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Each year, millions of people join gyms to get fit and lose weight. To be profitable, a gym model typically revolves around several key revenue streams. The most basic is the gym membership. However, membership dues or fees are typically not enough to make gym owners rich. This is why most gyms supplement their core revenue stream with supplemental revenue from fitness classes, juice bars, tanning salons, and renting space to personal trainers.
Who is this business right for?
The type of people who start a gym are usually people who are passionate about health and fitness and have good business sense. Because owning a gym requires a massive time commitment, it’s not suited to individuals who need a flexible work schedule.
What happens during a typical day at a gym?
Gym owners typically arrive early in the morning, before 5 am, and may leave well after the sun has gone down. Gym owners may also have to work weekends, especially in the first few years when the business needs extra support.
The key day-to-day activities of a person involved in a gym business include opening the gym and cleaning up and prepping for the day, checking the register for any sales from the previous night that weren’t deposited, cleaning up and checking the equipment before opening, and managing gym members and employees.
If you run the business yourself, you will also need to manage the accounting for your gym, which includes verifying that all membership dues are current and that all classes are paid in full. Since a gym’s core income comes from gym memberships, doing the accounting for this is one of the more important tasks a gym owner has to perform.
What is the target market?
Preferred customer types include individuals who want to lose weight or hire personal trainers to meet personal fitness goals. Most gyms advertise locally in newspapers or by word of mouth. Good clients are those interested in working out with a serious long-term commitment.
Poor clients would be those who join for a short period of time and then quit. However, many gyms actually capitalize on this by charging a joining fee which protects the gym from early cancellations. The up-front fee is usually several months worth of fees, allowing the gym to recover advertising costs.
How does a gym make money?
The standard business model for a gym is to collect membership dues in addition to supplemental revenue. Supplemental revenue includes income from various classes, like:
- Aerobic classes
- Spin classes
- Circuit training
- Military fitness
- Jujitsu training
- Dance classes
Most gym memberships are charged on a monthly basis, with other revenue (like special workout classes) being charged either monthly or as a flat fee upfront.
Other sources of revenue include:
- Personal training
- Juice bar
- Tanning beds and related services
- Supplement sales
- Chiropractic services
- Massage services
Gyms typically see an influx of new members in January, peaking in the second quarter, then falling during the summer months. This makes the gym business highly cyclical.
What is the growth potential for a gym?
Small gyms are usually run by one or two people and may include a lot of personal training. They typically won’t have extensive supplemental revenue, however. An example of a small gym would be a so-called “black iron” gym, where members join primarily to hire a personal trainer and weightlifting coach.
Scaling a gym requires significant investment. For mass appeal, most gyms need at least 3,000 square feet of space to accommodate cardio equipment, a wide range of resistance and training machines as well as free weights.
Large-scale gyms also partner with supplement companies, self-employed personal trainers, and sometimes food services businesses.
What are some skills and experiences that will help you build a successful gym?
People who open and run a gym usually have experience running or managing a gym. While not required, it is helpful to have a degree in at least one of the following:
- BS in Athletic Training
- BS in Culinary Science (Culinology®)
- BS in Nutrition & Dietetics
- BS in Nutrition Science
- BS in Nutrition, Exercise and Health Science
- BS in Pre-Health
- MS in Biochemical & Molecular Nutrition
- PhD in Biochemical & Molecular Nutrition
- PhD in Community Nutrition & Health Promotion
- MS in Community Nutrition & Health Promotion
- MS in Community Nutrition & Health Promotion
- MS in Dietetics
- MS in Exercise Physiology & Nutrition
- PhD in Exercise Physiology & Nutrition
- MS in Food Literacy, Quality & Safety
- PhD in Food Literacy, Quality & Safety
- MS in Interdepartmental Nutrition Program (INP)
- PhD in Interdepartmental Nutrition Program (INP)
What are the costs involved in opening a gym?
