have gyms along the interstate.

Mike (09:46):

So this is the client journey. Like you figured this one out.

Tyler (09:50):

I wouldn’t say I figured it out, but it is the strategy I’m pursuing. Maybe it’s not the right strategy yet, but it’s the one I’m pursuing. I want gyms in 15 minutes within all of ’em and then it also allows staff to be used interchangeably between locations. Staff can be picked up. They can pick up additional hours at other gyms if need be. And because the driving distances are closer, we can have not just a single location staff meeting, but we can have multi-location staff meetings.

Mike (10:21):

  1. Does membership transfer between locations?

Tyler (10:23):

Yeah.

Mike (10:23):

  1. So this is interesting. Now I gotta get to that second question. That’s why do you prefer unprofitable ones?

Tyler (10:31):

They’re cheaper on the dollar. Yeah. And the members, they have this intense loyal to the community, but they have some things that are frustrating to ’em. And so when you come in, you come in with this fresh breath of air and this incredible amount of excitement and they just, I mean, I won’t lie. I sell my soul for a couple of weeks to that location back to founder phase where it’s like 16, 17 hours, but just to gain the respect of that location. And then there’s just this affinity or attachment to like, Hey, this guy’s really trying to do something special. And we finally have someone who’s full-time bought in trying to make this thing awesome. So, we’ve bought one of the four gyms recently we bought was profitable and I love that location. That’s the one I’m managing now.Bbut the members are, it’s a little bit harder. I have found they’re a little bit more skeptical of change. OK. And so I’ve had to be a little more creative around that cause they’re already running the location’s nice. The facility’s nice, the programming’s nice. The coaching’s good. You know, so I’m just thinking like, how do I provide this, this like big value add because they already have valuable value offerings.

Mike (11:49):

So when you do this purchase, do you have to get rid of the current staff or do you kind of put them in places new places or how do you do that?

Tyler (11:56):

That’s the hardest thing and it kills me. Yeah. It depends on the financials of the gym. There was one gym in particular where I had to let go of everybody. Even the cleaner. So I had to clean and coach everything for three months. Just because I couldn’t, I have an intense focus on no gym ever is unprofitable. And so I had one on one conversations with the six or seven coaches that gym had and I said, I think you’re great. Here is the financial, here’s the P and L. I can’t pay you without going into the red. Yeah. And I refuse to have you coach for free. So most of them understood. I know some of ’em, were a little bothered, not necessarily at me, but just at the situation. I’ve at least attempted to be careful to maintain quality relationships and the reputation that if I did buy an existing gym, it’s not that I’m gonna rip out the staff.

Mike (12:58):

It’s interesting. You really have your foot in like one foot firmly in the tinker thing where you’re like, you know, upper level entrepreneur growing replicating businesses, but then you also, at times have your foot in the founder spot where you’re jumping back in and literally firing the cleaner and doing the cleaning yourself for a period. And that’s, you know, and the goal of founder phase in Chris Cooper’s book, which, version two of founder farmer thinker thief is coming out very shortly. Your focus is on profitability, breaking even as soon as possible. Does that ever feel like you’re just torn in two directions?

Tyler (13:27):

Yeah. I don’t even think I’m a tinker. I mean, I like to think I am, but my life and my workflow is the founder.

Mike (13:35):

  1. That’s interesting. You have elements of both that we’ll call it that. When you come into a gym that you purchased, regardless of whether you have to get rid of the staff or keep some, do you then drop your existing framework and playbook and procedures and policies on that location or is anything you retain?

Tyler (13:55):

Oh man, that’s a great question. It’s gradual. OK. Yeah, I do it when it’s right. And I do it incrementally step one is to on-ramp everyone to the level method. So we go two weeks strong of the level method testing, and then I get ’em in the ChalkIt Pro, I show ’em how we’re trying to have this custom focus in the group classes to their programming. And then I, after that two week period, I start having goal reviews, talking to individuals, trying to get some on personal training. But yeah, it’s not until I feel. And then after that, then equipment purchases come in. So I sell off some of the broken or the really used equipment. I buy new ones. And usually that, and the coaching, I try as hard as I can to just be like a five star coach. So usually with those three things, like really, really good coaching, a new approach to programming with like levels and then new equipment coming in, then we equalize pricing. And then and then we start to introduce some of our accessory programs.

