Thread: How much money?
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Old 09-10-2011, 11:19 AM   #4
Brendan McNamar
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Join Date: Mar 2010
Location: Glendale  AZ
Posts: 2,216
Re: How much money?

This depends on your cost structure. There are three kinds of cost:

1) One time start up - Certification, 1st years affiliation fee, website, 1st years insurance, securing a location and first equipment purchase.

2) Fixed ongoing expenses - rent, insurance after year 1, affiliation fee after year one, wages to trainers, utilities. Anything you have to pay month after month regardless of how many members you gym has.

3) Variable cost - these are cost that you incur as more people join your gym. Additional equipment purchases are significant. More space, higher insurance, higher utilities.

Start up cost are what you need to get the doors open. Small garage gym probably $7,000 to $10,000 if you are careful. Fully equipped 3,500 sq ft. box could be $30,000 plus.

Fixed cost determined how much cash you need to keep the doors open until your members can cover these cost. This is where people get into trouble. Got high fixed cost and you are going to burn cash fast. Have low fixed cost and you burn cash slow and it is much easier to turn the corner to positive cash flow.

Variable cost are the least concern because they only go up when your income goes up. If your pricing is correct you should alway be happy to add members and incur more variable cost because you will be spreading your fixed cost over more members.

Unless you are a well financed professional in the fitness industry this argues for two thing. 1) keep your day job 2) start small and humble out of your garage.

I did it this way and it saved my ***. Now a year later my growth rate is picking up. I'm getting referrals from my members and I'm starting to shop for more space and equipment. If my fixed cost had been higher I would have gone broke.

I will also second the Faster Again business videos. They will say much the same thing but in more detail.

Don't forget your personal fixed cost. My personal bills are higher then my gyms month to month bills. You are not truly running positive cash flow for life until you can cover both your gym's expenses and your personal expenses.
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