Startup costs for a gym are significant. Most modest gyms costs between $200,000 and $400,000 to get going. A larger gym may cost upwards of a million dollars or more. Franchises may carry lower operating costs, but you have to pay a franchise fee, which may or may not make it a cheaper option to get started.
Some gym owners try to lower their initial overhead by buying used equipment. This is a double-edged sword. New gym goers want to see new equipment. Used equipment may not be in the best condition. If you go this route, make sure to have all used equipment thoroughly inspected and serviced prior to use.
What are the steps to start a gym?
Once you're ready to start your gym, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your gym is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your gym keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Select your state below for an in-depth guide on completing each of these steps in your home state.
How to promote & market a gym
Word of mouth and local advertising are the two primary methods of gaining new membership. Many gyms take out ads in local newspapers and offer discounts for first-time members. They may also offer free workout days or even free personal training services to attract new members.
Recommended: A website is essential for promoting your business and attracting customers. Weebly is a great tool.
How to keep customers coming back
A gym is often seen as a commodity service business. Because of this, you must differentiate yourself. Big chains, like Planet Fitness, for example, define a niche or target market and demographic. You should do the same. Catering to a specific group of people also works. For example, you could market your gym as a specialty gym for busy professionals. You could also set up your gym to be especially accommodating to women.
How and when to build a team
Most gym owners start by hiring freelance or self-employed personal trainers. This is because many gym members expect to have experts in the gym, even if they don’t pay for personal training services.
These are some of the first positions you should fill because they’re the largest revenue generators. You can rent space to a personal trainer for between $1,000 and $2,000 per month. Hiring salaried employees also makes sense as the business grows. Typical payscales start at $20,000 to $30,000 per year for full-time entry-level positions.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate gym business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, check out our informative guide, Sales Tax for Small Businesses.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
A gym business or fitness center is typically run out of renovated warehouse or commercial space. Businesses with a physical place of business require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
If you plan to lease space for your gym business:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a gym business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
If you plan to purchase or build a gym or fitness center:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for you business’ location to ensure your gym business will be in compliance and able to obtain a CO.
Many gym businesses play music to keep customers focused and entertained during their workouts. In order to play music in a business setting, permission must be acquired from the composer or license holder. Typically, it is possible to obtain “blanket” license allowing a businesses to play music owned by a large catalog of artists and recording studios. Such licenses can be obtained from Performance Rights Organizations, such as ASCAP and BMI.
Learn more about music licensing requirements and how to obtain a blanket license here.
Working out at a gym can be a high risk activity, especially for individuals lifting heavy weights or with certain medical conditions. It is strongly advised to have new gym members sign a liability waiver accepting personal responsibility for any injuries.
How much can you charge customers?
Gyms usually charge between $20 and $50 per month for memberships and require members to sign a one year (or multi-year) membership contract. Some gyms offer discounted deals if the client pays for a year in advance. On top of that, gyms charge a sign-on fee, which is usually between $100 to $300.
Supplemental revenue varies according to the demand and the type of gym you want to run. Consider your target market and gym location. If you’re in a high-rent district, you can charge more for memberships, personal training services, supplements, classes, and tanning and chiropractic services.
What are the ongoing expenses for a gym?
The largest expense for a gym is the initial investment in gym equipment, which can cost upwards of $200,000 or more. The second-largest cost is either the labor cost or rent, depending on the size of the business.
How much profit can a gym make?
Revenue and profit varies by size. However, it’s typical for a gym to generate between $1,000 and $2,000 a month in revenue within the first 6 months. After a year, a successful gym will generate at least $20,000 per month. According to the AFS 2016 Marketing Best Practices Research Report, a typical small fitness center in the U.S. makes $63 per SqFt., or up to $200,000 to $300,000 per year. Larger gyms can make up to 10 times as much money.
How can you make your business more profitable?
Generating more profit with a gym is simple. Most gyms add supplemental revenue as space permits. These “side businesses” are set up to rent space from the gym owner, creating predictable streams of income. For example, a gym owner might lease space to a chiropractor, a tanning company, a massage therapist, or even a food services business to handle the juice bar.