Mike (15:04):

I got the dogs here, barking their faces off. Two-Brain Radio mascots. It’s really interesting how you’ve kind of got that stuff. So it’s kind of a process for everything, right? So you’re starting with evaluating each gym as it goes. What kinda problems do you get into, like, I’m sure there’s some stuff like where, you know, retention, clients, maybe leave, staff problems. What are the main problems of buying a gym?

Tyler (15:27):

Well, you inherit all the quote, I’ll say quote problems. You run into the bro deals and the free memberships and the trades. And, you run into this member bought this piece of equipment and therefore has this much left on their membership. And it’s just navigating who has an entitlement where. Trying to figure out all that, and then having conversations with those indiviudals to say like, thank you for all you’ve done. How can I make this right? Because moving forward, we’re trying to professionalize this business. And I won’t be a part of it.

Mike (15:59):

What’s the response to a conversation like that. I know it varies, but what’s the general response.

Tyler (16:04):

You know, Mike I spend hours in these conversations to the point where I make sure the individual knows how much I care about the gym. And for the most part people, there’s a win-win, there’s like a meeting of the minds, but there have been cases where it has been better for the individual to move to another place. And that’s sad, but I can’t have these exceptions. I can’t make exceptions in certain locations or certain individuals.

Mike (16:39):

You wanna accommodate people as best you can, but it has to be consistent service. And that’s a principle of business that we kind of, at least gym owners in Two-Brain understand that everyone can’t have a discount or varying levels of discounts. And, you know, this thing, that thing, because all of a sudden you get people who are very upset with the whole situation. So those must be some interesting things. And I remember this is like, you know, 15 years ago I worked at a weird company where a new HR person came in and her mind was blown by what she saw and some of the things that were going on with all the, so I imagine it’s kinda like that sometimes where you open up this new box that you purchased and you look inside, you’re like, that’s an interesting membership agreement.

Tyler (17:17):

Yeah. So, and then there’s always like sublets, some of them have been subletting tenants that I wasn’t in, like entirely in the know about. So there’s always interesting things like that.

Mike (17:29):

What kinda retention do you generally get when you take over a gym? Do you have an idea of that?

Tyler (17:34):

You know, Mike, I’ve been really, uthe thing I’ve been most proud of our team is for two of the gyms, the most recent gyms where we had to equalize pricing, we had zero members leave.

Mike (17:46):

Really. That’s a huge accomplishment.

Tyler (17:49):

That hasn’t been true for all of ’em, but for the two most recent, um, wait, did that answer your question? I think I forget your question.

Mike (17:57):

No, that did. I was asking about retention rates when you take over a gym and like, so you basically added a hundred at two of them. The last two.

Tyler (18:04):

I mean, one of ’em wasn’t very great, and well, um, there’s no way you save the free membership people.

Mike (18:13):

That’s a tough one because free is free is free, you know, I dunno what exactly you could do to make that, to make that go. Tell me a little bit about, you don’t have to get into the exact mechanics of it or the numbers, but I’m curious, when you go into one of these buyouts, do you like, keep, you must have a war chest you’re like, OK, I’ve got this allotted to making this gym profitable as fast as possible. Like, is that how you go into it? Or how do you make sure that you like, do the other gyms support the current gym for a brief period? How do you do it

Tyler (18:39):

Financially? Month one has to be profitable.

Mike (18:44):

  1. So you’re gonna come in and you’re gonna make it happen.

Tyler (18:47):

Yeah. I should say it’ll be profitable at the expense of my time. So if I have a thousand dollars to allocate for team member expense or whatever it is, then I’m doing everything else until we break even.

Mike (19:03):

What’s the worst or the longest day you’ve worked in one of these situations, like, have you pulled like a 16 hour kinda thing?

Tyler (19:11):

Oh, more than that.

Mike (19:14):

Yeah. So you’re all in, like you’re willing to do what it takes, how long, so you take over a gym. How long are you willing to make that commitment? Say, you know, 16 hour days, at what point, or is there a point where you’re like, OK, this is a little bit rough or when you start to worry or have you never had to do that because you’ve been able to scale up fast enough?

