Wellness and mindfulness have been gaining popularity in the past couple of years. People pay more attention to their health by going to gyms regularly, signing up for memberships, and buying fitness products off the internet. As a result, the fitness industry has been reaping the rewards of society’s newfound goal to prioritize health.
As the concept of fitness becomes more significant, the industry is constantly finding ways to keep consumers engaged. This also led to an increase in the number of fitness businesses as more people discover the money in it.
However, this thickens the competition in the industry, eventually making it hard for a gym startup to thrive. In fact, it was stated that 8 out of 10 gym businesses fail in their first year.
Despite the alarming odds, many entrepreneurs still venture out, which resulted in the creation of micro gyms. Let us discuss the hype surrounding micro gyms: what it is, how it started, and its financial stability.
What is a microgym?
Micro gyms are small, independently owned fitness studios that focus on giving one kind of specialized workout or training. It has a customer-oriented atmosphere that big, commercial gyms lack. These studios give personalized sessions that help customers meet their goals, making every class worth their money.
Unlike the traditional 30,000 square feet commercial studio, a micro gym only occupies less than 10,00 square feet—sometimes even just a third of that size. It usually has around 100 to 200 members, which are already enough to keep the business going.
These boutique-like fitness studios pop up on developed and populated neighborhoods, offering classes ranging from the following:
- Yoga poses
- Kettlebell training techniques
- Ballet barre
- Inverted rows training
Owners are former big studio instructors and professionals who became disheartened by the lack of growth in their former job. Although sessions are priced at $30, microgym-goers are not daunted by the price. They are even more motivated to attend classes, making these small startups the fastest growing business in their industry.
How is the industry fairing?
Expert fitness instructors turned micro gym owners attest that they are now making five times more than what they made before.
When these boutique studios started, clients were doubling every month, reaching their membership capacity of 200, with each member paying at least $200 per month. At that rate, who does not want to leave their old life and become a full-time instructor slash micro gym owner?
However, the downside happened when the industry became too popular among entrepreneurs. At a blink of an eye, everyone has their own micro gyms located at every 800 yards of one another. It eventually becomes a race to see which business offers the lowest price, compromising its profits along the way.
Owners of these small-footprint fitness centers can confidently say that their new salaries exceed their old ones by fivefold. However, they are also acknowledging that the current influx of small studios made it hard to attract more clients and make money.
Is it profitable?
The United Kingdom’s health and fitness industry had maintained its financial health last year. Here are some of its key achievements in 2019:
- Approximately 6.7 thousand fitness-related studios with 9.7 million members, breaking the 10 million membership mark by the end of 2019.
- Total market valuation reached £5 billion for the first time in years.
- 2019 saw a 2.9% increase in fitness centers, 4.7% growth in gym-goers, 44% in membership spending, and 4.2% in industry market value.
- Approximately one in every seven UK residents is a gym member.
- There is also an increase in at-home gym studios, green fitness centers, boutique studios, and tech-enabled wellness centers.
These numbers alone prove that the health and fitness industry is a much profitable venture than most people would have believed. More so for micro gyms than big commercial ones.
Investing in small yet versatile boutique studios require much less cost, thus needing little capital for your startup. There is also a new business method that gets micro gym owners more profit than before.
What is the profit-first system?
Although business is risky, not all ventures fall to the clutches of failure and bankruptcy. There are a lot of factors contributing to business failure, and one of them is the way you handle profits.
Most enterprises, especially startups, handle their business the traditional way. They prioritize taxes and business expenses, deducting those from the total revenue. The amount left—if there is any—is considered as profit.
For most startups, this profit would not be going into the owner’s pockets, instead, it would be reinvested into the venture, prioritizing growth over anything else. This would have worked for a large enterprise strapped with monetary resources, but not for small businesses.
This is financial suicide in the making. This is the reason why most owners settle with table scraps and a pittance of a profit, thinking that “next year would be better”. But it will not be, not unless you change how you handle your profit.
Profit First is a business method introduced by Mike Michalowicz, which promises to turn your cash-eating business to a money-making machine. This approach defies every financial advice entrepreneur knew their whole lives, but it has been preventing entrepreneurial crises since its debut.
How does it work?
The concept is this: prioritize profit above all else by setting a profit percentage in your revenue, then spend what is left of the sales revenue to pay for the necessary expenditures and taxes. So instead of subtracting your expenses from the revenue to get a profit, you will now be deducting profit from the revenue, then fit the business costs with the available money left.
This might be strange at first and seems counterintuitive, but it actually works. Since costs are unavoidable, the biggest struggle would be finding ways to pay all expenditures without experiencing a shortage. However, the book does focus on how to cut expenses, even fixed ones, and increase your profit margins.
The profit-first technique is a long-term strategy that also promotes growth in the long run. Once an attractive opportunity presents itself, then you can invest an ample amount of cash in it without endangering the financial health of your business.