If you've read the article on the small markets, I'm sure you're probably crunching the numbers. You don't believe me. I understand.
I wouldn't either because right now there are two camps in the fitness industry: 1) The studio gym camp led by individuals like Thomas Plummer, Frank Nash, Bedros, and Rachel Cosgrove. 2:) The franchise gym camp that finds large markets, entices them with low prices, and hopes 80% of the members don't show up. Neither camp likes small, tiny markets because their models don't work there.
Plus, you've probably never been in a town that's so small that it has only one stoplight. In fact, you probably didn't even know they existed. They do. In fact, according to the census, there are 31,000 of them with less than 10,000 residents. I live in one.
This is different. This is new. This is small.
So, how do your numbers look?
The Break-Even Point of The Small Town Gym
Let me just throw some numbers out there and see how they stack up...
Let's start with the expenses:
- Rent - $2500, assuming around 4,500 sq. ft. at $6 per sq.ft
- Payroll - $1000, assuming you aren't paying yourself for the first 3 months
- Equipment Loan - $1000
- Utilities - $600
- Phone/Internet/POS Software - $300
- Security - $200
- Insurance - $200
Total - $5,800
Now, to keep it simple, instead of looking at revenue, let's just look at the break-even point (BEP) if our average membership is $30 per month.
BEP - 194 members ($5,800/$30)
So, every dollar from every member over the 194th member goes into your business' bank account. You can do with it as you please. Pay yourself. Buy more equipment. Reduce your hours at the gym, and pay someone to replace you. It doesn't matter. You're the boss, and you can do anything you want with it.
And remember, that doesn't count the income from any additional revenue streams you have. That's just from your primary, automated stream of revenue from gym memberships that is independent of you ever stepping foot inside your gym. The gold lies in these additional revenue streams.
Not too bad right?
And how do you know if my small market can support a gym?
You won't. But, you can make an educated guess.
In Illinois, there's a 19.8% gym participation rate. I tend to cut that in half, as I've found small towns tend to be a little less active. That's a very conservative estimate. So in a small market of 4,000 people, I can estimate I have a pool of potentially 360 members, well above my break-even point.
Another very non-scientific way to make an educated guess if your market can support a gym is to see if the community has an independent pharmacy and a grocery store. If it has both, it can usually support a gym.
And what is the significance of 300?
We've found the number 300 to be pretty significant, beyond the awesomeness that was the movie. With 300 members plus one or two additional revenue streams, an owner can expect a $75,000 salary working less than 24 hours per week. At 400 members, an owner can expect $100k per year working less than 24 hours per week.
Although that's not going to allow you to retire early, it could easily provide you with a comfortable living, or as this article states - happiness. Plus, you now have freedom and independence as well as the three drivers of motivation according to author Danial Pink. And best of all, it's better than the $33,120 the average personal trainer makes in a year.
Think small. Act small. Dream big.