Tyler (19:34):

It hasn’t been an issue yet. There was a time in our location where I was going four months strong of long, long days, like, yeah, yeah. Four to 9 30, 10 o’clock. And, that one was hard, but I knew every week sales were coming in and we’re getting better, but it was long. OK.

Mike (19:59):

I’m trying to get my head around that, which is, I’ve done that myself 10 years ago. I’m older than you now, but I, back then, I was all in for that now I’m like, I dunno. So what’s your long term timeline on that? Like, are you gonna keep kind of going like this or is your goal to like stop at some number and then kind of devolve into a different role or not devolve evolve into a different role where maybe you work, you know, 10 hours a month or a week or something that, or what is your long-term plan?

Tyler (20:24):

Mike, I love this stuff. I’m gonna work a lot. And I have a family, I have two kids. I need to be more disciplined, making sure I’m there when they go to bed and things and I’m home for family dinner, that has been the thing I haven’t been proud of. So big focus for this year is replicating myself. So when we buy more gyms or even start more gyms, I need someone just like me to go and just send it.

Mike (20:53):

You’ll have to gimme this number as part of the secret plan, but like, do you have a goal number or how many gyms you wanna acquire?

Tyler (21:00):

By the end of this year, we’ll be at 10. That’s the goal. OK. I don’t have like a 3 year or 10 year certain number. I just wanna make meaningful, create meaningful careers for my friends. Not like my college friends per se, but my staff. Yeah.

Mike (21:20):

  1. And as long as there’s sorry, I’m interrupt you. Go ahead. Pardon me?

Tyler (21:24):

Well, as long as I have individuals coming in that are excited and hungry for more opportunities, I’m gonna keep my foot on the pedal and providing those opportunities.

Mike (21:36):

So is your expansion somewhat dependent on staff? Like if you don’t have a good staff person, can you not expand or how do you manage that growth?

Tyler (21:44):

I’m trying to figure that out. Yeah, frankly. I think if I gave an answer now my answer might change next month.

Mike (21:52):

Sure. So then I’ll follow that up with a question. So how do you decide when it’s right to buy another one? Is it that you’ve got the current location in the stage where you can then jump to the new one? Or is it something like the opportunity comes up or how do you manage the pace of expansion? I’m throwing you hard ones.

Tyler (22:09):

I don’t think I have a good answer for that either. If an opportunity is there, I’m gonna take it and I’m gonna figure out a way, or at least attempt to figure out a way. I have some phenomenal individuals right now that when incentivized , I think we can make things work.

Mike (22:27):

Yeah. And you know, Chris has written about this and it’s even in his books now about there never will be a perfect time. So your answer is not, you know, it’s not a flaw as an entrepreneur. Like there never is a perfect time for everything. If you’re waiting for the perfect time to open a business, all the ducks are in a row. It won’t happen. You’re gonna have to take some chances, take some risks, fight through some stuff. So like, I don’t look at your answer as flip and saying, I don’t have that answer. I look at it as like, well, that’s the reality of business and you’re willing to adapt on the fly. Would that be accurate?

Tyler (22:55):

Yeah. So for example, like a detailed answer, we have three gyms within 15 minutes of each other in Utah county and three gyms within relatively 15 minutes of each other in salt lake county. But there’s two cities that separate those three gyms. And I wanna close that gap. I’m not ready for that yet. But if the opportunity came where one of those gyms in those areas was selling, I would take it. OK. I wouldn’t, however, start a gym in those areas because I’m not ready for it. That being said, if I pulled myself out of the management of the location I’m in, then I would start a gym in one of those two cities.

Mike (23:34):

If you started a new gym in one of those cities, and let’s say, you know, you start tomorrow, how long do you think it would take you to get it set up the way you want it? So you could move on. And I ask this question because it took me 10 years to get my gym set up properly. And I still didn’t have it set up properly. How long would it take you starting tomorrow?

Tyler (23:50):

It’s tough. I think my answer is a little skewed because I would probably draw some members from an existing location. OK.

Mike (24:00):

But you’ve earned that. Sothat’s not a freebie, you know, <laugh>.

Tyler (24:04):

I don’t know. I would say, before I’m out of the management of it, I work in 90 day sprints. So I would try to be outta there in 90 days. But, I don’t know. I don’t have, my second gym was the only gym I started from scratch and that took me a lot longer.

Mike (24:21):

  1. But that’s still interesting because I you’re talking in days and months here, weeks, not years. Which for me, like, again, trying to figure out back in the day, this was like 2009, 2010. How do I do this? And I didn’t have an answer by 2014. I was still adjusting things again. I think, I can’t remember when I started with Two-Brain, but that’s when I started really making some progress quickly. Did Two-Brain help you with systemizing the things or what was the main stuff that Two-Brain supplied to help you do this?

Tyler (24:49):

Oh, so Two-Brain and John Briggs, those two saved my career. Honestly, I was looking as I was graduating college, I was planning on selling the gym and taking another job. And then I found Two-Brain within like my going into my second to last semester at school and things turned around and I fell in love with the gym business again, I finally felt like I know how to do this now. So what specifically? I mean, yeah, they helped me with playbooks. They helped me realize there’s no exception of pricing. So my parents even have to pay a membership. They helped me see, I mean, I think everything <laugh>, they helped me see the value of an audience and how you write love letters and how you communicate with that audience. And, yeah, just a lot of great examples that just the community in Two-Brain itself has just been invaluable.

Mike (25:43):

Honestly, that’s the goal. And Chris has talked about this so many times is to be, is to give an entrepreneur the ability to scale up faster, avoid all the mistakes that all the old school people made, myself included, Chris included, and skip some of those things. And there still will be mistakes that you make and so forth, but being able to blow past some of that, like the idea of a staff playbook and cohesive pricing and packaging and structuring and audiences and schedules for love letters and all that stuff, none of that existed when I started and man, I messed it up, you know, so we can thank Chris for paving the way on that one and and then setting some of that up. So it’s great to hear that that’s giving you an opportunity. I’ll ask you this, buying out. Are you getting better at doing it each time you do it? Is that, does that negotiation situation become easier?

Tyler (26:24):

Yeah, but I will say Mike, what I’m learning through negotiation is it’s not a money grab. If someone wants $300,000, I’ll say yes to it if it makes sense, it just has to make sense to me. If they want $30,000, I’ll say yes, but I just need to know logically why that number’s making sense. So the negotiation, the price has really been, like the price never matters to me. It’s just, is it a win-win for both sides and is it fair? So I think I’m getting better at that on seeing both ends. And I’m very careful. I always have been of not taking advantage of another party. You know, one of the gyms was John’s gym and at one point he said, it almost feels like you’re trying to take advantage of me and that hurt. And so I tried to restructure some things to make sure there was an ongoing relationship. I will say this cause I haven’t said it, it is super super important for me to keep that previous gym owner working out in the gym, which might be surprising.

Mike (27:30):

That is interesting. That is very interesting. And I imagine it’s challenging at some points. Like if I sold my gym, I wouldn’t wanna be there anymore. So that’s an interesting thing for you.

Tyler (27:39):

So that is one of like the negotiating points for me is how do I keep that individual at least temporarily a part of the gym.

Mike (27:46):

I won’t make you say this, but I’ll say it myself though, but I know a lot of gym owners, myself included would tend to overvalue gyms, especially negotiations. It’s like, it’s a labor of love. This is the thing you built with your own hands, the whole deal. Like you, you know, you think it’s worth more than it is. The balance sheet of CrossFit gyms and micro gyms often doesn’t reflect what the owner perceives. So again, I won’t make you say that because you’ve got, had to go through those negotiations with people. But I do know that, especially from the stuff that Chris has written about, the many gyms that he’s evaluated, uyou know, sales that he’s helped broker and so forth and our how to buy a gym, how to sell a gym playbooks, which you can find on Two-Brain’s free tools page.

Mike (28:23):

But the idea you now though, is that some gyms when they’re run properly and they have a profit margin of 30% potentially, and all these other things, some of these gyms, their valuation would go up quite a bit. It’s not like one of those buy yourself a job. Like as a for instance, if I was an outside investor and I looked at your gyms and I said, OK, you know, gym number three does not have you involved. It’s just this manager, this system, this playbook, this profit margin, it’s got the P and L sheet, the whole deal. I’d look at that. And that would have a higher price than if I was looking at a gym over here, a different one that you don’t run that has an owner operators working 16 hours a day, tons of discounts, crazy, you know, rates, all these other different things that I’ve gotta fix. There is a clear difference in that. And I imagine you’ve run into some of that stuff in, in your, you know, the levels that you’re willing to go.

Tyler (29:12):

So if someone is looking to buy a gym, I think step one, when starting negotiation is you have to agree on the equation.

Mike (29:23):

Ahuh. Yes. I was gonna ask you about this. Tell me more your tips here, but get into that one.

Tyler (29:28):

So before any numbers are thrown around there has to be an understanding of what are we actually valuing and how are we gonna value it because then numbers start getting thrown around and emotions start getting involved. Yeah. And if you can keep those things out of it, then it’s a smoother negotiation.

Mike (29:47):

Well, and that, it makes a lot of sense because I remember reviewing, this was like, you know, a couple of, you know, distant friends we’ll call them. I saw how they were gonna try and sell their gym and it wasn’t super profitable. It wasn’t profitable at all to be honest. And so they decided that it would just be sold on the basis of equipment valuation and so forth. And it didn’t go super well because one thought that was unfair. One thought that was fair. They had to revise everything and go back to it. So it’s interesting. I love what you’re saying there is that before you start, get the, like, get lay of the land, the terms of engagement in place, then start playing because the emotions will come involved. Yeah.

Tyler (30:25):

  1. And I will say the equation changes most of the time. It’s like, so for instance, one of the gyms we agreed on the equation, the number came out. I put it together, sent it over and the gym owner said no way. And we didn’t talk for like two weeks. OK. And I was to trying to talk, I’m like, help me understand this is what we agreed on the equation of how to value it. What am I missing? Because I wanna buy your gym, you wanna sell your gym. What am I missing? Because I don’t wanna just buy an inflated gym, like right. Have an inflated price. And so then we factored in some other things that as part of that original equation, he thought was fair and I agreed with 90% of it. And so we added that on.

Mike (31:08):

You’re negotiating and you know, all is fair in that I get, and the dogs are going crazy again here. Of course we almost, we almost made it. But so my next question is, you know, I won’t even ask that one just to tell me your tip two, what would tip two be?

Tyler (31:25):

Be fair. Honestly.

Mike (31:27):

Is it hard to do that?

Tyler (31:28):

I think I’m in a position now, honestly, Mike, where I think I probably could persuade the individual for my own benefit. And I’m really, really trying not to ever do that because my reputation and the gym’s reputation is important to me for a longer term vision. And I don’t want, at any point for gym owner to feel like they got the shorter end of the stick.

Mike (31:52):

Give me one more tip. And this tip, I would like it to be something about how would you, how do you replicate? I mean, I’m gonna lead you by the hand here, but like, I wanna know how, what would you advise someone who’s trying to replicate one system into another gym? Cause you’re kinda a master at that. It looks like, how would you do that? Because for me, that’s baffling, I’ve got new staff, new clients, new layouts, new lease, new profits, losses, expenses. How do you do that? What’s a tip.

Tyler (32:16):

Well, I’m not great at it, but I’m working really hard at being great at it. SO you’re asked me, how do you replicate this.

Mike (32:26):

Imagine this here’s the scenario, I’ll clarify this. So I’m coming in and I know that you’ve done this. You’ve got six gyms and I’m gonna buy a second one. And I’m like, Tyler. Like, I don’t have a clue how to make my successful gym influence my unsuccessful gym. What do I do here? How do I get this one to look like this one?

Tyler (32:46):

So I guess my tip would be maybe my answer changes next week. My tip would be lay out a 12 week plan for yourself, like week one and two for me, are method on ramping, nothing else. That’s the only thing. And I’m coaching it all. I can’t have someone else come in and coach it because I need to sell the community on me and the brand. Week three is goal reviews and introducing potentially another staff member. Included in that is getting started if there isn’t one, a private Facebook group and getting chatter outside of the gym. Week four week five, you know, that’s what I would do.

Mike (33:27):

  1. So I’ll, you know, cause every situation is gonna be different. I’m putting you in a theoretical spot, but I’ll just summarize that. And you tell me this is accurate as just have a plan and have like an implementation plan that goes piece by piece, depending on your unique situation. Would that be accurate? Cause like, for me, I’d be like, I would probably get too unfocused and see, I look, I’m gonna try and just ram everything into place right now, right off the bat. Not gonna work like that. You probably got a Lego block your foundation and then start building the walls of the castle.

Tyler (33:55):

Yeah. You know, it’s tough Mike, like the cleaner in one of the gyms we’ve recently bought, came to me yesterday. There’s six cleaners on trade memberships. They don’t get paid to clean, but they don’t pay for a membership. And the girl came to me and said, rumor has it, Tyler, you’re gonna make me pay a membership now. And I said, um, no, I’m not changing anything yet. I’ll change some things when the timing’s right. But,in our other locations I’ll pay you a fair wage to clean the gym and you pay us a fair wage to participate in the workouts and the coaching. And she said, oh, then it sounds like I’m gonna actually make more money. Cuz a membership is one 50 and I’ll start making three hundreds and then I’ll actually make, you know, and then she said, well, that’s nice to know, cuz I’ve always felt like I’ve been doing a service to the gym.

Mike (34:44):

So you’re really professionalizing is what you’re doing.

Tyler (34:47):

Yeah. But yeah, I would have a plan. I would agree with what you said in your words. But be very carefully, like I know I have a pretty good playbook, but I can’t just put that playbook on another location because it offends people. And so it has to be gradual and Mike, I’ve learned some things in certain locations that I really like that we end up changing across the board for everyone. One of those things, for instance, that I really like that, I didn’t know I would like, we haven’t done this with all the gyms yet is a 15 minute gap between classes.

Mike (35:20):

I wouldn’t have thought of that.

Tyler (35:23):

That was in place at the Draper gym. And I thought, I don’t wanna pay the coach for the, like if they’re coaching four classes in a row, that’s an extra hour of labor.

Mike (35:32):

That’s what I would’ve thought right off the bat too.

Tyler (35:34):

Yeah. But it is so nice for the community.

Mike (35:37):

So it’s retention play almost. Yeah.

Tyler (35:41):

Yeah. And so playing with the idea of how do we roll that out, across all the gyms, there’s some pushback with the existing managers and coaches. And I try to give the managers 98% autonomy. There are a few things that I have to put my foot on. And one of those, I don’t feel strong enough yet to say like this has to happen, but I learned that in a location that I didn’t like originally, but I’m starting to really love.

Mike (36:05):

I think, you know, I have more questions, but I’m gonna let you go. Cause I know you’re probably working a 16 hour day, but I think we need to talk about this in like 6, 7, 8 months. Will you come back and give us an update? I literally could sit here and ask you another 90 minutes worth of questions on this stuff. So I’m gonna put a cap on this episode, but I think we’re gonna reconnect on this and go maybe deeper into like some of the stuff you’ve learned. You know, I’d love to dig into learning from a gym you buy and then rolling those changes and back filling stuff to existing gyms. That would be fascinating. Is it fair now? Uh, as I close this one out to call you a gym tycoon?

Tyler (36:41):

I don’t think I deserve that yet, but maybe, I’m careful never to receive any individual nicknames or every time a staff member says Tyler’s gym. It’s a immediate correction. Cause we’re building something I think really special in Utah and it’s a team effort even though I’m probably working the most hours.

Mike (37:00):

I won’t call you a gym tycoon, but I’ll call you you know, the head of RxFit, building, you know, building a chain of communities and jobs for your crew. Is that accurate?

Tyler (37:15):

Maybe we talk financing.

Mike (37:19):

So we’re gonna bring you back on the show. We’re gonna dig into more of this, Tyler Welch will be back on Two-Brain Radio. Tyler. Thank you for being here today. I really appreciate it. I’m your host, Mike Warkentin. I’m all about telling the stories of amazing gym owners. Please subscribe for more episodes. Now here’s Two-Brain founder, Chris Cooper with a final word.

Chris (37:37):

Thanks for listening to Two-Brain Radio. If you aren’t in the Gym Owners United group on Facebook, this is my personal invitation to join. It’s the only public Facebook group that I participate in. And I’m there all the time with tips, tactics, and free resources. I’d love to network with you and help you grow your business. Join Gym Owners United on Facebook.

 

Thanks for listening!

On Monday, Two-Brain Radio presents marketing tips and success stories. Chris Cooper delivers the best of the business world on Two-Brain Radio every Thursday. 

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